When choosing an online broker, it is important to understand what your priorities are. Much like buying a car, or choosing a doctor, there is no one-size-fits-all criteria that can be written here that will guide you to the perfect broker for you. This article will highlight some of the difference between online brokers and which type of investor might benefit in each category. It is also important to not that many of these things are changing rapidly. Some of the cheapest online brokers are adding features that in the past were only found on the sites of the most expensive brokers, and conversely, many of the most expensive brokers are offering deep discounted commissions for users who only want the most basic features.
One of the most obvious and most important difference between online brokers is their commission rates. For investor´s that generally make smaller, frequent trades and want to do their own research, this is probably the most important criteria. Commission rates for online brokers can get down to less than $5 per trade for those who trade frequently. Even $7 to $9 commissions are easily found from some brokers and have no minimum requirements for the number of trades per month. Along with commission rates, it is also important to note any special fees and restrictions.
The next most important difference between brokers is the types of investments available and the fees charged for them. Not all online brokers offer the ability to trade in mutual funds or options, or some brokers require special requirements to be met before trading in them. If you want to trade in something besides stocks, it is important to make sure your broker offers that service. Some of the cheapest only brokers don´t offer a lot of options besides stocks as investment vehicles.
Another major difference is the amount of tools and information available on the website. For many investor´s, this is not an important feature because most of the information and tools can be found for free on other sites. Some investor´s, however, like to have everything in one spot and don´t want to spend time doing their own research. Generally the difference between the low cost and higher cost brokers is the difference in this category. The lowest commission brokers generally only want you on their site to execute a trade.
The last major difference is in the auxillary services offered by the broker. Some brokers offer services such as check-writing, ATM withdrawals and direct deposit. Again, this criteria generally is counter to the commission rate. The lower commission brokers won´t offer nearly as many auxillary services as the higher priced brokers.