In this post, let us discuss a few useful tips to choose a stockbroker. First, let us start with a general description of stockbrokers. Stockbrokers are individuals who help you in buying or selling stocks, ETF’s, mutual funds, futures, options etc. They serve by sending your orders to the stock exchange and get it done. They earn by charging a commission for every transaction from you.
Nowadays, stockbrokers come under the umbrella of companies or firms. Based on the service they render, they are classified as discount brokers and full-service brokers.
The online brokers are also known as discount brokers. They practically help in placing the order while buying or selling from your home. They don’t give any suggestion about the shares or stocks. The main advantages with them are their charges are minimum. They might charge around $5 or even less for a single order. This charge is very meager compared to a conventional brokerage. Also very less or no investment is required for discount brokers account. So anyone can use them. Few examples for discount broker are listed below.
Fidelity, TD Ameritrade, Charles Schwab, E*trade, Interactive brokers, Merrill Edge, Trade station, All invest, First trade, Sogo trade, capital one investing, Lightspeed trading,just2trade etc.
Full-service brokers are real consultants who help you identify the type of investment or stock or mutual fund that you would be comfortable with. They give a solution based on your capability and requirement. They generally charge high fee amounts of around $75-$500 based on your investment plan. So they deal with big size dealings. Few examples for full-service broker are listed below.
Edward Jones, UBS, Raymond James, Merrill Lynch, Wells Fargo Advisors, Morgan Stanley Smith Barney, etc.
If you are experienced with choosing your own stocks, you can go ahead with a discount broker to save cost.
Tips For Choosing A Stockbroker
Discount brokers are advisable for small investors. Full-service brokers are utilized by high-end customers who are ready to invest a lot.
The following factors need to be considered while choosing your stockbroker.
You may place many orders while investing. For each and every transaction the brokers charge a certain fee as commission. Normally the range will be around $5 for every trading in case of discount brokers. This will be higher in case of a full-service broker. So think about it before opening your account.
Most of the brokers charge an annual or monthly fee as maintenance of the account. Prefer a broker who charges minimum annual or monthly fee for holding an account.
Minimum Account Balance
You can start with a small account and then add it up. There should be minimum balance in the account. It costs around $5000 for discount brokers in most cases. In some case of discount brokers, no minimum balance is required. But full-service brokers require a hefty balance.
Variety Of Funds
You should be given an ample variety of choices for selecting your fund. Most of the brokers give the same list of stocks. So go for more flavor.
Research And Opinion
Almost all the stock brokerages give access to third-party research ideas or opinions. This will give you an idea about key parameters like earnings per share, dividends, financial reports of companies to help you make the final call.
A lot of mutual funds, ETF’s, etc., are handled by a lot of brokers without any commission or transaction fee. The transaction fee is also known as a load. Discount brokers usually waive this load. But full-service brokers charge for these funds.
Any Time Money
If you are investing, you should be able to use your money anytime. A lot of banks act as a discount broker. They provide ATM cards and free checks to access your money anytime as a privilege.
Round The Clock Support
Whenever you have any clarification regarding your investment even during night timings or weekend, support should be given. For example, you want to know the maturity amount of a fund you are going to close, and then you can call your customer service executive for the reply. Therefore 24/7 support is also a necessary criterion while selecting the broker.
We hope that the above tips will help you in finalizing your stockbroker. In general, more you pay more the services you get. The final choice of a broker depends upon your investment capacity and knowledge level.