How to Choose A Discount Online Stock Broker
Choosing an online stock broker can be difficult. The decision becomes even more complex when you are looking for a discount online stock broker. A discount online stock broker allows you to buy stocks only. If you want stock advice, you will need to go to either a full-service online stock broker or a local stock broker. These usually cost much more than a discount online stock broker. Reading online broker reviews can help, but it is also essential to know exactly what you are looking for in a broker so you can make the right choice among the many discount online brokerages.
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Instructions
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Decide what trading options you want from your online broker. Different brokerages offer different services. If you intend to simply trade stocks and mutual funds, a regular discount online broker should suffice. If you want to trade futures, you will need a futures online broker; options trading requires an options online broker. Not all online brokerages offer all of these choices.
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Check the minimum opening balance at different online brokerages. Some companies require a higher opening balance than others. The right discount online stock broker should not require you to open an account with more money than you are comfortable investing.
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Evaluate the fee structure of the online broker you are considering. Some online brokerages charge as little as $4 per trade; others charge much more. A discount online broker, in general, should charge less than $10 per trade. If you plan to make a lot of trades, a low fee structure is essential. Specialty brokers, such as those that handle options and futures trading, may charge higher fees than a standard discount online stock broker.
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Evaluate the stocks and mutual funds the discount online stock broker has access to. You want to ensure that your online stock broker can help you invest in any of the stocks and mutual funds you are interested in. It doesn't do you much good to have your money in a brokerage account but not be able to access the particular mutual fund you want.
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Find out what types of accounts a discount online stock broker offers. If you want to open an IRA or a Roth IRA, you will need to ensure that the broker has that option available to you.
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Tips & Warnings
A discount online stock broker allows you to buy stocks only. They will not give you stock advice. If you want stock advice, you will need to go to either a full service online stock broker or a local stock broker. Full service online brokerages are available, but usually cost much more then a discount online stock broker.
Find out what types of accounts your discount online stock broker offers. If you want to open an IRA or a Roth IRA, you will need to ensure that the online stock broker makes that option available to you.
Trading in options and futures is potentially much riskier than trading in standard stocks. If you are looking for an options online broker or a futures online broker, make sure you know what you are doing before you invest a lot of money.
References
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