Things to consider when hiring an online broker
These days just about everything can be done online, including investing. But before you sign up with an online broker, there are several things you should take into consideration beyond just what services an online broker can provide and at what cost.
Discount brokers
While a discount is great when you’re talking about a sale at Macy’s, a discount brokerage may not be the best place to start for the new investor. The discount broker will buy and sell for you, but you’re otherwise on your own in deciding what your investment strategy will be. That can be an unnecessary risk for many.
Full-service brokers
As the name suggests, these brokers offer a lot more, but at a cost. A full-service broker is going to give you advice that’s tailored to your investment needs. Of course, that comes with a higher price. If you’re a young investor, this may not be financially feasible. You are going to have to weigh the cost of the broker versus learning on your own about investing.
The price is right
Don’t make your decision based solely on a broker’s commission cost. That old saying “you get what you pay for” applies. Rates vary, but read the fine print. Much like the disclaimer for car ads that say in hushed tones “taxes, tag, and title extra,” there may be additional fees for limit orders, options, even talking on the phone with your broker.
Different methods of trading
While I spend a great deal of my time on the computer every day, I don’t want to be tied to it 24/7. Find out if the firm you are using offers different options for placing a trade when investing vs. making an electronic order. Keep in mind there may be additional costs associated with those options.
Customer service
When you call your online broker, does the phone ring without end? Are you placed on hold? If you need to speak to the broker, is someone readily available? Do they call you back in a timely manner?
Go to the broker’s website throughout the day to see how quickly the site loads and click on some of the links to make sure everything is in working order.
