Online Broker Comparison - Questions Every Investor Should Ask

When selecting a broker for the first time or shopping around for a new online broker these are the questions you should ask. What kind of investor are you? Are you an active trader, a buy and hold investor, or do foreign markets interest you? Finding out what kind of investor you are is the first step in comparing discount brokers. Each online broker you work with will have a specialty they’ve built their business around. Some specialties include customer service, mutual fund management, low cost trading, real time tools, user friendly interface, or having a network of traders interact with each other. Which of these specialties is the best? The best broker is one that fits your needs.

The best broker comparisons highlight the differences and make suggestions based on what kind of investor will be using the service. Some comparisons are worthless because they are comparing apples and oranges and they fault the apple for not being an orange. Each company is different and they have grown in different ways. For the majority of investors most online brokers have all the services they could possibly ever need. With that in mind what are the main areas to compare.

Ease of use. Websites that are easy to use will help you avoid a lot of headaches. Usually within a few minutes of trying to sign-up you will have an idea of how easy the rest of the company’s site will be like.

Minimum balance to start an account and avoid fees. Are you an active investor with access to enough cash to open an account. Do you have enough available to avoid account minimum fees? For most online brokers this is not an issue because they have eliminated all these kinds of fees.

Inactivity fees. What if your account is inactive? Will you be charged a fee? Some broker’s inactivity fees in are figured on a monthly basis. If you are a buy and hold investor they may penalize you for not actively trading. Again, this is usually not an issue. This is usually an issue with big name brokers that haven’t really caught on to the low cost mentality.

Customer Support. How easy is it to contact someone at customer support? If you needed something urgent could you talk to a real person about your account?

Investment Products. Are you wanting to invest in more than just regular stocks, bonds, mutual funds, and options? If you prefer mutual funds, does the broker have a wide range of no-load and load funds to choose from? Many brokers don’t like trading penny stock or excessively risky stock.

Timely Execution of Trades. How long does it take for the broker to execute an order after you’ve placed it? While most companies will be very close on time of execution some are worst than others. A search engine can make short work of investigating if a company has had problems in this area.

Does the Broker have Physical Locations? Many investors that are Internet savvy have never placed foot in a physical location and have traded for years. Other investors may take solace in knowing they can drive to a branch and talk to someone face to face.

Trade Commissions. How much will it cost to trade? How many trades do you anticipate executing each year? How much of your total investment will the commission represent? Trading costs can add up quickly if you buy a number of individual stock, buy weekly, or sell regularly.

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