Brokers, Brokers Everywhere
Looking for a discount broker?
New ones appear to be popping up everyday. Each with different bells or
whistles to entice an investor to use their service.
Below are 10 factors to consider
when choosing a discount broker. Take each of these into consideration and
apply importance based on your situation and requirements.
Rates - Online brokerages can be put
into three general categories:
a) Super-cheap brokers that
charge from $4 to $12 per trade. Best used for those that plan on
trading very frequently, but satisfactory for buy-and-hold investors as
b) Mid-priced brokers that
charge between $12 and $20 per trade. These brokers justify slightly
higher prices with better known brand names, and possibly additional
c) High-priced brokers that
charge more than $20 per trade, typically around $29.95 per trade.
Other fees - Beyond the price per
trade, you will find brokerages may charge other fees, including fees for
transferring assets into the account, fees for closing an account, IRA
custodian fees, wire transfer fees, account inactivity fees, annual fees,
and fees for not maintaining a minimum balance.
Minimum initial deposit - Judge
your own financial situation. If you are new to investing, or not yet
willing to commit large sums of money, look for an account that has a
minimum of $2000 for initial deposits or perhaps even less. IRA accounts
will typically have lower minimums, and in some cases there is no minimum
Customer service, site performance, and interface -
Check out each brokerage's website and make sure the interface is
intuitive and pleasing. You also want to know what kind of customer
service the brokerage has. In researching this you will definitely want to
see how the brokerage does at sending you all relevant material you ask
Traditional banking services - It is
possible now to do everything that you typically use a bank for through a
brokerage account. Banking features available include:
- Money market sweeps
- Check writing and bill payment
- Visa cards
- Direct deposit
- ATM cards
The higher rates that your cash
will typically attract in a brokerage money market account versus the
typical savings or checking account could make this an attractive feature.
Also, if you meet certain minimum account levels, some brokerages will
reimburse you for fees imposed by ATM machines.
Research - There is plenty of research
available for free all over the Web, but some brokerages have research
that you may find particularly useful. Some of the offerings include
analyst reports, real-time quotes, and detailed financial data.
Mutual funds - The selection of mutual
funds at brokerages can differ widely. If you have a particular mutual
fund family you are set on using, make sure the brokerage you are
selecting offers that family of funds.
Investment product selection - Beyond
equity mutual funds, there are a number of other investment vehicles you
may wish to use. All the brokerages will offer the stocks on the major
exchanges. However, if you are interested in over-the-counter bulletin
board stocks (OTCBB), you will have to see which brokerages offer them.
Other choices such as options, government bonds, corporate bonds, and the
like are not available through every brokerage.
Other methods of getting your investment choices executed
- Check out whether the brokerages you are looking at also
have touch-tone phone trading, and how that works. Sometimes you just
might want to place an order through a real, live individual, and many
discount brokerages offer that possibility, too.
Other freebies and perks - Beyond the
low costs, some brokerages will give you frequent flier miles, books,
months of Internet access, or just plain old money for you to open up an
account. The reward for opening an account can go as high as $100, so keep
that in mind.
Seems like there is a lot to
consider. But the bottom line is, use the discount brokerage you feel
comfortable with. It is your money and you should have the final decision
and control. The above are just some features to consider and compare.
Disclaimer - The information contained in
the documents in this website should not be construed as an offer to
sell, or a solicitation to buy, any securities referred to herein.
The information is considered reliable, but not guaranteed as to
accuracy or completeness. TheStockAdvisor specifically disclaims
any liability in connection with the documents and/or information
contained within this website. See complete