headerphoto

Choosing an Online Brokerage Firm

Discount or "online only" brokers serve as order fulfillment centers. You will not have your own personal adviser assigned to make recommendations suited to your specific needs. The research, choices and decisions of what stocks to buy and when to sell are 100% your responsibility. Since these brokerages do not have to support research departments and large staffs to offer the one-on-one customer service of a full-service broker, they can charge deeply discounted transaction fees.

While all discount brokers may offer low transaction fees, there are differences among them. You must conduct some research to find the one that best fits your needs. Each online broker will have a required minimum deposit amount to open an account. In addition, some require that a specific number of trades be conducted per quarter or per year in order to avoid a “maintenance fee.” If you plan to make a lot of trades, that type of fee requirement wouldn’t be a factor in your decision. If you don’t make a lot of trades, it might be wise to keep looking. With regards to your conducting research on an investment opportunity, some online brokers have a very limited in-house research capability while others have large investment-oriented libraries open to their customers. The ability to do research on a company of interest is an important tool for a self-directed investor. The same research information is available elsewhere, but you would have to find it for yourself. Is ease of access worth paying a little more per trade? That is for you to decide.

There are other differences among discount brokers that could be of significant importance to you as an online investor.

  • Additional perks, such as all-in-one accounts, are offered by some discount brokers, especially at higher deposit levels.
  • Most, but not all, online brokers now trade mutual funds.
  • The same is true as far as providing concise year-end, cost-basis information that makes tax time so much easier.
  • Nuisance fees also vary widely among the discounters. Some donít seem to have any and some have an extra fee for just about everything. Any fees charged in addition to the transaction fees, such as postage, issuance and delivery fees, etc. may be small but must be factored into the overall cost.

Finally, the discount brokerís website should be easy to navigate. You should be able to find and read your statement easily and there should be information available on how to contact a real live person if you have a problem.



IORC Simulator
Center

Whether you are interested in finding out waht it's like to trade online, a margin account or just want more information on how to better protect yourself from hype, the Investing Simulator Center is right where you need to be. Click below to try it out!

Online Trading

Margin Accounts

Stop the Hype