Before online discount brokerage firms like ScottTrade, Zecco, TradeKing and others, trading in the stock exchange was reserved for those who had the resources to pay the large fees that stock brokers charge their clients. This barrier for the smaller trader was overcome with the emergence of a brand new concept; the advent of a discount online broker. A discount online broker provides brokerage service at a much lower cost than a traditional full-service brokerage. This is due to the fact that a discount brokerage provides you with the most basic of services and unlike a full-service broker does not provide personalized advice.
These days there are several different discount brokers which have entered the market, and due to this it has become very difficult to find out which broker is good and which is not worthy of your business. This article should give you a starting point for what you need to look for in a discount broker and help you decide which online broker is the best for you.
- The first and foremost thing that you need to know before selecting a discount broker is the kind of instrument that you are interested in investing. There are several different types of brokers: discount stock brokers, discount commodity brokers, and discount real estate brokers and your choice is surely going to be affected by the type of instrument that you are planning to invest in.
- The next thing that you need to determine is how much commission is being charged. In terms of commission, there are two types of discount brokers: standard discounters and deep discounters. Standard discounters have fees which are generally 50% less than full-service brokers and deep discounters have fees which are between 60 to 90% lower than full-service brokers.
- Another important thing that you need to take care of is whether there are any hidden fees associated with trading through a particular broker. There are brokers which have several hidden fees and you need to be wary of those brokers. Make sure there are not penalties for a certain size of trade or limitations placed on the types of stocks you want to buy.
- Another important aspect that you need to keep in consideration is whether the customer service of the brokerage firm is at par with the industry standard. You would not want to invest with someone who does not even answer your queries. You can test this level of customer service before hand by calling their sales team before hand, but understand that a sales call will likely be more friendly and helpful than a technical one.
- The kind of value added services offered by the broker is another aspect that needs to be taken care of. Most of the discount brokers out there offer to their clients’ services such as telephone stock quotes, free check writing privileges and dividend reinvestment service. Think about the kind of things that might be important to you in your broker and identify those particular services.
These are some of the things that need to be look for in a discount online broker like TradeKing, ScottTrade, Zecco or others before investing your money with their firm. Ultimately, an online discount broker is a great way of investing in the stock market at a very low cost, but you want to be careful and do you homework before you open an account and attempt trading online.
