Updated: Sep 5, 2021
Most new investors today don't know where to begin when choosing a broker. There are quite a few reputable brokers on the market today. Which broker is the best fit for you? What should you look for when selecting a broker? In this post we'll discuss six features that should be reviewed when considering a broker.
Most brokers on the market today don't charge fees or commissions on stock transactions. It wasn't long ago that self-serve brokerages would charge $5 per trade. Those fees can really add up. Due to the number of available brokers most have gone away from this model. Ensure you review fees on margin, options, crypto, etc. You should avoid margin (a mini loan from your brokerage) all together until you really understand the world of investing. Some brokers have lower fees or ways to "buy" into lower fees with subscriptions. Reviewing and understanding those fees can help you, should use features like margin in the future.
Look into what assets are available on the platform you're looking into. A popular option today is crypto. Not all brokers offer buying and selling crypto, so that might sway you away from a particular broker. Most brokers will offer Stocks, ETFs, and mutual funds but some have restrictions on which they offer or even restrictions to when you can trade these assets.
Ease of Use
Do they have an app or is the broker a desktop only platform? How intuitive is the interface? These are important considerations. You don't want to download an app that overwhelms you as a new investor. Remember, you will learn and grow into it, so bare bones isn't great either. Another aspect to consider is access to pre-market and after-hours trading. Some brokers don't allow access to any trading time other than when the market is open. This could mean a decent difference in stock price on both the buying and selling side under certain conditions. Having that extra option for trading enables flexibility on your end.
Connectivity with your bank
This is hard to figure out before signing up completely but can be searched easily with google if you use a large, well known bank. It's important to be able to fund your account easily to help with consistent investments. Equally, you want to be able to get your money out quickly if you need it as well. Most brokers allow Electronic Funds Transfers (EFTs) to and from your bank. Another key factor is fund settlement time or how long your money will take to be available for use. Some brokers still have a 48hr+ settlement periods for stock sales. This means your money won't be available for withdrawal or use to for 48hrs+ after the sale. That can seem like forever if you're looking to put that money to work in the stock market quickly.
Some brokers have brick and mortar stores while others just have a customer service number. Review customer services records on google to see how other people experienced the brokers service when they needed them. Nothing is worse than having money issues with no one to call or talk to. You'll feel the pain of poor customer services if you choose a broker with a poor track record. Research a brokers customer service before you need it.
Fractional shares are the ability to purchase pieces of a share vice the whole share. Investors that are interested in stocks like Tesla (TSLA), Apple (AAPL), Google (GOOGL) or Amazon (AMZN) may not always have the money available to buy a full share. That's where fractional shares come in. You could buy a $10 piece of a share and you would own a small percentage of your chosen company. This allows investors to buy companies they want even when they can't afford full shares. Not all brokers allow the purchase of fractional shares so if that's something that interests you make sure your potential broker has this option.
Lastly, most stock brokers are nearly identical in today's day and age. It's the subtle differences that can help you decide which one is the best fit for you. Take your time and do your research, future you will thank you. Also, stock brokers aren't permanent either, most can transfer your entire portfolio for a small fee (around $100) to another broker. The important factor is to find one that meets your needs and to start compounding those investments. It takes time and money to build wealth with compound interest, so the earlier the better.
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