Stocks, bonds, and mutual funds are some of the best investments you can make, but unfortunately, it’s difficult to pursue these types of investments completely on your own. In fact, you need a license if you’re exchanging securities independently.
Thankfully, there’s an alternative option for independent-minded investors who want control over their exchanges without the legal paperwork and hassle of training or licensure: online brokerage accounts. Brokerage accounts give you the power (and usually a platform) to do all your investment trading, usually for a per-transaction fee, and are easy to start. The problem is, there are hundreds, if not thousands of options online, and finding the best brokerage account can be both difficult and stressful—this is your money, and you want to make sure it’s in good hands.
So how should you go about choosing a brokerage account online?
Before you get too deep in the process, there’s a bit of homework you have to do. Only when you’re armed with the knowledge of your current position and goals can you even begin to consider your options; everybody is different so you need to know what you’re looking for.
- Define your main goals. Different people have different needs. Are you looking to stash some money for retirement? Are you looking to be an active trader with profitability as a goal? You’ll be looking for different platforms.
- Take inventory of your current investments. Do you currently have a brokerage account that you’re looking to switch or are you starting from scratch? If the former is true, what about your current platform is making you change?
- Make a list of candidates. Use searches or referrals to generate a list of potential candidates—you’ll need this when you start narrowing down your options.
Then, the main section of the article will list factors to consider when choosing a brokerage account. Some of these will include the company’s commitment to security, the company’s history, the amount of available information, the availability of customer service reps and advice, the price of each trade committed through the platform, and the ease of using the platform.
Factors to Consider
Once you have a list in place, you can start narrowing down your candidates based on these criteria:
- First, how secure is this platform? Is it cloud-hosted, with a private layer of security? Does it use multi-factor authentication and other methods to ensure the person accessing the account is really you? What are their policies on identity theft and other types of breaches? You’ll be using this account to plan for your future, so security features are a must.
- How long has this platform been around? New platforms aren’t inherently more dangerous or less trustworthy, and in fact, might go out of their way to lend you more support because of their eagerness to grow. However, an online broker with a long and stable history is a good sign for your account’s reliability.
- Trade costs. Most online brokers make money by charging per transaction, so how much are you expected to pay? Most basic online brokerage accounts charge between $5 and $10 for each trade. If you’re trading often, you’ll want the lowest fee possible, but it’s not as big of a deal if you’re using a buy-and-hold strategy.
- Account types and minimums. You may be looking for specific types of accounts with your provider, such as a Roth IRA or other retirement investment vehicle. Some providers also offer different types of trading accounts, such as ones with unlimited trading and a monthly fee in lieu of trading costs. Take a look at the account types—and the account minimums—before making your decision.
- Information and advice. If you want a one-stop-shop for all your investment research and trading, you’ll want to choose a platform that offers plenty of news and information in the financial sector. You may even choose a brokerage account with available advisors who can help you make decisions and adjust your account over time.
- Help and support. If you get confused or need assistance, is it easy to get in contact with customer support? Make sure you choose a provider with ample help and support options available when you need them.
- Usability and personal preferences. Finally, consider how easy it is to use the platform, and any other special personal preferences you might have. Most brokerage accounts will give you a free trial, or at least a demo, to get a feel for how the system works. Small choices, such as navigation and layout, may make or break the experience for you, even if it’s only on an aesthetic level.
Hopefully, with these selection criteria, you’ll be able to narrow your brokerage account choices to a single standout candidate. No two people will have identical goals and needs, so even if your choice is unconventional, stick with it if it helps you make progress toward your goals. Besides, you can always switch providers if you end up unsatisfied.
Categories: Stock Market