How To Find A Stockbroker
February 14th, 2008 by LoadRunner
Log on to the internet and you will be confounded by the sheer number of stock brokers listed, with each one making proposals and offers that are more attractive than the other. Flooded with such a vast array of choices, what should be the criteria for finding the right stock broker? This becomes all the more important since you are investing your hard earned money in stock trading.
Compare Brokerage
The first and foremost criterion is the brokerage. You may not consider the brokerage an important factor, if you have to invest once in while, or, if you are a long-term investor. By its very nature, the business of stock trading involves selling and buying over shorter spans of time, it would, therefore, make bad business sense to ignore the brokerage factor while trying to find the right stock broker. Added over a period of time, higher brokerage may cut into your earnings or add to your losses.
Brokerage Plans
Do an extensive comparison-shopping for brokerages. There may be traps as well. While a broker may offer some discounts on one type of trading, he may overcharge in other types. Moreover, stock brokers quite often offer different brokerage plans on various investment packages, trade options and other services. The names of the options or plans may differ from broker to broker, but the substance remains unchanged. The investment options or plans may include Automatic Investments, Real-time market trades, Real-time Limit trades, and so on. Again they may offer various payment plans on each of these options. While some brokers accept a minimum account balance of $ 2,500 only, others may insist on higher amounts. Some brokers do not charge anything on funds transfers; neither do they charge inactivity fees. The subscription charges may also vary.
Service Charges
Stock brokers also charge you fees on their services such as Transfer Funds fees, Inactivity fees, subscription fees, minimum account charges and so on. As an intelligent stock market investor, you should scan the brokerage and other service charges of each stockbroker closely before finally opening your account with anyone.
Beware of Hidden Charges
An honest stockbroker does not keep his prospective investors in the dark about any aspect of his fees and charges. He explains everything clearly with examples and mathematical calculations so as to alleviate any possibility of doubts or misunderstanding. For example, it may be clearly mentioned that for trades above, say, 5,000 shares you will be charged regular commission besides an additional cost of $ 0.005 per share above 5,000 shares. Similarly there may be additional fees for stocks priced at less than one dollar.
Clarity about Investment Conditions
Consider a situation when you require funds to purchase stocks through automatic investment plans.
Your funds in such cases should be available in your account by 1.00 PM on the trading day prior to the scheduled investment day, failing which your automatic investment plan will not work. Certain brokers offer several convenient funding options to meet this cut-off time including one-time and recurring ACH electronic transfers, check deposits, and wire transfers.
Other Attractive Benefits-Fractional Shares
While trying to find a stock broker, keep in mind that some offer attractive investment benefits to their members. In most cases you are bound to make a certain minimum investment. Normally, for example, you are expected to buy at least one hundred shares of a stock, the reason being that all stocks trade in units of 100 shares. If you cannot buy 100 shares in one go, you may be charged very high trade fees. The accounts of those investors who cannot meet the stringent condition of minimum purchase are locked out of the stock market.
There are, however, certain brokers who solve the problem of such investors who cannot afford to spend or do not wish to spend so much money by offering fractional shares. Fractional share, as the name suggests, is just a fraction of a share. You need not, therefore, buy one hundred shares or even one share. You can buy just a fraction of a share and you can invest absolutely any dollar amount with no minimums or buy any number of shares of a stock-whether a thousand shares or one-tenth of a share.
All these benefits can be availed only if you do a thorough and intensive comparison shopping for the right stockbroker. You need to study the website of each stockbroker in detail and ask questions so that you do not repent later on.
Importance of Research in Stock Trading
If you are a novice in stock trading, instead of venturing on your own, it is better if you seek the advice of your stockbroker at the initial stages of your trading. Based on in-depth research that your stockbroker carries out on the financial performance of the companies, he will be able to guide you on your investment portfolio so that you can maximize your profits.
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