How to Choose an Online Broker That You Can Trust
Choosing an online broker is one of the first and most important steps you need to undertake when investing. Your choice may be dependent on several factors, ranging from your investment style to how adept you are when it comes to trading stocks. Following are some tips to keep in mind when choosing an online broker.
The first thing to do when searching for a trustworthy online broker is to check for licenses and certification. The company must be certified within its state of operation. Dig deep when it comes to company history, making sure that you find out when it started and where it is located. Google the company and seek additional information from third-party sources to prevent unbiased data.
Experience in Trading
New investors are either active or passive with their investing habits. Regardless of where you fall in however, it’s usually best to opt for a full-service online broker. A full service type provides everything you might need for investing, including statistical tools and advice from brokers on how to handle your money and create an enduring and diversified portfolio. Other advices, depending on your preferred investing technique, include:
- Opt for low-cost minimum account requirement if you’re a passive investor with little cash to set aside. Minimum accounts are usually at $500.
- If you intend to actively buy and sell for profit instead of investment, opt for discount brokers to minimize the commission costs.
- If you’re investing to fund your retirement, opt for brokers specializing in long-term investments.
The maintaining balance is not the only thing you have to worry about. Commission costs, inactivity costs and other hidden fees should also be researched, especially since online brokers don’t exactly advertise this information. Take the time to stake out an online broker’s website for a few days, reading all of its entries to get a general feel for the service. Watch out for asterisks and footnotes because they’re usually conditions to what seems to be an “excellent” offer. For example, the online trader might only charge $1 per transaction, but only for clients with a minimum account of $10,000.
Stocks and Mutual Fund Database
Look for a stock company capable of providing access to hundreds – if not thousands – of stock options. You’d want a service that already has the stocks you want within its database. This makes it possible for you to diversify as much as possible, therefore protecting your assets against any market setbacks. Most online brokers deal with mutual funds, individual stocks, margin trading, money markets, bonds, options, futures, CFDs and Exchange Traded Funds. Take note that in some cases, different fees may be attributed to these transactions.
Trustworthy brokers will provide you with sufficient information when making your investing decision. This means the availability of articles and studies to keep you updated on investing news and strategies. Charts, trends and statistics should also be part of the service, allowing you to assess the current market and make an informed decision. Some online brokers may offer this information free of charge, while others may charge a flat rate for one year of access.
A straight stock trading service might be enough for you, but it’s important to consider your long-term goals. Specifically, take into account the additional broker services, such as IRA openings, bank account links, credit services and more. These one-stop companies will let you buy, sell, transfer and make payments all through a single system. Take heed though! Make sure that the company has excellent safety guards on its website. Security programs that help protect your identity, credit card number and transactions are crucial, allowing you to earn and invest in relative safety.
A personal recommendation is usually the best way to find an online broker that you can trust. If you happen to have friends or relatives in trading, ask them what online broker they’re using. Ask about the fees, customer service, minimum requirement and other factors previously discussed.
Availability to Customers
Look for multiple contact information, such as phone numbers, email addresses, chat options and even the address of land-based offices. This means that in the event of a problem, you have several ways of contacting broker representatives for help. You might want to launch a speed test on your favored websites. Send a query through their email/chat functions and time how long it takes before you get a response. Keep in mind that when it comes to stock trading, time is crucial. Any answer that goes beyond 20 minutes is too long of a wait.
Talk with the Representative
While testing out the efficiency of a company’s customer service, this might also be the best time to talk to its representative about items not expressly provided in the website. For example, does it offer DRIPS and is there a return on cash perks? The answers may not be as important as the way the answers are delivered. The company representative must sound professional and capable of offering information quickly and in a cohesive manner.
Rate and Compare
There are currently websites that review and rate brokers depending on different factors. Through these, you’d be able to perceive a company’s reputation among its peers. Take advantage of these rating websites to compare different online brokers, paying attention to costs and the services included in those prices.
Trade Free Option
Once you’ve managed to whittle down the list to five or less online brokers, you can check if the company offers a Trade Free option. This means that you can trade for a specific number of days with zero commissions charged. This allows you to earn, save and learn more about the broker’s service, all at the same time.
Only time will verify the trust you give your online broker after offering him/her your account. In a few months of transacting through your choice, you’d be able to fully understand whether you’ve made the right decision or not. Help increase your chances of finding a trustworthy online broker by learning as much as you can and following the tips above.
When it comes right down to it, your choice of a trustworthy broker should depend on your personal investing preferences. Don’t be too concerned about starting big with a $10,000 or $25,000 account. You can build that along the way. Instead, focus on the broker’s quality of service to help you consistently build your financial goals.