How to Choose the Best Online Brokerage Account for You

With stock investing becoming one of the most popular ways to increase your wealth, more and more people are wondering how to go about choosing the best brokerage account for them. Finding the right brokerage account might be something that sounds intimidating to someone who has never opened one before, but it’s actually a pretty simple and painless process for anyone that takes some simple advice as to how to find the best brokerage account. There are many to choose from so it’s important that you make a careful, considered decision.

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The Top Line

A brokerage account allows you to invest in stocks, mutual funds, exchange-traded funds, and bonds.
When researching where to open a brokerage account, consider costs like trading commissions that the brokerage firm will charge for buying and selling equities; and minimum account balance requirements.
It’s also important to consider which investment options each brokerage firm offers and what features and functions are available on the company’s website.

Why You Need a Brokerage Account

For those who are unfamiliar with stock investing or investing in general, a brokerage account is one of the most important pieces of the process. A brokerage account is an online account that is used to purchase equities and other assets that are used for investing. Without a brokerage account, it would be very difficult to purchase these assets as well as sell, manage, and view them in an organized way. A brokerage account is truly the gatekeeper to stock investing and is essential if you want to be an investor. For that reason, it is incredibly important that you take the decision-making process a priority when it comes to your brokerage account.

Factors to Consider

When it comes time to choose a brokerage account, there are a number of features that you should be taking into account. When you take the following features into consideration, you will discover how to choose the best brokerage account for you.

Investment Options

Brokerages offer their own funds such as for a target retirement year, investing in technology, or investing for the long-, medium-, or short-term. While you can buy a Brokerage A fund from Brokerage B, it may be more expensive to buy that fund from Brokerage B. This is why it makes sense to understand which options are available from an online brokerage, paying special attention to the offerings that are from that specific online brokerage.

Trading Commissions

Another factor to take into consideration is the trading commissions that are charged with the brokerage account that you select. For each trade, brokerage accounts typically charge a fee to execute the trade, whether it is a buy or sell. This is how brokerages often make money. In addition, many brokerages offer mutual funds and ETFs as products to their customers. These funds often come with management fees or annual fees as a percentage of the assets under management. Brokerages also offer many products including investment advice, other accounts, and trading tools. You should be familiar with what these products are and what they would cost if utilized before you decide to use them with your brokerage account.

Minimum Balance Requirement

One of the most important things to watch for when creating a brokerage account and choosing the right brokerage for you is whether the brokerage account that you are opening has a minimum balance or minimum deposit requirement. This isn’t as much of a problem with experienced investors who already have many accounts and investments, but for new investors it can certainly be a barrier of entry. With a high minimum deposit, it can make several brokerage accounts less accessible to those that are just starting out and don’t have many funds to work with. If you want to open your first brokerage account, make sure that you are familiar with minimum balance and deposit requirements, or you might be subject to fees associated with not keeping the right minimum balance. Most brokerages that are new user friendly do not have minimum balances, but traditional brokerage accounts do institute a minimum deposit and minimum balance.

Account Fees

While many brokerages are now offering free trades to make their brokerage accounts more appealing, brokerages still have to make money. To do that, they have fees associated with holding assets, opening new accounts, using other products, and various other functions that you can utilize within your brokerage portal. It’s a great idea to look over a summary of all the fees that you might be liable to pay when trading or holding your assets with your selected brokerage account. When you are aware of all the fees that are associated, you can be sure to avoid things with high fees or at least be aware of the fees that you are paying. In general, it is nice to avoid fees, but is sometimes unavoidable if you want to have access to all of the features that you’re going to need to invest effectively and according to your personal strategy. Many modern brokerages don’t charge many account fees and keep it affordable for users both new and experienced.

Necessary Features

When it’s time to choose the best brokerage account for you, one of the main factors that you will want to take into consideration is which features of your brokerage you will be using on a regular basis. Every investor is different and needs different features, so it may be helpful for you to consider what type of investor you are going to be, how often you are going to be trading, and which trading products and features you are going to need on a daily basis. For example, you will want to know how the broker conveys information about the performance of its offerings, how it shows your investments and how they’ve changed over time, and whether you will be able to modify the broker’s website to fit your custom needs. With a brokerage account that has all of the features that you want, you will never be limited when configuring your investing strategy. However, selecting a brokerage account with limited features could put you in a tough situation without being able to execute your investing strategy as you had envisioned it. Be sure to conduct a thorough review of all of the features that your brokerage has and also read reviews from those that are in similar situations to you and have gotten use from the same brokerage.

When you are looking for the best brokerage for you, one factor that you should pay attention to is what signup promotions your brokerage currently has going on. Many brokerages will conduct giveaways, free trading, and other promotions in order to entice you to sign up with them. You certainly shouldn’t form your entire decision around this, but it is a factor to take into consideration since you could see free trading and other financial benefits of choosing one brokerage over another. If you are going to sign up with a brokerage based on the sign up promotion that it is currently offering, be sure to be aware of the associated fees and charges that will take place after the promotional period ends.

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