You have probably arrived at this page because you are in the market to find a stock broker. But what kind of services should you look for? How do you know that your broker will work to get your trade executed cheaply, quickly and for the best price? We have you sorted.
It is no secret that the right brokerage firm can open up your investing opportunities. So in this article, we have provided some of the tips to keep in mind when choosing a stock broker. Read on to find more.
1. Where you want to invest
The first thing that should come to your mind is where you want to invest. Here, you have two options, either to invest in shares listed in your local stock market or in foreign markets.
If you plan to invest in local markets, you will have plenty of brokerage firms to choose from. If you plan to invest in foreign markets, you will have limited options. Check the international stock broker guide to find out which brokers trade which markets.
2. What you want from your stock broker
The next step is to determine what you want from your stock broker. There are various categories of stock brokers. For instance, discount brokers also known as execution-only brokers carry out your trading instructions either by phone or online.
Full service or advisory brokers will discuss will discuss your investment ideas or portfolio directly with you. They will offer you advice that you need but it is you to make the final decision.
3. Check costs carefully
There are several brokers out there who promise low headline dealing rates but they don’t live up to their promises. Some of them keep their promises only to claw it back through excessive account management fees or high currency conversion costs.
Make sure to read the guides on stock brokers cost to get an overview on how stock brokers charge their clients. Those guides can also help you compare costs of various stock brokers of major stock markets.
4. Understand how your stock broker works
As a beginner, understanding how various stock brokers work might be a bit technical for you but it is important as it will help you choose the best firm. For instance, when it comes to international stocks, different brokers deal in different markets in different ways. A few of them offer direct market access, which means your order is sent directly to the exchange.
As a beginner, you don’t have to care how they work behind the scenes. Unless you need the absolute best price possible and very fast trading, how they work behind the scenes will not make a huge difference to you.
5. Look for a flexible, convenient service
Flexibility and convenience also fall under the tips to keep in mind when choosing a stock broker. Flexible and convenient brokers offers tax-advantaged accounts such as SIPPs and ISA, especially in the UK. If you are a higher rate taxpayer, minimizing tax can bring a big difference to your investment returns.
For international investing, flexible and convenient brokers offer multi-currency accounts. These types of accounts allow you to hold cash in several different currencies without extra charges.
6. Stay safe
Make sure you only deal with reputable brokers who have put the necessary measures to protect their investors. Such brokers understand how investor compensation schemes and protection rules work and they are ready to protect and compensate you if the worst happens.
That said; never place your money with some new brokers that nobody has ever heard of. Also, never trust those firms with your money if they are based in countries that have no rules to compensate or protect investors.
7. Don’t let brokers upsell you
Stock brokers’ main goal is to generate much commission and fees from you. So they will do their best to sell you products and services you probably don’t need or encourage you to trade more often which is very dangerous.
Having said all this, the most important thing you can do is to shop around and compare different stock brokers. Never settle on the first firm you come across.
When you have a shortlist of stock brokers, go ahead and sign up with more than one of them. It is not easy to determine whether a brokerage service is really going to suit your needs until you have used its platform for a while.
Always remember that there is no problem if you decide to keep several accounts. Those accounts will benefit you in one way or the other since different stock brokerage firms tend to be better in different niches.