Choosing the best broker seems like a simple process. But in reality, it can be a nightmare.
Finding the best broker is not easy. Not at all!!! I’ll give you seven tips on how to do that.
In the very beginning, you want to be sure that the broker has the right credentials, understands the market, has similar wealth-building beliefs as you do. Trust me.
What is the main point when you have to choose the best broker
a) make sure a broker offers the services and features you most need,
b) don’t pay extra for services and features you don’t need or want.
The best approach is to make a list of facilities you want from your broker.
Tips and tricks for choosing the best broker
- Minimum Trades – Check if there is a clause about minimum trades that you will have to do as well as the penalty for not complying with the requirement. There are actually brokers who have no minimum requirement or require only a few hundred dollars.
- Costs – Consider the commissions and other fees that broking companies charge. Brokers typically have a wide assortment of fees for cost per trade. That’s the holy grail of the online brokerage universe.
- Customer service – Look for customer reviews online or on specialized forums, please. Make sure that the broker offers such support and it’s available during more than just “regular business hours”. Check if it’s available in various forms: email support and live chat can be more convenient contact methods than a direct phone.
- Investment options – Some ‘’full-service’’ brokers may not offer products of all asset management companies or AMCs. A good broker is one that offers you the ability to invest in a large number of assets: stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate investment trusts. You will need a broker who can provide you with all of the possibilities if you want to spread your investment wings.
- Investment Advice – The problem may arise if you are not DIY (do it yourself) type. Some brokers will offer limited investment advice, while others will provide a full investment advisory service, usually for a small fee, some will charge a higher fee if you need broker assistance. You have to explore what suits you best.
- Asset Allocation Guidance – Especially for new investors Asset allocation is one of the more challenging investment functions. It can be complicated enough to decide on initial asset allocation, but even more, involved to maintain that allocation going forward. Periodic rebalancing is not the easiest of tasks if it must be done manually and will be necessary to do from time to time. Most robo advisor services will handle asset allocation and automatic rebalancing as part of their account management fee. If you’re looking for “hands-off” investing, robo advisors could be the best option for you. You have to find out if the broker offers this service and if there is an additional charge.
- Types of Retirement Accounts – It’s best to confirm this at the very beginning that the broker offers multiple types of retirement accounts to invest in. And even if you want only a regular investment account right now, you may decide to open a custodial account for one of your children in the future. If you have confirmed that these options are existing before you first sign-on, you can be relaxed. I know that most investors like to have all of their various accounts with a single broker, particularly if they are happy with the service.
What type of trader do you want to be?
Are you an active trader or buy-and-hold investor? Whatever you are, it will affect your choice of broker. If you are a buy-and-hold investor and invest in index funds, making a few trades per year, fund selection may be more important to you than low transaction fees.
You have to determine if you’re an investor which means long term investing, or active trader, short term trading. If you are still learning how to trade stocks online, you shouldn’t rush into choosing a broker. Everyone eventually develops their own trading style.
Online stock brokers offer a wide array of features and fees. Choosing a broker with a good reputation is worth it. Someone with the features you really need and a reasonable fee structure. Don’t let yourself be attracted by a platform with the bells and whistles. Especially when you are at the beginning.
Readers, what do you look for in the right investment broker? Let me know and share it with others.