Reference no: EM133004139

Detail the process for buying and selling shares.

• An investor buying or selling shares can take a direct investment approach or an indirect approach.
• With the direct approach, an investor will select the shares to be included in a portfolio. The transaction will usually be carried out through a stockbroker.
• A stockbroker accepts buy or sell orders from investors and acts as the agent in placing the orders into the stock exchange's trading system.
• The share trading system used by the ASX is known as ASX Trade and the transfer and settlement system is known as CHESS. Settlement occurs in T + 2 business days.
• A broker may be a discount broker that executes transactions but does not provide investment advice. A full-service broker will execute buy and sell orders, but will also provide investment advice and some other financial services.
• With the indirect investment approach, an investor does not select the stocks to be held in a portfolio; rather, the investor purchases units in a managed fund such as a public unit trust.

Question:

Jack and Jill have recently married and have decided to start buying shares for an investment portfolio.

a. Explain the role of a stockbroker in the direct investment approach to share investments.

b. Within the context of services provided by a stockbroker, discuss the two main types of stockbrokers that an investor may choose to use. Differentiate between the services provided by these brokers.