4 of 6 in Series:
The Essentials of Investing Online
Your online broker is the most important member of your online investing team, handling everything from tracking your financial portfolio to helping you buy and sell investments. When online investors run into problems, 77 percent of them go to their online brokerage firm for help, says rating service J.D. Power.
Brokers differ from one another in nine main ways. If you’re aware of these nine things and understand what you’re looking for, you can quickly eliminate brokers that don’t fit your needs. The factors to consider are as follows:
Commissions: Commissions charged by online brokers have been steadily falling since the 1990s, with most taking a dive even lower during the price war that erupted in early 2010.
Availability of advice: Full-service traditional brokers are all about giving you personalized attention. Not only can they pick stocks for you, but they’ll also pour you coffee and serve you donuts when you visit them in their fancy offices. Self-service brokers give you the tools you need, and then you’re pretty much on your own. A few brokers fit somewhere between full service and self service.
Access to an office: You may not think that having access to a branch office will be important to you; after all, you’re an online investor. Still, rating service J.D. Power found that 40 percent of online investors who have access to branch offices tend to be happier with their online brokers. Go figure.
Other banking services: Some brokerage firms let you move money from your trading account into other types of accounts, such as high-yield savings or checking accounts. Some also provide ATM cards or credit cards.
Speed of execution: When you click the Buy or Sell button on the Web site, it doesn’t mean that the trade is done. Your order snakes its way from your computer to other traders on Wall Street, where it is filled. Some brokerages have spent a great deal of effort giving you the fastest path to other traders. That’s generally beneficial because it means that you get a price that reflects the true value of the stock you’re buying or selling.
Customer service: Some brokers have customer service reps available at your beck and call either in offices or on the phone. Others let you e-mail a question and wait for an answer.
Site reliability: Some brokerages have focused on limiting system downtime, which might be important to you if you trade many times a day
Access to advanced stock-buying tools: Many investors are increasingly looking to their brokerages to provide comprehensive tools that can track tax liabilities, help them go prospecting for stocks, or monitor market movements or breaking news.
Ease of use: Online brokers geared for people new to online investing or who plan to trade very infrequently are minimalist and have as few buttons as possible. Some sites targeting advanced traders provide trading tools aimed at helping investors flip stocks or other options quickly and at set prices.
Brokerage firms often have confusing commission structures to fool you into thinking you’ll pay less than you ultimately do. Make sure that you check to see whether the firm charges extra for certain types of orders, such as limit orders or mutual funds. Some brokers zing you with fees or inflate commissions if you don’t keep a balance of a certain size. Some brokers also charge you for switching to another broker. Always check before signing up for covert fees.
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Source:http://www.dummies.com/how-to/content/how-to-find-the-best-online-broker-for-you.html
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