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Investing in a business is one of the easiest ways to generate significant wealth in the long run. However, you cannot carry out that process just by phoning the company and telling them that you are interested in buying their stocks.
Instead, what you need to invest in the help of a stockbroker.
Your stockbroker of choice will act sort of like your stock market middleman. It can either be an actual individual or an online service.
It can allow for various activities, like making it public that you’re interested in buying/selling stocks, sharing the information related to what you’re looking for, and providing ways for you to contact another buyer/seller to finally carry out an exchange.
Nevertheless, people tend to opt for online stock brokers for their easiness, versatility, and extra features. However, it can be a little hard to find out one that genuinely speaks to your needs.
Do you need a complex by full-featured platform? Or a user-friendly one? Are you in need of research resources, or are you just looking for a simple trading platform?
To assist you in the search for your ideal online stock platform, here we have compiled some information you can take into consideration:
Understanding the types of stock-brokers
First of all, you need to understand that there are two main types of stock-brokers, and what you can expect from any of them can exponentially vary from the other. Understanding what each type consists of can play a significant role in your decision-making process.
- Discount broker: Those companies that offer investor platforms to buy and sell online usually limiting themselves to providing only that. It is common for them not to have extra features, nor any type of offered assistance. It balances a fair and low price with a straightforward, user-generated experience.
- Full-service broker: Companies that offer platforms that, aside from allowing you to buy and sell, provide personalized guidance and access to well-detailed research for you to make better investments. While typically more expensive, they tend to be an excellent tool for more established investors looking to improve via a more personal approach.
Even if both types are highly viable options, you probably should go for a discount broker if you are just starting as an investor. Not only will their low-costs help you begin more accessible and faster, but having to pay low commissions (or not even having to pay them at all) will help you have a better hold of your actual earnings. Besides, you can still manage yourself well with the use of outside sources for any needed research.
If you were to make good use of it all, you already have what you need to start improving your portfolio with bigger and better investments. And the option of full-service brokers is still available to you if you were to be interested in it for the future.
What to look for when choosing an online stock broker?
There just isn’t that perfect one that has it all when it comes to online stock brokers. But, you can still find the one that suits your needs the most.
For that reason, we recommend using the following guidelines in the evaluation of your options:
- Cost structure: Most online brokers don’t charge any commissions for trades alone, but some offer extra features like access to mutual funds that indeed have a cost to use. Compare what you need to what you can actually afford. There is no need to pay an extra amount of money for features you have no use of yet.
- Account minimums: Some online brokers don’t require an initial deposit to give a go, but others can ask for a specific amount. Don’t let that bother you. It’s a good idea to start investing from the get-go. Only be sure that the broker of your choice can accommodate any amount you are capable of investing in already.
- Mutual funds: Investing in mutual funds isn’t in everyone’s interest, but if it is among yours, do look for an option that offers a large selection for you to choose from.
- Features: Based on what you currently feel that you need to kick-start your investments, look for an online stock broker covering those exact needs. In the end, it all depends on your preferences.
Also essential to keep in mind that stock-brokers can come in many forms and shapes. Your “common” broker isn’t the only option at all.
Investors can now count with the help of their regular day-to-day mobile cell phones. Apps such as Acorns and Square’s Cash App are great options that allow you to do everything a stockbroker offers you at your hand’s reach and on the go.
Like so, many brokers have introduced the option of Robo-advisors, which can do the entire process autonomously without you having to give any sort of input after the initial setup. Think of it kind of like a car that can drive itself. Only this is a brokerage account that is investing on its own. As results have shown previously, it is a trustworthy low-cost solution that frees up any investor’s hands and time.
Considering that, try and keep an open mind in your search to increase your chances of finding the right online stock broker for you.
Take commissions into consideration
As stated above, not every online stock broker asks for a commission, while some even ask for low amounts. However, you should still have an idea of how any commission of any size could come into play in your investment, where your broker makes use of them.
Let’s say that you have $1,000 to invest in, but the broker of your choice charges a $6.99 fee for every investment you make. Furthermore, you invest in not one but five companies at the same time. Well, that means that out of your $1,000 original investment, you have now lost nearly $35 in trading commissions alone. That’s almost a 3.5% loss from the moment you’re starting. Now consider every time you add up a new investment to your portfolio, that $6.99 commission will keep repeating itself as long as you stay with that choice of broker.
However, that’s not to say you should straight up abandon that broker, the services it could be offering might as well be worth it. Instead, it is more of an invitation to always keep in mind that loss and make sure it doesn’t have repercussions for your plans in the long-run.
What do you need at hand to open an account?
Let’s say that you already have a choice in mind. Opening an account in any online broker service is a straightforward process. You could do it in a matter of minutes just by filling a series of forms, but you can help yourself get done with it faster by having these documents already at hand:
- Social Security Number
- Any form of ID
- Information regarding your current funding method
And that’s it! Just follow the instructions as stated by your provider, and you’re all set up.
Our online stock broker suggestions
Now that you know everything you need to finally open an online stock broker account, here are some discount broker options that we highly recommend for you to give it a start with:
- TD Ameritrade
- SoFi Active Investing
- Merill Edge Self-Directed