What sets them apart from a veteran investor to a newcomer in investing is the priority they set in selecting the ideal brokerage service. The best online stock brokers will aim to align with your objectives and style to make your investing career successful.
Although there is no full-proof way of eliminating risks and ensuring high returns, choosing a proper brokerage that matches your requirements can surely give you an edge. Having a clear notion of what factors to look for before selecting an online broker will help you choose the ideal one that will eventually determine the gap between profitability and disappointment.
1. Understanding your requirements
The foremost thing to prioritize that most beginners tend to overlook is determining your requirements and identifying what is the most crucial for you in a trading platform. This can majorly depend on your investment objectives and the level of experience you have.
For example, a novice investor will most probably look for educational resources, a supportive customer team, and the option to practice demo trades while choosing a stockbroker. On the other hand, a professional investor with a history of executing numerous trades may seek features like advanced charting options, the option to trade various assets apart from stocks, and more.
Concluding certain doubts may also give you a head start in this process of finalizing an online broker for the stock market. These may include deciding the type of investor you are – active or passive, determining your investment goals, your requirement of resources, and the type of trades you prefer to execute.
2. Evaluate the broker’s offerings
Upon determining your needs clearly, the next step is to analyze and evaluate the offerings and features your preferred broker is providing. While the basic requirements may vary among investors, certain features need to be available with the brokerage service that ensures their potentiality. While going through this process of selecting a broker make sure to prioritize the security factor by ensuring that the brokerage is regulated by the FDIC. Factors like the broker’s name in the SIPC and FINRA may also denote their authenticity. Apart from the genuineness of the brokerage, you also need to check for the security measures they take such as the inclusion of 2FA, uses of cookies or encryption, and the way they handle your information online.
Coming to the offerings, make sure to look for the types of accounts the broker has to offer as well as factors like account minimum, retirement account, risk management and type of insurance among others.
3. Have a clear idea of the fee structure
Considering the account fees and commissions required by the broker will give you a clear understanding of how much you can afford while using a certain broker. While it is justifiable to pay a small premium for exclusive features, as an investor your primary goal needs to be losing as limited investment gains to commissions and charges as possible. Some of the factors that you need to keep in check are any requirement of account minimum, maintenance fee, understanding the margin rates as well as the minimum account balance or loan amount. In terms of trading commissions make sure to understand how they will be determined. Apart from this, verifying if there is any difference in rates for various securities, any facility of free trades, expenses on advisory services, and more.
4. Make sure to try out the platform
In the process of going through different online stock brokers, you may come across numerous claims and offers proposed by various brokerages. While the steps mentioned above are certainly worth considering, the best way to verify the capability of a broker is to test it out. There are plenty of brokerage services that provide free trials for investors to use the platforms without the hassle of signing up. Opting for a trial version will also help you to look over the variety of information that the platform has to offer along with the seamlessness of the trade execution.
Conclusion
While these are the topmost qualities to look for in an ideal online stockbroker, as an investor you might also consider factors like availability of customer support, ease of deposit and withdrawal, and the volume of educative resources it has to offer.
