If you are new to investing in stocks, you cannot find your way around without a brokerage account. As a newbie in this market, selecting an ideal broker is very different for you than for an older investor.
Choosing a broker is as important as choosing a stock; both require a lot of contemplation because not all brokers are right for investments. There are a number of tips to consider when picking your first broker because this will foretell your future in the market.
So what’s a broker?
A broker is your representative in the stock market; they make sales and purchases on your behalf as contracted by you. There are two types of brokers: regular brokers and broker resellers. Regular brokers are those who deal directly with you as their clients while broker resellers act as intermediaries between the client and larger brokers.
Regular brokers like Questrade are often considered more reputable than their counterparts broker resellers because they make a direct impact on their client without going through anybody else. These two kind of brokers should be well recognized and certified to do stock trading as brokers by recognized organizations.
- Do you want full service or a discount broker? As the name suggests, the full service broker offers more services to you as an investor with more of one-on-one advice as well as individualized suggestions and research. The fact that the discount brokers are not fulltime does not mean that they leave out important details. They are also easier to find in the online community. The problem is who to trust from the online market unless you have good reviews. Younger investors mostly go for discount brokers probably because there are many online discount brokers that are offering a massive selection of tools for inexperienced investors to help them learn about the future of the stock market.
- How much are you willing to spend on the fees? Trade execution fees are important to consider beforehand. If you are under 30, you might not have all the money to spend but might be working on a tight budget. Looking at the fees is essential to ensure that you make the most of your investment dollar. There are important costs that you should consider:
Minimums – Most brokers always have a minimum balance to open a brokerage account which may range around $500-$1000 for an online discount broker.
Margin – These accounts have higher minimum balance requirements than any standard brokerage accounts. New investors may not think of opening this account yet, but it is something to think about in future. It is also wise to check the interest your broker may charge you when you trade on the margin.
- Withdrawal – Even though it’s your money, it can be hard to withdraw because brokers may charge fees to make a withdrawal or they won’t allow you to make one if your balance is below the minimum. Be sure to understand the rules involved in withdrawing money from an account with your broker.