There are a lot of options available to someone looking for an online stock broker. Most of these brokers are cost â€“ competitive and there are a lot of things you have to keep in mind. Here are some key things that you need to think about when evaluating an online broker.
Cost: This is the most important factor and you need to compare the cost of transactions across certain categories such as:
- Market or Limit Trade
- Options Trade
- Automatic Investing
- Buying No Load Mutual Funds
Price of Assisted Trades: Some brokers charge you extra if you call up and place an order. If you intend to call up and trade, then make sure you find out what they charge on phone trades.
Promotional Offers: Some brokers give you cash â€“ back if you switch to them from some other broker. If you already have an account and are looking to move to another broker, then be sure to check out the rewards for moving out.
Inactivity Fee: Some brokers charge you inactivity fee if you donâ€™t trade for a quarter or sometimes even a month. If you are not a regular trader â€“ watch out for the inactivity fee.
Account Minimums and Differential Pricing: Some brokers require you to keep a minimum balance and then still others would charge you a lower price if you maintain a certain balance or trade above a certain number
Automatic Investments: If you are not a market timer and are happy to invest a certain amount in fixed securities recursively, then you need to find out whether the broker offers you the convenience of automatic investment. You can select a schedule and the broker will automatically execute your trade according to that schedule.
Special Rebates: Sharebuilder has certain special rebates for Costco Members and so if you have a certain membership already and a broker gives you some special offers on that â€“ be sure to compare the brokers in this new light.
Availability of Certain ETFs: For a long time, I assumed that you can buy any ETF through any broker. I was surprised to see that there were certain ETFs that werenâ€™t available through my broker. If you like to research and buy stocks and funds of a slightly exotic nature â€“ like something that replicates the Australian Dollar or Gold funds, then you will need to find whether your broker offers such funds or not.
Customer Service: Read reviews about the brokers you are screening and read about peopleâ€™s experiences in dealing with them. Reading reviews on forums sometimes gives valuable insight about how a broker really acts, when you need them.
These are some factors that I think are important to consider while selecting a broker. Different users will have different needs and based on what is important to you â€“ evaluate the various brokerages that offer their services.
A slightly modified version of this post appeared on Cash Money Life earlier.