Fools with questions on finance -- or just about any other topic -- can often find prompt and helpful answers from the folks on our discussion boards. Witness our Investing Beginners discussion board, for example, where a new poster named Mcraft112 asked a bunch of questions about choosing a broker. I've presented Mcraft112's questions in italics, followed by my responses:
What are some things that I need to look out for when looking for a discount broker. I have read the Fool's School to Choosing a Broker but I still have questions.
As we point out in our Broker Center, there are a lot of factors you can consider, but the most important ones will vary by person. For example, if you have no interest in mutual funds, you won't care about fund-related charges at the brokerage. If you prefer going to a brick-and-mortar building to deal with your portfolio, you'll want a brokerage with local branches, not an online-only enterprise. I'd recommend making a list of what you value most in a brokerage, and comparing contenders on those counts. Think about which services you'd use the most, and see what they cost. (Our Broker Center's comparison table can help you see how you might construct your own comparison.)
Can a broker that invests in mutual funds invest in any fund family?
First, for those who don't know, a "fund family" is a company such as Fidelity or Vanguard or a host of others -- one that offers several or many mutual funds. The answer here is "no." I don't think there's any brokerage that offers funds from every single fund family out there. Some brokerages have a rather narrow range of available funds, while others offer access to thousands. Note that when you see "NTF" next to a fund, it means there's no transaction fee to buy into it. TD Ameritrade
Don't let the absence of a fund you're interested in be a deal-breaker for you if you find an otherwise terrific brokerage. You can usually just buy into the fund from the fund company itself. (It might take a little longer, since you'll have to get necessary forms and send money.) If, drawn by its 10-year average annual return of 15.3%, you want to invest in Champion Funds recommendation Muhlenkamp Fund
How do you figure out the entire cost of a trade? The ones I have seen say as low as 8-10 dollars but they also say if you have 120 trades a year. What if you don't have 120 trades a year?
Many brokerages' trading commissions apply no matter how many trades you execute during the year. Our Broker Center features some brokerages with fees as low as $4. TD Ameritrade, with its $10 commission, will charge that amount if you only make one trade in the year.
In some senses, then, the cost of the trade is the $4 or $10 or $25 that you spend to buy your stock. But it's also good to try and keep that to 2% or less than the value of the investment. If you're buying $500 of stock, a $25 commission would amount to 5% of its overall value, a big bite. Invest $1,500, and the percentage of that $25 cost shrinks to 1.7%. With a $10 commission and a $500 investment, you're paying just 2%.
To get even more perspective on these questions, click in to our discussion board and see what answers Mcraft112 received from board denizens.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article, but she is a Muhlenkamp shareholder. UnitedHealth Group is both an Inside Value and Stock Advisor recommendation. The Motley Fool has a full disclosure policy.
