Picking the Right Online Stock Broker

By on Jul 4, 2013 | Investing | 4 comments

Picking the Right Online Stock Broker

The word of online trading is getting more crowded every day as new online stock brokers fight for your investment money. At the same time, the more established companies try to retain their customers with lower commissions and improved trading tools. Whether you are looking to open a new account or find a better one, it is important to know what to look for when comparing online brokers.

To help you pick the right one, we just launched a comparison page of the best online brokers. Here are some of the things you should be looking for when doing your research.

Online Stock Broker Commissions

The first thing that people typically look at when comparing online stock brokers is their price structure. While this shouldn’t be your only criteria for selection, pay close attention to the following commissions:

  • Stocks & ETFs: it is likely that you will purchase shares of stock or ETFs at some point in your investing career. This is probably one of the most important metrics to look for. Out of our list of the best online brokers, the lowest commissions are offered by OptionsHouse ($4.75 per trade) and TradeKing ($4.95 per trade).
  • Mutual Funds: while it’s usually cheaper to buy mutual funds directly from their parent company, you do have an option to buy them through your broker. Their commissions are typically higher than those of stocks & ETFs, but several brokers offer commission-free mutual funds. Fidelity and Scottrade offer the most no-transaction-fee (NTF) mutual funds.
  • Options: if you trade options, pay attention to option base and per contract commissions. Among the best online stock brokers for option traders are OptionsXpress and TradeKing.

Account Types and Minimum Deposits

The most common brokerage accounts are individual brokerage, joint brokerage, rollover IRA, traditional IRA and Roth IRA. You may, however, be interested in less-common types, such as a 529 college savings account. Determine which type of account is right for you, and look for online stock brokers that offer it.

Pay attention to minimum opening deposit requirements. While some online stock brokers have no minimums, others require anywhere from $500 to $2,500 to open an account.

Trading and Research Tools

You may have a simple index fund portfolio and have no need for advanced trading or research tools. Or you may be an active trader and consider a robust streaming quotes and strategy testing platform essential for your investment style. Whatever you preferences, understand what you need and check to see if it is offered by the online stock broker you are looking at.

Some of the more common and useful research and trading tools include:

  • Portfolio Performance: most online stock brokers will have some sort of performance tracking tools. If you require more advanced metrics to check if you strategies are working, look for brokers that offer what you need.
  • Tax Tools: these can be especially helpful during tax season. The better versions allow you to specify a tax-lot allocation strategy to minimize your capital gains taxes.
  • Fundamental and Technical Research: if you prefer to use your online stock broker’s research tools, check to see what is offered. You may be interested in fundamental research reports, options trading strategy calculators, or a virtual trading platform.
  • Active Trading Platform: essential for active traders. Pay attention to whether an active trading and streaming quotes platform is included with each basic account, or requires an additional monthly subscription.
  • Online Trading Communities: these are growing in popularity and allow you to share investment and trading ideas , see what others are trading and how they are performing. These communities can be a great place to learn from seasoned investors.

Promotions and Freebies

Many online stock brokers offer cash rewards, free trades or gifts for opening a new account. A great promotion may help you decide between two otherwise similar brokers. Check out these ongoing deals from some of the most popular online brokers:

Whether you are looking to open a new brokerage account or thinking about moving your existing assets to a new place, check out our best online brokers list to help you pick an online stock broker that is right for you.

Are there any other factors you consider when choosing an online stock broker?


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4 Comments on “Picking the Right Online Stock Broker”

  1. Mark Ross

    For me, the first things I look at when I start choosing my online stock broker are the fees and the tools they provide that their clients can use to monitor their investments.

    • Anton Ivanov

      Broker commissions and trading/research tools are definitely one of the most important things to research. Thanks for stopping by!

  2. Derek @ MoneyAhoy.com

    ThinkOrSwim really is the best there is. I’ve used 5 or 6 different trading platforms, and it is head and shoulders above everything else. They were bought out by TD Ameritrade a couple of years back, so nothing to worry about there.

    Check it out, the best charting software in the business!

    • Anton Ivanov

      I’ve heard good things about ThinkOrSwim in the past. It can definitely be something to look into for active traders. Thanks for taking the time to leave a comment, Derek!

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