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Choosing An Online Broker

Aug 18, 2007
Sometimes we simply have too many choices. Laundry detergents can fill an entire aisle at a supermarket, when they all do essentially the same thing. Fast food restaurants offer 8 different package deals all made of the same basic food. The more options we have the harder it is to know exactly what we want. Nowhere is that more evident than choosing a broker for online investing. The proliferation of online brokerages has left the new or average investor with a pile full of prospectus stacks and no real idea of how to choose one from the many. There are three important questions to ask that will help you determine the best broker for you.

What do you want to invest?

Whoever said, "It's just money" didn't have any. The amount of money you want to invest will make a difference in everything from the type of investment appropriate for you to actual brokerage houses. Some brokers require a high initial investment to fulfill the type of portfolios they specialize in. Other brokers require you to keep a certain minimum in your account. That's different than the initial investment price because if your stocks initially lose ground and your account drops below the balance you could be required to replace that money. There are brokers that specialize in low initial investment and new investors. Many of them use balanced mutual funds to build up an account over time then switch the investor to a higher yield account when enough money has accrued.

What kind of help do you need?

Brokerage houses offer many levels of guidance and broker interaction. The more you need your broker to do for you, the more you'll pay in fees. Some companies such as E-Trade who have pioneered the world of online investment made easy offer the experienced investor the ability to manage their own portfolio from home with a minimum of help from employees. This saves the fees for the investor and gives them a greater sense of managing their own finances. Other brokers offer a full service online staff able to advise, make trades and notify the investor about market news and IPO's. A new investor should pick a broker who can offer guidance and explanation before diving for the first time in the complex world of finance.

What else do you want to do?

If all you want to do is invest and put your savings somewhere that will accrue extra money for your future then any broker can do. However many brokers, credit unions and banks offer additional services you may want to use. Some offer credit card services, retirement accounts, tax help, debit cards and loans. If you are looking for a "one stop shopping" financial solution a firm with more options may be better for your online investing needs. However, if you are comfortable with your local bank and current financial set up then any online broker can be used to add to your existing household plan very easily.

With the availability of a multitude of online brokers to assist you in the investment of your finances there is no question that they want your business. All you have to know is which one of those businesses you want.
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