In today's topsy-turvy markets, you need every advantage you can get. Making sure you have the right broker to fit your investing style is crucial to your overall financial success.
At first glance, you might think that picking a broker is like picking a supermarket: With some minor differences, there's not much to distinguish one from another. But you might be surprised at just how different some brokers are, both when it comes to buying and selling stocks and other investments cheaply and efficiently as well as in giving you the research resources you want to make the most informed investment decisions. Now more than ever, you need to be sure the broker you choose will be there for you when you need it.
The cream of the crop?
SmartMoney recently released its annual look at various brokers. The survey based its rankings on a number of factors, including range of available investments, availability of banking services, trading efficiency, research resources, and customer service.
Taking the top four spots were some giants in the industry. Fidelity nabbed the No. 1 position with five-star rankings across the board, while E*Trade
If you look no further than that, then seeing the industry's biggest players on that list isn't particularly surprising. The top discount brokers got there by having good general-purpose tools. But simply picking whoever's at the top of any given list won't necessarily give you the best fit for your particular style.
Different strokes for different folks
Now, if you're a typical investor with a wide range of needs, then those overall rankings may reflect your preferences pretty closely. But digging into the detail of the survey exposes some other things you should consider, especially if you have specific needs you want addressed:
- If you trade frequently and need in-depth trading tools to support your investing, then you might want to focus on the trading tool rankings. Fidelity scored top honors there, too, but optionsXpress
(Nasdaq: OXPS)clocked in at No. 2, well above its overall ranking.
- On the other hand, if research is more important to you than trading, then you'll find the order of those rankings changed. Schwab and TD Ameritrade end up on top for research in SmartMoney's survey, with Fidelity and E*Trade at the bottom end of the foursome.
- Similarly, certain types of investments are easier to buy and sell at some brokers than others. Fidelity and Schwab, for instance, are among those offering free ETF trading. If you want to trade more complex instruments like options or futures contracts, then that opens a whole new can of worms in comparing brokers.
The more important takeaway, however, is to take any broker survey with a grain of salt. Look back at the recent past and you can find a host of similar lists with differing results. Because different surveys use different criteria to judge brokers, they'll come up with lists that look nothing like each other. It doesn't take much to have a big impact on the rank various brokers get.
Building a relationship
Moreover, until you actually work with a particular broker, you won't really know what the experience is like. If you trade frequently, then nothing's more frustrating than a clunky interface. But you may find that over time, you actually learn to like a particular system as you figure out how best to use it.
If you've never used a broker before, you'll probably need some time just to figure out what you want from your account. With a wealth of free investing resources elsewhere, you may find that you rarely use your own broker's research tools, making them a less important consideration. On the other hand, you may prefer having all the resources you need at your fingertips from a single source.
Get what you need
Whether it's customer service, fast trade executions, or good online resources that are most important to you, there's one thing that's true for everyone: If you're not happy with your current broker, there's no good reason not to switch. With cutthroat competition in the brokerage industry, it's a great time to be shopping around. So if you haven't looked around in a while, take a look today. It could well help make you a better investor.
If you're in the market for a broker -- or just want to check out the competition -- make a visit to the Fool's Broker Center. You'll find a handy comparison table that will help make picking the best broker a piece of cake.
Fool contributor Dan Caplinger thinks he's a better investor than he was when he got started almost 25 years ago. He doesn't own shares of the companies mentioned in this article. optionsXpress and Charles Schwab are Motley Fool Stock Advisor selections. Try any of our Foolish newsletter services free for 30 days. The Fool's disclosure policy is always trying to get better and better.