How to Compare Online Brokers

The technology wave has brought easy access to many services, including stockbrokers. When comparing online brokers, many of the same considerations for comparing traditional brokers apply.Before you begin an account with any broker, you should understand the basics of investing so you know the type of account you want and the type of broker services you need. There are many resources in print and online that can provide you with this information for free.

Difficulty: Moderate

Instructions

1. Write down the type of transactions you want to make through an online broker and how often you think you will be making each type. What kind of money do you have available to start with and to continue to put into the account? How much do you see that increasing or decreasing over time? What kind of account will you be setting up?

2. Decide which kind of brokerage service you are seeking. You can choose from discount brokerages, premium brokerages and full-service brokerages. Some use their own software, and some do not. There are pros and cons to both.

3. Look up the fees and commissions charged for every type of transaction you can foresee yourself making. Read all the fine print. While looking up the charges, note any minimum or maximum limits the brokerage may have on transactions.

4. Look up multiple online reviews about the primary brokerages in which you are interested (see Resources below). Some reviews from print may be published online or be available at your local library. Overall, how did the top runners on your list fare? What problems have been consistently reported? You are looking for overall high marks over the course of multiple years, up to the present time.

5. Check into scandals, consumer complaints and other problems with the brokers you are considering. There are multiple sources online that track such things (see Resources).

6. Read up on any complaints about time lags in their software and on their website. If you want to make a transaction quickly, the last thing you need is a website that continually lags and will cost you in lost investment earnings.

7. Read up on their policies for terminating service. If you are unhappy with the service you receive from your chosen broker, you should able to move your money to another broker in timely and inexpensive manner.

8. Find out where the broker is headquartered or the location from which they conduct their online business. Check with the Better Business Bureau in that region for complaints. Complaints are not necessarily a reason to be concerned, but how the complaints are handled and what they are in regard to will give you some further insight into whether you want to trust your money with the broker in question.

9. Visit the website of each broker you are interested in. Check out as much of their site as you can without joining or signing up for anything. If they offer a "tour," take it. Look for the kind of customer service they offer and what on-site research tools they offer.

Tips & Warnings

• Some banks, brokers and other financial companies offer low-cost and free classes. A local college or university that offers a degree in financing or financial services may also offer free classes for the community that are taught by students in the college program and supervised by the professors.
• Know your own risk tolerance level before you invest, and stick with the types of investments that match that level. Do not allow anyone or any life circumstance to coerce you into taking higher risks than you are comfortable with and can afford to take.
• In the investment world, numbers can change on a daily basis. Many experts recommend that you plan for the long term and conduct only one or two portfolio reviews a year to avoid making rash investment choices.
• Its not just the company you want to check into; do your homework on the person in charge of the brokerage. A change in leadership can result in changes that affect the company's track record. You are looking for experienced leadership with a great track record.
• While recommendations from people you know can be helpful, your experience with the same company may vary. Always do your homework first before taking any type of financial risk.
• Never risk or invest more than you can afford to lose.
• Always make sure you have some liquid savings for emergencies. It can be time-consuming to remove funds from investments. In cases of emergencies, you may not have the luxury of waiting for investments to be cashed out.

Resources

• Investor 101 from Investopedia
• Better Business Bureau
• U.S. Securities and Exchange Commission (SEC): Check out brokers, get tips, file complaints.

[kaileil]

on 2/26/2009 ZECCO IS THE WORSTSave yourself the trouble...don't go with Zecco. Their system is horrible, and the free trades isn't an incentive anymore. There is no advantage and many disadvantages.