Investing in stocks, mutual funds, and money markets is now the norm among people, from those who get the Motley Fool Stock Advisor or other systems to those who just have a little invested here and there. But before we toss a single coin into these markets, there are essential things we need to consider. At the top of these factors is the brokerage firm we need to use.
Thanks to the internet, we can now choose brokerage companies online. The only problem is that there are too many of them. How do we select the best one? Read on as I detail vital factors to consider.
Minimum Deposits
Account minimums are one aspect we should review before signing up with an online brokerage firm. While some brokers allow us to register without a deposit, others require upfront payments before activating our accounts.
Most brokers who deal with mutual funds require a substantial initial investment. We could struggle to invest in such firms if our starting deposits are way lower. To avoid such embarrassments, we need to research the account minimums of an online broker. Some brokers that don’t require an initial deposit include Merrill Edge, TD Ameritrade, and Ally Invest.
Trading Styles and Tools
As beginner traders, we’re less likely to demand a lot from an online brokerage firm. We expect firms to offer us some introductory resources. These could be videos, tutorials, zoom seminars, and other resources tied to investing.
But as we become experts, we will need more trading tools from a broker. As active traders, we will require an online brokerage firm to offer research tools, analysis tools, Robo-advisors, platform customization, and rebates for high volume trades, among other tools. We need to be aware that any extra feature might attract added costs.
Cost Per Trade
Fewer things are as important as cost per trade in the brokerage world. That’s because we can compare the unit prices among firms and select the ones with prices that appeal to us. However, we cannot base this decision on a single trade.
Firms avail several trade options at different prices. A brokerage company could offer a small fee for stocks but charge higher on other options such as mutual funds, bonds, or ETFs. We should compare all the possibilities if we intend to invest in various trade components.
Account Fees
Once we register with online investment brokers, account fees become inevitable. These fees come in the form of extra features we choose to be added to our accounts. Charges can also be applied when we transfer funds to a competitor’s broker site. Some brokers even charge a fee for closing our accounts.
We can minimize brokerage fees by opting out of the services we don’t need. For standard charges such as inactivity fees and annual costs, we can only compare their pricing and sign up to brokers who charge less.
Reputation
A broker’s reputation is usually depicted by the reviews they get. We need to research online reviews about a particular firm before deciding. Lots of negative comments indicate that other customers are fed up with a specific broker. We should heed their advice and stay far away from such companies.
The ideal company displays its fees, has responsive customer support, and does not hide any charges. We are also likely to trust an online broker who has been in operation for many years.
Offers and Promotions
Due to competition, most online brokers offer new clients alluring deals. We can expect offers such as bonuses on deposits, commission-free trades, and other free trading tools and platforms. Promotions shouldn’t be the only factor that we should consider. A brokerage with high commissions isn’t worth our time, even if they offer the best freebies.
