Post of the Day
March 22, 1999

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Subject: Choosing a Broker for Newcomers
Author: ckmw

Many new Fools have sought help in choosing the best Discount Broker. Some have become frustrated at the process of making the choice after doing their own research while others have simply stated that they are new and would appreciate any recommendations. The problem with saying anything good or bad about any broker is that the reference is related to a very limited time frame and often to just a particular situation or limited occurrences.

Notice how often different web sites, which evaluate brokers, change their rankings and how the rankings vary dramatically depending on the criteria. This one is best because it offers the cheapest trades. No, this one is better because they have no minimum balance. Nope, this one over here has free dividend reinvesting and no maintenance fees. Hey, look at these guys � they give you free check writing and an ATM card. Ya, but this one sends out nifty Christmas cards. But I don't like the colors they use on their web site. It goes on and on - ad infinitum or ad nauseam. As the old saying goes, "When you are knee deep in alligators, it's hard to remember your purpose is to drain the swamp." Point being, remember what you are looking for, your own needs, your own criteria and what kind of trading you'll be doing.

Personally, I would say that all the brokers that are talked about on this discussion board are generally good companies or at the very least trying to be. This is not to say that all their services, policies, and even employees are fine for you. There have been many Fools who have tried to respond positively in a sincere attempt to help those making the decision. I have also noticed that they seem to be getting a little tired of answering the same questions (who wouldn't). Maybe this web site (and personally I think it is the best) could come up with even a better way of steering newcomers to various sources of information about brokers. Something like: New? Click here. [There is a Discount Brokers FAQ available].

"I would suggest doing the research yourself and getting the information from the horse's mouth."

Without trying to sound too "preachy" let me now mix my advice with my own experience prefacing it by saying that all of us would probably like support in making this decision (some more than others). The support, however, takes on both objective and subjective flavors. On the objective side, I would suggest doing the research yourself and getting the information from the horse's mouth. Yes of course, go ahead and read the messages on this discussion board (and yes again, try to look beyond the "my broker sucks eggs comments" � these folks are angry and maybe they have a right to be, but it won't help you). Visit the different web sites that evaluate brokers (notice how they do not agree with each other). Read what The Motley Fool has to say about choosing a broker, but finally go to the brokers' web sites. Start some communication with them, e-mail them, call them up, write them a letter, visit one of their offices if you can. Ask questions!

Living in Japan, I decided to request applications and information from about fifteen brokers. I also e-mailed questions to them. For me this was more than just asking questions and requesting materials but rather a testing ground or a courtship if you will. I wanted to see how and when they would respond. This was an important category in my own criteria. I felt that if they could not meet my expectations as a potential customer then they surely could not later. Personally, I would give this fact finding or investigation period at least two months. Think of it as doing a research project on which a large percentage of your final grade will be based.

After all of your research, you will undoubtedly narrow the field. Let's say you've got the list down to around three or four. Now comes the subjective side of your decision � the emotional part. I must stop here and make a confession. I was at this point myself a couple of weeks ago. I was trying to make the final decision. It was fairly late in the evening and I was agonizing which broker to go with (I had even been dreaming about it). I had their materials and my own notes spread out on the kitchen table. Finally in desperation (or indecisiveness), I e-mailed one of the TMFs directly and apologetically asked for advise. However, before they had a chance to respond, I made the
"Yes, we can make these decisions ourselves and no one can make them better than we can � but it is work and it does take time."
decision myself and e-mailed them again (I decided to decide). No matter what the TMF or anybody else would have said, it is our money (my wife and I) and it is our responsibility to make decisions regarding it. There is nothing wrong with asking for advice from others as long as you don't try to put the burden off on them � the choice is yours and so is the work. Don't forget - you and I will have to make even more important decisions buying and selling securities! Oh no! or should I say Oh yes! I believe the spirit of what the Gardner brothers and the TMFs have been saying is Oh yes! Yes, we can make these decisions ourselves and no one can make them better than we can � but it is work and it does take time. It is a learning process, which at times can be painful yet rewarding � hopefully very rewarding!

So there you have it, I have made my choice and I have done my best in making the choice so I am happy with it. You can do the same. Of course only time will tell if I have made a good one. If in the future I am not happy with the services, I can always transfer my account to a different broker and yes in extreme circumstances there are always lawyers � but that is extreme.

Good Luck and If any of you newcomers (such as myself) need encouragement and don't have anyone nearby, e-mail me. I'll probably get back to you with something like "Damn the torpedoes, full steam ahead!" You can do it!


PS. Now that I have chosen my broker(s), I'll be leaving this board and moving on to some of the other boards. A number of you might be saying, "Thank goodness, I don't have to read this guy's ramblings anymore." Sincerely though, Thank you all for your help and suggestions.

Hmmmmm. Can anyone recommend a good stock to buy? (Just joking)

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