Choosing an Online Broker
Investing wisely online begins
with diligence. Part of the wisdom lies in choosing a reputable
online broker. Here it is important to distinguish between choosing
a broker and using one. Using an online broker should be nearly
as easy as using a browser. So, when a novice investor chooses
an online broker, he or she should investigate several important
conditions.
- First, find out what it costs
to make a direct trade. E-trade,
for example, advertises that it costs $14.95 per trade. Double
that figure since you will ultimately sell your stock, too. E-trade offers plenty of support
for investor research as you will see if you go to the E-trade
home page.
- Second, find out how much you
will need to deposit in the online broker's account in order
to establish an account. Waterhouse
Securities, for example, allows investors to open an account
with $2000. Their cost per trade is $12. Waterhouse also provides
links and research sites that allow investors time to study the
market.
- Third, read the business section
of the local papers and search for articles about online brokers.
You will find many articles that refer to the reliability of
online brokers. These articles often report on web site outages
and ease of use. As well, find out what complaints investors
have lodged against online brokers. A common concern is communication.
Your online broker should have your account set up within two
weeks. The broker should also provide technical support and a
phone number where real people can be reached. Ameritrade,
for example, offers trades for $8 and advertises that trading
and research is simple, but can investors contact the brokerage
house easily by phone without an unreasonable wait?
- As you can see from the three
examples above, E-trade,
Waterhouse, and Ameritrade all seem to
offer similar services at different prices. Each site has information
on cost, research, and ease of use that must be investigated
before choosing an online broker.
Other Online Brokers
