With a big and smooth market available online, online trading has become a prevalent exercise amongst diverse populations. While earlier only professionals used to invest in stocks, today a lot of students find it a good way to make money while they study. But trading is not an easy job. As a result, a lot of trading apps have taken birth. Brokerage firms are the most popular among them. You will need brokers no matter if you are a beginner or an expert. Hence, brokerage calculators are important. Let us know more about them here!
- What is Brokerage? :- Before we proceed to learn how a brokerage calculator helps, we need to know what brokerage is. Brokerage is an intermediary service that allows one to do multiple tasks, trading being one. They have a fair share of ideas about a particular field and can guide people about how to do a particular task. For example, when you search for a house, it is best to rope in a broker. He or she will be in a good shape to help you find a house that suits your maximum needs. They will know which locality will have what kind of house and at what price. They also help in negotiating as they are a link between the two or more parties involved in a transaction.
Similarly, a brokerage firm in the online trading market acts as a middleman who connects buyers and sellers to trade stock shares, bonds, options, and other financial instruments. They are then either given fees or a percentage of profit, known as commission, for their service. Two types of brokers are available today: discount brokers and full-service brokers.
Discount Brokerage:- A discount brokerage firm charges minimal or discounted rates for facilitated transactions. It is a relative term as the discount is given on a full-service brokerage. A beginner in the field of trading is most likely to have lesser funding. Plus, they don’t want to take high risks. That is when discount brokerage comes in handy. You can start trading by paying minimal charges and lowering the risk of losing money. However, we also need to remember that because the brokerage is discounted, the services shall be less too. You are least likely to avail of investment analysis or performance analysis services that a full-service brokerage will provide you.
Due to the boom that trading has received, discounted brokers are largely available on the internet today. They are available for people with smaller capital to trade for lower fees. The reason that they are least likely to incur infrastructural costs helps them be cheaper. Moreover, they just execute the orders of the client. Hence, it is the investor who has to do all the thinking and research. So the cost of paying salaries to experts is also being cut.
Full-service Brokerage :-A full-service brokerage firm is a licensed entity that provides as an intermediary between the sellers and buyers of financial instruments besides providing several other services. Some of those services include research and advice on financial trends, tax tips, etc. However, it all comes at a price, that is too fairly high. It is best for people who are experts in online trading. Or else people who have enough money to invest, both in securities and brokerage, can subscribe to a full-service brokerage. People who wish to make use of their money but do not have enough time to study the trends should also connect with a full-service brokerage.
Brokerage Calculator :- A brokerage calculator is used to get a clear idea of how much will an investor be paying to a brokerage firm or application for the services they will be offered. It gives accurate and clear information about the brokerage charges to be incurred. Hence, even before a person invests his/ her money in security, they can know the amount of money that will have to be given as a brokerage. This will help them understand which kind of brokerage they should go for. If a firm is charging exorbitantly high prices, then the person can be safe and not avail of its services, lest they incur unnecessary losses.
The Formula :- To calculate brokerage, a calculator multiplies the number of shares bought or sold by the price of one unit of the stock. The derived value is then multiplied by the brokerage percentage. Let us make things clearer with an exhaustive example. Suppose, Mrs. Shukla wants to invest in shares of company Y and wants to sell shares of company Z. She wants to sell 20 thousand (20,000) shares and purchase another 21 thousand (21,000). Each share is valued at Rs. 30. The brokerage value charged by brokerage firm A is 2.5 percent.
The total value charged will be:
Total value of shares of company Y = 20,000 X 30 = 6,00,000
Total value of shares of company V = 21,000 X 30 = 6,30,000
Total amount = 6,00,000 + 6,30,000 = 12,30,000
Brokerage charged = 12,30,000 X 2.5 = 30,750
The Benefits :- While one can calculate the brokerage manually as well if one wishes to calculate money for multiple stocks and by different firms, it would be a laborious task. The calculator facilitates easier comparison. It will also help you find accurate and detailed results. And most, importantly, much of your time will be saved. Hence, you can instead apply that time to studying market trends.
Conclusion :- Calculating brokerage is a fairly simple process. You can purchase a tangible financial calculator easily from a stationery shop. It will come with other instruments too. Otherwise, you can compare the prices on an online brokerage calculator. A number of them are available online. Or better, you can apply the formula yourself, either manually or using an electronic device. You just need to know three variables to calculate brokerage: the buy or sale price of each unit of security, the volume of trade, and the brokerage price. Save time and be accurate with your results with a brokerage calculator.
