A broker is a financial service provider that gives investors access to the stock exchange. Through a broker, you can buy and sell financial instruments such as shares, bonds and ETFs. As a retail investor, you cannot trade directly on a securities exchange. When you want to buy a share, your order is transmitted via the broker to the exchange or a trading platform where the transaction is executed at the prevailing market price.

The broker provides a trading platform where you can monitor prices, place orders and manage your portfolio.

The investments you purchase are held in your investment account and remain legally your property. The broker handles the execution and administration of the transactions. A broker earns money by providing these services. In most cases, you pay transaction fees for each purchase or sale. In addition, a broker may earn from the spread, currency conversion fees or interest on uninvested cash. In essence, as an investor you pay for access to and execution on the financial markets.

Short example:

Suppose you open an account with a broker and deposit €2,000. You want to invest in a share that costs €25 per share. You decide to buy 78 shares. The purchase amount is therefore 78 × €25 = €1,950. The broker charges €6 in transaction fees, bringing your total expense to €1,956. The shares are credited to your account and the remaining amount stays as a cash balance.

After one year, the share price has increased to €32. The value of your 78 shares is then 78 × €32 = €2,496. You decide to sell. The broker executes the sale and again charges €6 in transaction fees. You therefore receive €2,490 in your account. Your original investment was €1,956, resulting in a profit of €534. In this example, the broker has received transaction fees twice, once on purchase and once on sale. Regardless of whether you make a profit or a loss, the broker receives compensation for executing your orders.

Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult a professional advisor when making financial decisions. The information and tips provided on this website are based on the personal insights and experience of our analysts and are intended for educational purposes only.