One of the biggest challenges many investors run into is choosing a good stockbroker. There were nearly a quarter million registered stockbrokers in the United States in 2010. It can be difficult to find a broker who really knows how to provide quality results. This article provide a spotlight to choose a great broker by considering most important facts that applicable to:
What Kind of Broker Would You Want?
You have several different types of brokers you can use:
• Full service broker. Full service brokers provide the most exhaustive services to their clients. These brokerages will assign a broker to work with you one on one. They can answer any questions you have and give you insight on what securities to choose. The downside is that they charge much higher fees, so they may not be feasible if you are working with smaller portfolios.
• Online brokerage. You can save a considerable amount of money trading securities online. I bought my first share of stock when I was 14. I had $100 to work with and would never have been able to afford a real broker. The main disadvantage with these services is that they will only help you place trades. You will need to do all the research on your own.
• Discount broker. Discount brokers provide more direct support than online brokerages. However, they won’t help you research your securities or set portfolio goals. As a result, they will charge lower fees than full service brokers.
Which type of broker should you work with? That depends on your goals, budget, time and understanding of the markets. You probably won’t be able to afford a full service broker if you only have $1,000 to invest. However, you might need their services if you are an amateur investor who has never studied the markets before.
Doing Your Research
You should do your due diligence when looking for any professional and choosing a stock broker is no exception. Here are some helpful guidelines to help you choose a good broker:
• Look for unbiased reviews. There are a number of different places you can find reviews on registered brokers. You will find a number of resources such as Morningstar, Barrons and About.com that provide reviews on any stockbroker that you may consider working with.
• Check with SEC. Make sure that the broker is registered to trade and does not have any violations with the SEC.
• Speak with the broker themselves. Ask the broker for specific details on the services they offer. Make sure that they fit your needs. This is an essential step, even if the broker has a commendable track record. The fact that others have been satisfied with their results doesn’t mean they will be a good fit for you. Always keep your own goals in mind when you are choosing a broker.
You want to make sure you can answer the following questions before you choose a broker:
• What services do they offer?
• How do commissions work?
• Do they charge a management fee (load) for their services?
• What returns have they posted for their previous clients? Make sure you use consistent metrics when comparing brokers. Many of them might state their results in terms of annual returns and others might report them in relation to the Dow or some other benchmark.
There are many things that you will need to take into consideration when choosing a broker. Make sure you know what you are paying for.
Kalen Smith is a personal finance and forex writer. He shares advice on trading currencies and other topics related to forex.