Comparing Stockbrokers
January 12th, 2008 by admin
Sometimes you become unsure as to which one of the two or three stockbrokers you should finally select to open your trading account. It is, therefore, advisable that you do comparison-shopping before settling for a broker. There are certain salient points on which you should compare them.
Guidance and Information
Compare the quality as well as the quantity of information provided by each stockbroker on his website. The stock investment scenario keeps changing with new policies, rules and algorithms coming in periodically. You must ensure that the information and guidance provided by your stockbroker should be the latest and most relevant to your investment needs. There should be latest news flashes about the new stocks coming in the market, financial decisions and policy changes in the relevant financial sectors to keep you updated so that you can take informed investment decisions. Sometimes the information provided, though important, is too less to serve any useful purpose. The tools for stock market research such as charts, quotes, symbol finder, market scanners, fundamental and technical analyses, moving averages, Linear Regression Functions, Band Indicators, Oscillator Indicators, Index Indicators, General Indicators and so on and their use should be explained to the investors.
Brokerage or Commissions
You may ignore your broker’s commission-if it is high– if you are a one time or a long time investor, but you cannot ignore the broker’s commission if you are a day trader or a frequent trader. Higher commissions cumulatively affect your overall earning percentage. It must not be forgotten that the brokers survive on commissions and they try to charge the maximum from the investors. Some brokers have hidden charges, which even the experienced investors cannot easily detect.
Minimum Deposits
Since investment in stocks tends to be huge over a period of time, the brokers expect the investors to maintain a certain minimum deposit with them. The minimum deposits range from zero dollar to $500 to $2,500 depending upon broker to broker. That a broker charges zero dollars as account minimum should not be an only reason for you to open an account with him. You must compare the benefits offered by each broker. Some times the benefits offered in terms of services and commissions outweigh the comparatively higher minimum deposits. Conversely, a minimum deposit of zero dollars may prove costly in the long run.
Investment Plans
Some stockbrokers offer automatic investment plans. There are others who do not provide such plans, or, offer them only on selected investments.
There are still other brokers who make irresistible offers for automatic investment plans for only $1.00-$2.00-$3.00 per investment. The automatic investment facility is offered daily on all the listed and NASDAQ stocks and ETFs. This shows how important it is to compare the two-brokerage firms before signing up you account.
Real-time Market Orders
While some online brokers accept real time market orders and charge smaller fees such as $1.50-$2.00-$3.00 per trade, there are others who charge higher fees such as $6.99 -$9.99 to $12.99-$19.95 per trade. It would be interesting to note that those brokers who do not want any minimum deposit, charge as much as $11.95 to $15.95 per trade. As a vigilant investor, you must note these differences while comparing the two brokers.
Regular Brokerage Investment Minimum
Some brokers insist that you should buy at least 100 shares of a stock, since all the stocks trade in units of 100 shares. If you trade in less than 100 shares at a time, you have to pay higher commission charges. Obviously if you cannot afford to buy 100 shares or more, you cannot trade in stocks at all. There are brokers who offer the facility of fractional share investing. You are not obliged to buy 100 shares or even one share. You can buy even a fraction of a share and invest any dollar amount that suits your pocket or mood.
Inactivity or Maintenance Fee
You may have to suspend your investments for some time. Some brokers charge you inactivity fees, which can be as high as $40 per quarter. This can be a very unwelcome liability especially for a person who may have stopped investing due to financial constraints. You must, therefore, check this feature while comparing two online brokers.
There are other issues, which must be studied when making comparison between two brokers, and these include dollar based investing and subscription fee and so on. Vigilance is not only the price of freedom but of making money in stock trading as well.
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