How to Choose a Broker

Choosing a broker is among the most important decisions that an investor ever has to make!  There are 4 aspects that you'll want to take into consideration when deciding which broker will best meet your personal investing needs.

1. Choosing Discount or Traditional

The very first decision you must make is the type of broker you want to use.  If you plan to research the market to determine what investments you want to make, and just want someone to make the purchases and sales for you- then you will probably prefer the services of a discount broker.  In some cases, you can make each of your trades online on your own- or if you would rather call in each of your trades, you will talk to the first available broker who will then handle your requests.

When you open an account with a traditional broker, on the other hand, you will work with a broker on a one-on-one basis.  He or she will prepare reports, investigate and research investment opportunities on your behalf, and will handle all of your trades for you. 

2.  Commissions Paid to Brokers

While the major difference in the amount of commissions paid to brokers depends on whether you select a discount or traditional broker, there is also some variance in the amount you pay among different discount brokers.  Some may provide services at $5 or $8 commission, while others might charge as much as $30 commission.  Higher fees sometimes mean better or faster services, but not always.  Taking the time to compare brokers within the type of brokerage account you want (discount or traditional) can mean saving money on unnecessary higher fees.

3.  Minimum Investments

Brokers all have their own minimum investment requirements.  They typically fall within the range of $500 to $1000, however, you want to be cautious of the smaller minimum investment brokers.  Sometimes, brokers will allow you to invest a small amount but then they will charge you a maintenance fee whenever your balance falls under a certain amount.  When you are new to investing and don't have large sums of money invested, the small maintenance fees can add up to the equivalent of 6-10% interest! 

4.  The Complete Package

Other services offered by the broker might be important to you and should be considered prior to selecting a broker.  If you want the ability to research information online, you should make sure the website of the broker you go with allows you to do so easily.  Some brokers can provide you with up to the minute reporting features online that you can view or print.  If the speed of transaction is important to you, look into how long it takes the broker to complete your trades.  Some brokers are now offering Visa check cards that you can use at ATM's to withdraw money from your investment accounts, which can be extremely convenient!

These four aspects; the type of broker (discount or traditional), the commissions paid to the brokers, amount of minimum investment requirements, and other services offered by the broker- should all be taken into consideration when you are deciding which broker will best meet your specific needs.