How shares are traded

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2. What type of broker do you want?

The choice between Discretionary, Advisory and Execution-only depends completely on your priorities.

If you don't want to be involved in share selection, but want your portfolio actively managed (rather than just tracking the index), then you need a discretionary or advisory service.

• Some people like the personal contact which local brokers provide, and are happy to pay the extra costs involved.
• People who trade infrequently don't have to worry so much about commission rates, so for them a discretionary or advisory service may be preferable (although watch out for management fees which will bite whether or not you trade).
• If you travel a lot abroad, and it is difficult for you to manage your own portfolio, it may be necessary for you to have an advisory service.

If, on the other hand, you prefer to handle your investments yourself, and don't need or want the advice, an execution-only broker is your best choice.

• The costs are lower
• You get an increasing amount of data, news and research provided through their websites

The table below shows how the difference in commission charges between a full-service and an execution-only broker mounts up if your average bargain size is £5,000.

If you only trade once, the difference is tolerable. If you trade 36 times a year (just 3 times a month) the difference is a staggering £2,340 - not far short of half your staked capital.

1. The role of brokers 2. What type of broker do you want? 3. Choosing a discretionary or advisory broker 4. Choosing an execution-only broker 5. Opening an account with a broker 6. Placing buy/sell orders by telephone 7. Placing buy/sell orders online 8. Normal market size 9. The spread 10. Contract notes 11. Settlement 12. Conclusion

• First Steps in Shares