Considerations in selecting your online broker
Just a cursory look at the Internet will show you many online brokers through whom you can trade. This can often make it both difficult and confusing when choosing an online broker who meets your requirements best. This is why it is important to do your homework carefully because a good broker can make all the difference to your trading success. Look through the many websites that offer impartial information on online brokers but always keep in mind that everything should be treated with scepticism because it is easy to plant slanted reviews online. Take a good look at the website and make sure that you can trade easily and conveniently at the time and place of your choosing. It can be quite frustrating to have a good trade in mind and not be able to get hold of your broker to execute your order at the right time.
All online brokers are not the same and you should know a little bit about the different types of brokers in order to make a sensible choice. You will also need to find a broker who can deliver services in accordance with your personal requirements. Essentially you can choose between brokers who will act on your behalf directly and broker resellers. Broker resellers act as an intermediary between you and a larger broking firm. You will generally have a choice between the following categories of brokers:
Discount brokers offer you a minimum no-frills service at a minimum cost. You can regard them as mere order takers who will place your order for you either online or over the phone. Do not expect help or advice of any kind when it comes to either research or stock picking. In fact, if you are dealing online, you will have no personal contact whatsoever with the broker or his employees. Some of them may offer some services such as research at an additional cost but you are probably better off buying these services directly from the third party provider. If cost is your primary concern and you are quite happy trading without support, you should choose a discount broker.
A full service broker is the next rung on the broking latter and will generally provide you with a complete range of research and advisory services. He will attempt to address your investment objectives and construct a portfolio for you that meets your risk and other requirements. In fact you can leave most of the hard work to the broker but there is a price to be paid for these services. For instance a full-service broker might charge you a commission of $100 per trade where a discount broker will charge you between $10 and $15.
A money manager or financial advisor will take over active management of your portfolio and there is nothing that you will need to do because the trading will be done on your behalf. These services are expensive because of the expertise involved and are suitable for large investors with large portfolio for whom investment management expertise is more important than costs.