You have decided that you are ready to go out on your own and use an online broker. The savings over a full service broker are tremendous, but the responsibility for finding the right investments is now going to be falling directly onto your shoulders. If you are ready to do your homework and run your portfolio, then you need to get started finding out which online brokerage would best suit your needs. Here five steps to help you determine which broker might be right for you.
Four Steps to Finding the Online Broker for You
Step One: Research Their Product Offerings
Not all online brokerages offer the same amount of products or the same line of products. You’ll need to see which brokerage matches your needs as far as product offerings. If you are looking to put the money you don’t invest in stocks into a certificate of deposit or money market, you’ll need to make sure you find an online broker that also offers the typical bank deposit accounts. If you want to trade options, look into their options trading program.
Step Two: Compare Pricing Structures and Minimum Investments
Online brokerages have to make money, and trading fees are the way they generally do that. You’ll want to compare both fees per transaction as well as what kind of fees they may charge for inactivity. These inactivity fees can eat you alive, so I recommend finding a brokerage that has no inactivity fees. Also consider the minimum investment level and align that with your investment amounts.
Step Three: Study Research Reports Available
Since you are on your own in the investment world now you need to make you have solid research information to work with. Find an online brokerage that allows you to access stock and fund research from major players in the industry such as S&P or Value Line.
Step Four: Customer Service and Trade Execution
I put these two important pieces together, since they are both so crucial. Always make sure you study reviews of other investors who have put their money in these brokerages before to see how the customer support is. There will certainly be times when you need to speak to someone as soon as possible about an issue, so you want to make sure they are available and helpful. At the same time, you must make sure the website and trade system is reliable. If you are going to be buying and selling stocks, you need a site that executes your orders quickly or you can get burned.
There is no single online brokerage that is best for everyone, rather it depends on your situation. Use these steps as a guide to help you find the one that is right for you!