How to Choose an Online Broker? [The Complete Guide]

With more and more investors flooding the stock market, there is an ever-increasing competition between online brokers. This cutthroat competition has resulted in decreasing trade commission given to the online brokers and an increase in the services provided by them. Choosing the right broker is entirely up to the investor who must consider the expenses and then hire an online broker.

How to Choose an Online broker

Few investors are willing to pay high trade commissions to these online brokers while some want to save the profit. Following is the guide to finding a good online broker. While finding an online broker, the investor must look for ones providing following services-

1) Cost per trade

Investigate thoroughly the total fee charged by the broker. Lower price per deal of these brokers will be profitable for you. However, consider other costs as well. It is advised to keep in mind your type of investment while comparing the commission charged by online brokers. If you mostly invest in mutual funds, lower cost per trade on stocks is of little benefit to you.

2) Diversity in investment options

An excellent online broker provides all the possibility of expanding the wings of investment. An excellent online broker suggests you invest in a variety of assets like bonds, stocks, mutual funds, real estate investment, exchange-traded funds, etc.

3) Requiring the least initial investment

It is impractical for new investors to have high initial stakes to meet the need of some brokerage firms. What is the point of a broker good enough if he has a high initial investment requirement? Brokers are having almost negligible initial investment requirement.

4) Good asset allocation guidance

Asset allocation is the task investors find the toughest. Particularly for new investors, asset allocation is challenging. Deciding upon initial asset allocation is a crucial task, and maintaining that allocation is even more complicated. Choose a broker who can handle your asset allocation and can also do rebalancing at the minimum additional cost.

5) Good customer support

Investors need assistance, and hence, it is compulsory to look for an online broker offering excellent customer support. Online brokers provide customer support over emails, live chat, phone calls, etc. Choose an online broker offering assistance even after business hours.

6) Do your bit of research

Do not rely on tempting ads and offers often put up by broker firms. It is an excellent idea to do the right amount of research on the firm and even contact customers associated with that firm. Online brokers often end up cheating and to avert such scenario it is must to do a good deal of research and not to rely on information provided by the firms.

7) Consider your investment personality as well

The choice of brokers is affected by what kind of investor you are. For buy and hold investors, fund selection is more prior over low transaction cost. For active traders, doing many transactions in a year, low transaction costs are the primary factor.

Anum

Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you'll find her work all over the PF blogosphere.

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