Beginner’s Guide to Investing: Tips for Choosing the Right Online Broker
Like traditional brokers, an online broker offers a variety of investment options, such as mutual funds, stock options, individual stocks, bonds, futures, ETFs, and even forex trading. If you’re a newbie investor, choosing the right online broker is the best way to start investing on the right foot. After all, this is a broker whom you’ll entrust with your hard-earned money.
Here are things to consider when selecting the right online broker for your investing needs.
#1 PAY ATTENTION TO COMMISSIONS OR COST PER TRADE
As an investor, you’ll probably not invest in all investment options on offer. So, check out commission charged by the broker on the particular investments you are interested in. Oftentimes that means looking at the Cost-per-Trade when comparing online brokers. However, it is important to note that the commission or cost-per-trade for stocks might be wildly different from that of bonds for the same broker. So, take a closer look at the costs and commissions associated with each investment option.
#2 INVESTMENT OPTIONS
A great online broker offers a rich, diversified menu of investment options. Even if you want to invest in stocks right now, you want to open an account with a broker who’ll provide you with other investment options in the future. In other words, does the broker offer a great variety of investment options, including ETFs, bonds, stocks, mutual funds, real estate trusts, securities, futures, Forex, etc.?
#3 CHECK ACCOUNT FEES
Watch out for account fees like research fees, trading platform subscriptions, dormancy fees, annual fees, and so on. Ideally, you want a broker that doesn’t charge account fees, but that isn’t always the case.
#4 DOES THE BROKER OFFER DIRECT INVESTMENT ADVICE
Do-it-your investing is all the rage right now, especially with increased connectivity to the internet. Even still, you want to invest your money according to prudent and sound investment strategies. That’s where advice from an online broker can come in especially handy.
#5 DOES THE BROKER OFFER INTEREST ON UNINVESTED FUNDS?
Not all online brokers offer interest on uninvested funds, but you want to one that does. This way, your uninvested money can earn something, even if it’s as little as 1 percent.
#6 CUSTOMER SUPPORT
How will you get in touch with customer support when you need help? Does the broker offer email, phone or live chat support? More importantly, go with a broker whose customer support team is available 24/7.
#7 MINIMUM INVESTMENT REQUIREMENT
Due to fierce competition among online brokers, it’s not uncommon to find ones that have zero minimum investment requirements. That’s a good thing if you want to start small and get a feel for the quality and services offered by the online broker.