Choosing an Online Stockbroker

Choosing the right online stockbroker is important if investors are to take full advantage of investing online. Thanks to advancements in communication technology, trading is now made more efficient. Investors benefit from competition among online brokers as they battle it out to provide investors the most value for their portfolios.  The following are some points to remember when comparing stockbrokers and picking the best broker that would suit your needs.

  • Know that different brokerages offer different services and they also differ in minimum deposits. You may not be required to post a minimum deposit to open an account with some brokers, while you may be required to put up several thousand dollars with others. Some brokers may require a higher opening balance to avail of their premium platforms, functionality and personalized support. Steer clear from brokers that require you to open an account with more money than you are willing to invest.
  • Know the cost to buy shares as well as the fee structure of your target online broker. You should find out if the fee to trade changes based on the type of order or size of order. Most investors go for brokers that offer a flat rate regardless of the type, price of the stock, or size of the order, also known as flat-fee trades.
  • Be aware of the investment options available. Your online stockbroker should not be limited to offering only access to trading stocks.  Make sure the online broker is able to help you invest in any mutual funds, ETFs and options you are interested. Most brokers do, but some just do not.
  • There are a lot of online brokers that offer funding a 401k, Roth IRA or other retirement accounts.

Tips for choosing your online broker:

  • Come up with a focus list of online brokers that interest you, narrowing down your choices according to your specific needs.
  • You will need tools to trade successfully. It would make sense to choose a larger broker that offers access to strong trade tools — from real time streamers to last sale tickers, live news feeds, mobile trading and even for some level II quotes.
  • Be aware of fees other than trade commissions. Many stockbrokers have already excluded many fees, but some still charge for inactivity fees, transfer fees and, in case of a retirement account, yearly IRA fees.

Discount online stockbrokers typically allow investors to buy stocks, however, they are not inclined to giving stock advice. If you want stock advice, you are going to need a full service online stockbroker or a local stockbroker.  They usually cost much more than a discount online stockbroker but the advice they offer can be worth gold.

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