How to Choose a Broker Articles | Investing

By: Peter Stock

If you plan to begin investing, you are going to want to open a brokerage account. The problem is that many beginner investors do not know what this is or why it is important so they make mistakes when choosing their broker. So what do you need to know about how to choose a broker and make proper investing choices?

Before you open an account with a broker, you need to know what kind of broker you want. There are two main types to choose from: the full service broker and the discount broker. The full service broker is also called the traditional broker and when you go this route, you work one on one with your own personal broker. Some tasks that they perform are:

• Help you build a portfolio
• Perform reports on your portfolio
• Offer investment ideas
• Show you how well your investments are doing
• Available by phone or email to help you buy and sell
• Help with buy and sell of stocks, bonds, mutual funds, etc

Some examples of this type of brokerage firm are Morgan Stanley Dean Witter, Merrill Lynch, A.G. Edwards, etc. You can learn a lot from these types of brokers but the one on one service will usually mean you have a higher commission to pay than with a discount broker.

A discount broker is more for the do-it-yourself investor and doesn’t offer as much personal guidance as the full service broker. Some examples are E-Trade, Ameritrade, and TD Waterhouse. These charge you a lower commission because you do not get the personal relationship with a broker. Usually these work by trading online or possibly with a phone call.

The next thing you want to look at is whether or not the broker you are considering is available online. Most investors prefer one that is even if they do not plan to make all of their transaction this way. In addition to having website functionality, it should also be user friendly and you should feel comfortable with it.

Then you may also want to look at how much commissions they charge. Typically there is a per trade fee. The cost of each transaction can vary greatly. Instead of just looking for the cheapest, you should look for the best value. What are you getting for the included fee? Next you should also look into a minimum balance and any maintenance fees. How much are they? What do they include?

When you take these things into consideration, it will be easier for you to choose the right broker for you and your needs. Remember that your broker is there to help you with your investing needs.