Overview

Before you can begin investing, you need to open a brokerage account.  This is an account that will enable you to buy stocks, bonds, mutual funds, ETFs and other common investments.  This post is not a review of brokers, but we will tell you what things to look for as well as some we have used ourselves.

You have to first decide if you want a full service broker or a discount broker.  A full service broker may make stock recommendations, research investments, place orders, and even provide more general financial advice.  A discount broker does one thing – executes your purchase/sell orders.  Since you are reading this website, we assume you you want to do-it-yourself, and therefore recommend a discount broker.

How to Compare Different Brokers

Not all brokers are created equal.  Here are some things to look at when comparing brokers, especially online brokers:

  • Commissions – this is the first thing most people look at anyway.  Most brokers should charge between $5 and $30 per trade online.  Phone or human orders will be more.
  • Fees- the first one to check is account inactivity fees; many have them but can be waived with some minimal balance.  Other things to check are asset and wire transfer fees, annual fees, and minimal balance fees.
  • Customer Service – for online brokers, check out the user interfaces and do the demos. Try online chats or call customer service to see how responsive they are.  Many magazine or online publications have fairly detailed reviews.
  • Mutual Fund Availability – most brokers can buy no-load funds free. However, the available selection varies greatly between brokers.  Be sure to see how many each broker offers.  Alternatively, you can always buy no-load mutual funds direct from the fund company.
  • Research – if you plan on doing your own research, it pays to see what resources your broker has available.  The cheaper brokerages do not offer much while the larger ones often have a wealth of free research available online.
  • Account Minimums – check on minimal initial deposits, future deposits, and ongoing balances.
  • Misc- you can look at other amentities such as banking, check writing, money market sweeps, credit cards,  etc.  Sometimes it is very convenient to do all your financial transactions from one source.

Online Brokers We Have Used

There are many online brokers to choose from – to be honest, most are pretty good.  The experience changes as you execute more frequent trades, but we hope to discourage that.

In terms of good overall experience with reasonable commission schedules, we like E-Trade, Fidelity, Vanguard and Charles Schwab.  The user interfaces are very good and you can get solid customer service over the phone.  Vanguard is better for their mutual and index funds.

For pure discount, no frills service, we have used and like TradeKing.  The interface is very simple but easy to use.  We have heard Interactive Brokers are good too, but have never used them.

Summary

Finding a good broker should not be difficult.  Determine what criteria is important to you and compare brokers.  We also recommend reading the annual reviews from Smart Money, Forbes, and other personal finance magazines.  You should be able to find those issues at your local public library.