You're ready to open your first brokerage account -- congrats! Or maybe you've already got one but are in the market for a better one. You're eager to plunk some dollars into Intel
Many of the advertisements you'll see for brokers focus on the price per trade, better known as the commission. While choosing the brokerage that provides the absolute lowest price per trade might seem attractive -- and might even make sense -- you may well find that there is some trade-off between service and price. (You've probably discovered that once or twice before in your life.)
Online brokerages can be put into three general categories:
- Super-cheap brokers that charge between $4 to $12 per trade. These are best used by those who plan on trading very frequently, but satisfactory for buy-and-hold investors as well.
- Mid-priced brokers that charge between $12 and $20 per trade. These brokers justify slightly higher prices with more well-known brand names and often some additional services.
- High-priced brokers that charge more than $20 per trade, typically around $29.95 per trade. (They think $30 trades sound too high, so they knock off a nickel -- but we're not fooled.)
Understand, though, that trading costs aren't the only ones to consider when shopping for a discount broker. There are also other fees you should factor in, such as:
- Fees for transferring assets into the account
- Fees for closing an account or transferring assets out
- IRA custodian fees
- Wire transfer fees
- Account inactivity fees
- Annual fees
- Fees for not maintaining a minimum balance
Look into every fee a brokerage charges and see which ones apply to you. Otherwise, you might sign up with a low-price brokerage, only to find that it's charging you $25 per quarter just because you're not trading enough. Yikes.
There may also be other special "services" that brokers offer, so be sure to read the fine print and decide what's worth paying for.
If you're only making five, six, or even 10 trades in a year, the difference between paying $7 per trade and $20 per trade usually isn't that significant. Better to focus on customer service and your total cost at a brokerage (including various fees).
Learn much more about evaluating and choosing brokerages at our Broker Center, which features a handy comparison table. There you can even open a new account at a brokerage that makes the most sense for you.
For more personal finance and investing basics, visit our Personal Finance area, our Investing Basics area, and our Fool's School. You can also learn a lot via our acclaimed How-to Guides and online seminars and our book, The Motley Fool Money Guide: Answers to Your Questions About Saving, Spending and Investing .
