December 7, 2006
What should you consider when comparing brokerages and choosing one? Well, fees are one big factor to examine. Find out how much you'll be charged in commissions for various transactions and services. Since some brokers set up their fee structure to encourage high-volume trading, find out whether you're required to make a minimum number of trades per year or per quarter, and whether additional fees are imposed for not meeting the trading requirements. Here are some other considerations:
- The minimum initial deposit. Some brokerages require at least several thousand dollars, while others have no minimum.
- Usability and service. If the brokerage offers online trading, check out its website's interface and see how easy it is to navigate and use. Ask some questions and see how responsive the customer service is.
- Banking services. Some brokerages now offer banking services, such as check writing, money market accounts, credit cards, ATM cards, direct deposit, and more -- some with no fees. It might benefit you to consolidate bank, money market, mutual fund, IRA, and other accounts to take advantage of the attractive one-stop-shopping options that some discount brokers offer today.
- Research. Some brokerages now offer free company research for their customers. This can be attractive, but keep in mind that research is also available for free or for a reasonable price online.
- Mutual fund offerings. Many brokerages offer a variety of mutual funds. If you're interested in some particular funds, check to see which brokerages offer them. Know, though, that you can usually purchase no-load mutual funds directly from their companies.
- Non-stock offerings. Of course, you can buy shares of Best Buy or Yahoo! or Dell or Lowe's through just about any brokerage. But if you're interested in bonds, for example, see whether the brokerages you're considering offer them.
- Convenience. Would you rather place trade orders through an actual person, by touch-tone phone, or on the Web? See which brokerages offer what you want.
Some of these factors are more important than others. For example, if you trade only twice a year, commission costs might not matter as much. To guide your decision, make a list of all of the services you need and how vital they are -- and then evaluate each contender on each category.
To learn to more about brokerages and possibly find a better brokerage for yourself, check out our Broker Center. Since your short-term money shouldn't be in stocks, learn to put it to good use in our Savings Center, where we also offer you some good deals on interest rates.
Best Buy, Dell, and Yahoo! areMotley Fool Stock Advisorrecommendations. Dell is also aMotley Fool Inside Valuepick.