Investing in the stock market can be a good way to build long-term wealth, but to buy and sell stocks you need a brokerage account. You can choose a full-service brokerage firm that provides investment advice and guidance as well as the ability to execute trades. Or you can opt for a low-cost online broker and make your trades yourself. No matter which you choose, you need to carefully evaluate each firm and choose the broker that best fits your needs.
Think about the type of trading you expect to do and your level of experience with the stock market. If you need investment advice as well as trading, you might want to look at full service firms. You will pay more in fees and commissions, but you will also get expert guidance to help you choose the best investments for your needs. If you are comfortable making your own investment decisions, you can save money by choosing a discount broker instead. Keep in mind that many discount brokers now have physical offices where you can meet with an investment professional.
Make a list of the brokerage firms you are considering. You can find ads for online and full-service brokers in financial publications, and online at financial websites. Write down the website for each firm so you can do further research.
Compare the minimum balance requirements for each brokerage firm, especially if you are just getting started and have little money to invest. Each broker has its own minimum balance requirement, and you need to make sure you can meet that requirement. In addition, some firms charge a quarterly, semiannual or annual maintenance fee for accounts under a certain size.
Check the costs associated with each type of trade, especially if you plan to do place any limit orders, option orders or other specialized types of trades. Some brokers charge a flat fee for all trades, while others use a tiered structure that charges more for certain complex trades.
Review the mutual fund trading the firm offers. Some investors prefer to have their brokerage accounts and mutual funds under the same umbrella. The ability to buy and sell mutual funds without a fee can be very valuable. Most brokers who provide commission-free trades limit that benefit to certain funds, so check the list and make sure the funds you want to use are included.
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