A price war has broken out among online brokerage firms in recent months, making it a great time to shop for a brokerage account. Here are some key questions to ask when choosing a broker:
How much cash do you need to start?
Different brokers have different account minimums depending on the types of services you want. Some allow a $0 minimum to open a retirement account such as a traditional individual retirement account or a Roth IRA; others can require anywhere from $500 to $10,000 to begin trading. And some brokers will waive the initial deposit if you set up automatic monthly deposits.
What are the costs?
People shopping for their first brokerage may simply look for providers with the lowest trading fees. That could be a good strategy if you plan to make a lot of trades. But trading commissions are only part of the picture. Other costs may include annual fees, inactivity fees and additional charges for access to different trading platforms and research, so factor those into your evaluation as well.
What types of assets can you trade?
The ability to trade individual company stocks, exchange-traded funds and mutual funds is standard for most brokerage accounts, but the selection of funds can widely vary. If you plan to trade currency, futures or options contracts, check that the broker offers those products. Also, note whether the associated fees and account minimums differ from what you'd pay to trade equities.
How much help does the brokerage offer?
How much hand-holding will you need? If you're a first-time investor, probably a lot. Some brokerages offer online or in-person consultations with financial advisors, which may be attractive to newbies. If you're a DIY investor, the depth and usability of the brokerage's research tools also will be a factor.
Select a broker whose educational tools and advice services match your investing comfort level.
Is the platform right for you?
Like test-driving a car, get behind the wheel of any brokerages you are considering and ask yourself: Do I like how this feels? One of the best ways to do this is through a broker's demonstration account or virtual trading, also known as "paper trading." Many brokers also have videos showing how the platform works.
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