When you make the decision to start investing one of your 1st tasks is going to be finding a Brokerage account that fits your needs. Indeed it’s one of the most important decisions that you’ll make and, because of that, we’ve put together a Blog article to tell you about the most important things you should look for in a brokerage account. Enjoy!
There are basically 2 kinds of brokers, either ‘Full Service’ or ‘Discount’ Brokers. We’ll take a look at full service or ‘traditional’ brokers 1st.
When you open an account with what’s known a s a full service broker you will have the opportunity to work hand in hand with a personal stock broker who will offer you ideas about where to invest, prepare regular reports about your portfolio, inform you about how well your investments are doing and be available quickly when you need their advice. This availability allows you to pick up the phone (or send an email) when you want to buy or sell anything for your portfolio like bonds, mutual funds and stocks. They will also offer you a lot of research sources to help you make your investing decisions. Of course the customers of full service brokerages pay a much higher commission fee to get these special services, something that definitely needs to be taken into consideration before signing on the dotted line.
A discount broker, as the name implies, will charge less in commissions but will also give their customers much less service and not much in the way of advice or research. They are made more for the investor that wants to do it themself and make their own decisions pay less in commissions for that fact. When a decision to make a trade is made the investor can make them online or, if necessary, call the brokerage firm and speak to whoever is available at the time. In the last few years many discount brokerage firms have started performing the same kind of research for their clients as full service firms do in order to attract more customers. E-Trade, Scottrade and others are examples of discount brokers.
Depending on the brokerage firm that you choose you’ll be charged a set fee per transaction. It is vital to know what the rate for this is as many brokers offering the same services can have vastly different trading prices. In some cases the services you get may be better but in others the services are the same, meaning that the price per trade is simply more expensive and has no other benefits. Find this out before you agree to become a client.
Minimum opening balances and maintenance fees are another important bit of info that you’ll need to know before making a choice. Some have higher and some have lower but the average is about $1000.00. If a maintenance fee is charged if you fall below that minimum you may lose a substantial bit of money, especially if you’re a new investor. Check to make sure there isn’t or make sure you never fall below the minimum.
Finally there are the charges for extra services, research tools and investment advice. If you know enough about the market to do this yourself you can use a discount brokerage but if you’re a newbie you may need a full service firm. Find out what the brokerage firm you are leaning towards charges and make sure that their prices are at least comparable to others. One good tip is to make sure that the website they have is user-friendly. If it’s not every time you go to make a trade you’re going to get frustrated.