How to Choose An Online Broker

tradingOver the last thirty years, investment has moved out of the city and become an attractive option for a growing number of us. That trend has been accelerated by the internet revolution, with a huge number of online brokers competing with one another for clients, all of which continues to have a positive effect on commission levels and customer service.

However, while the overall environment for those who want to get into investing is good, it is more important than ever to think through your choice of broker before taking the plunge. With a vast array of brokerage options, you want to maximise your profitability. So, what should you look for?

The importance of commission

Whether you opt to do your own research or turn to www.onlinebroker.net, the most important factor to look at first when considering a choice of broker is the level of commission that they charge on the particular type of investment that you are interested in. While all brokers will offer a similar range of investment choices, the commission they charge will vary significantly for each.

When it comes to individual stocks transactions, a broker will usually ask for a standard commission per trade, although some will charge you per share. With options trading, there is often a per-contract fee on top of the stock trade amount, though this is usually a nominal amount, and some will give you the choice of paying either a contract fee or a commission.

Mutual funds are another popular investment vehicle. All mutual funds contain their own internal fees, which are known as expense ratios, but some brokers will charge a fee on top of this, so look out for brokers who offer commission-free mutual purchases. The same advice applies to Exchange Traded Funds (ETFs), as by shopping around, you should be able to find a broker who provides commission-free ETFs. Bond purchases may also attract a fee, depending on your broker.

Look out for account minimums

An account minimum is a minimum level of investment that a broker will accept from a client, so for those who just starting out or who have a relatively small amount of money to invest, a high account minimum set by a broker, or by a mutual fund, can be a problem. Fortunately, there are brokers out there, some of them among the most highly rated in the industry, that don’t insist on account minimums, or that impose relatively small account minimum requirements.

Beware account fees

Keeping fees to a minimum is the key when choosing a broker. Some brokers will charge additional account fees, including charges for withdrawing funds or moving funds to another broker, or annual fees, research charges, and fees for subscription to a trading platform. So, look out for a broker that doesn’t make these charges, particularly if they are for products and services that you are unlikely to use. By cutting down on charges, you will boost your potential profitability.

Find a broker that suits your needs

For beginners to online investment, it is unlikely that you will need access to a state-of-the-art trading platform, or in-depth research. However, it is possible that you could benefit from some education or advice on how to go about online trading. Look out for brokers that are geared up for new customers by offering tutorial videos or graphics, or other services that could be useful for free. Your online broker should be suited to your needs, so take the time to find one that you feel comfortable with.

Take advantage of promotions

Another useful factor to bear in mind when choosing an online broker is that in order to attract new clients, many will offer a range of bonuses and deals, such as commission-free trades or even a cash bonus for deposits. While choosing a broker based purely on their promotions isn’t a good strategy, it makes sense to factor in the level and type of promotion being offered and it can certainly help to sway you one way or the other if you are trying to decide between two well-matched sites.

Conclusion

Getting into investment, for those who do their homework and take it seriously, can provide a boost to your finances, and the modern online investment industry makes it easier than ever before to get involved. However, it is vital when starting out to find an online broker that suits your needs and that will help you to make the most out of your online investment.

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