Online Brokerage Selection Tips
If you are comfortable making your own investment decisions, an online brokerage firm can save you a lot of money. But not all online brokers are the same, and it is a good idea to shop around as much as you can. Considering factors like how you trade and how much help you need is the best way to find the firm that is right for you.
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Commission Schedule
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One of the biggest benefits of an online brokerage firm is that the commissions are so much lower than traditional firms. Many online stock brokers charge less than $10 per trade, but they may charge more for limit orders, option orders and other special trades. If you expect to use any of these special orders, review the full commission schedule carefully.
Stock Screening Tools
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Some online brokerage firms provide stock screening tools investors can use to choose the stocks they want to focus on and whittle down the universe of thousands of stocks to the ones they want to invest in. These stock screening tools can filter for everything from dividend yield and price-to-earnings ratio to average price and earnings growth. If these screening tools are important to you, try out a demo before you sign up for an account. Different tools provide different functionality, and it is important to choose a firm whose screening tools best meet your needs.
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Local Branches
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Many online brokerage firms have local branches where customers can speak to investment advisers and other experts about their investment goals. These local services can be very important, and they could be enough to tip the scales in favor of one firm or another. When looking at local offices, check the locations carefully. While many online brokers have branches in major cities, fewer have opened branches in smaller towns.
Other Services
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Some brokerage firms provide additional services, including estate planning and tax advice. If these additional services are important, look for a brokerage firm that provides them. Be sure to evaluate the cost of each of those additional services and compare those costs to what you could find on your own. In some cases it may be more cost-effective to have all the services you need provided by your brokerage firm, but in other cases it may be cheaper to use separate companies.
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References
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