To buy stocks, you need a broker. We believe that any broker you choose should offer inexpensive ("discount") prices and be what parents used to joke about children -- "seen and not heard." You can learn everything you need to know about finding a discount broker and the mechanics of buying stocks at our discount broker center.
Staying discount in a full-price world is tough: Full-service brokerage firms spend millions of dollars on advertising to convince you that you need their services. Think how much it costs to run those black-and-white TV ads showing a kindly Wise man, intoning "Dean Witter, we serve investors one at a time." They must be earning enough from their customers to pay for expensive TV time, so perhaps the ads should say, "We swallow fat fees from one investor at a time, adding up to big profits for us."
Let The Motley Fool and Fool community members show you the sad truth of full-service brokers, how to kiss your full-service broker goodbye, and how to size up a discount broker. We hope that when you hear "full-service broker," you'll think "great-tasting broccoli," or "ugly pop star." Rare or nonexistent.
"What's Wrong With Full-Service Brokers," anyway?
We have a pretty set opinion of whether you should use a full-service broker or a discount broker (if you didn't already gather that so far). We favor the discount brokers, who execute trades for about one-twentieth the amount that full-service brokers often charge. Here's why.
What do full-service brokers really do?
License to Steal: The Secret World of Wall Street Brokers and the Systematic Plundering of the American Investor, reviewed by Yi-Hsin Chang
If you think you need a full-service broker, Yi-Hsin thinks this is the place to start. The book recounts the outrageous lifestyle of some rogue brokers but also gives many everyday instances of how brokers shamelessly peddle stocks they know nothing about, "park" shares in clients' accounts without their knowledge, and manipulate a stock price to create a bigger spread (difference between the bid and the ask and hence bigger profits).
How to fire your full-service broker:
"Kissing Your Broker Goodbye," and "Kissing Your Broker Goodbye (Part Deux)," by Michael Giudicissi.
In two great Fribbles, Fool community member Giudicissi triumphantly details how easy it is to jettison your full-service broker. Take the plunge!
If you're already convinced and ready to go discount:
Ten Ways to Size Up a Broker
Want to open a discount brokerage account but not sure where to start? Wondering if you're getting the best service for your money from your current discount broker? Either way, here are 10 things that will help you size up a broker and choose the best one for your needs.
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