Investing is a significant tool for wealth creation. And yet, before you learn everything there is to know about trading stock or crypto, the online broker you choose is actually your first and one of the most important trades you’ll ever make.
In today’s world, investors have more online broker options than the earlier generations ever did. And this variety of choices—although welcome—also make decisions more complicated.
That said, we created this article to make it easier for you. Here are some tips on how to find a reliable online broker:
1. Look For History Of Reliability
As mentioned, there’s a broad range of online brokers out there. Some brokers have been around the investing scene for decades while others are just a few years old.
But it doesn’t mean that these newcomers are unreliable and untrustworthy. They just haven’t proved their worth yet.
You also want to take a closer look at newer brokers you’re eyeing. Some brokers do scam people—whether with ‘too good to be true’ offerings, extremely high fees or just making it difficult to withdraw your funds.
That said, it’s important to do your homework. You can try visiting independent review websites like Global Fraud Protection.
These websites allow you to learn and read more about various online brokers so you can differentiate the reliable ones from the scams.
And if possible, we recommend that you simply sign up for the well-known brokers instead of the new ones.
Not only will they give you peace of mind, but they’d also provide reliability in various market scenarios.
For instance, larger and more established online brokers may not impose trading restrictions on a frenzied market since they have enough funds on hand to regulate and cover their clients’ trades.
2. Investment Options
One thing you need to consider when looking for an online broker is the investment options they offer. A good online broker allows you to invest in various assets including:
- Stocks
- Mutual Funds
- Options
- Bonds
- Futures
- Exchange-Traded Funds
- US Treasury Securities
- Certificates Of Deposits
Even if you’re only interested in investing in stocks right now, you should consider the possibility of wanting to invest in other options in the future.
Thus, you want an online broker that can provide you with all possible options.
3. Check The Costs And Fees
As an investor, you want to maximize every penny. That said, you want to check a broker’s fees and costs.
Trade execution fees are the major expense you’ll have, but there are other brokerage fees you need to know. These include:
Commission Fees
Brokers earn by taking a small part of their earnings as commissions or payments for their service.
A common fee structure for a broker is a per-trade commission ranging from almost nothing to over USD$100 per trade, depending on the size of your order, how it’s placed, and how accessible or liquid the asset in question is.
Withdrawal Fees
Most online brokers charge a fee when withdrawing, and some won’t allow withdrawal if it doesn’t reach the minimum amount required.
Make sure you understand the rules in terms of withdrawing your money and profits from your brokerage account.
Minimum Balance
Some online brokers will ask you to deposit a minimum amount to set up your account. Online brokers usually have the lowest minimum of about USD$500-1,000.
Margin Accounts
Newbie investors may not open a margin account right away, but if it’s something you’re thinking of investing in, then know that margin accounts have higher minimum balance requirements and fees than your standard brokerage accounts.
Also, make sure to check the interest rate that a broker charges when trading on margin.
4. Accessibility And Support
Even seasoned DIY investors still need assistance from customer support. So, make sure that the broker you’re eyeing offers reliable support and is available even after regular business hours.
Just imagine facing an issue on your brokerage account that currently holds 60% of your wealth and you can reach them.
Thus, you want to choose a reliable broker with a phone or email support that can assist you when you experience a problem.
Also, they should have 24/7 chat assistance that can answer client queries.
Takeaway
And there you have it! Choosing an online broker is one of the most difficult decisions you’ll ever make as an investor. As a rule of thumb, always make an informed decision.
That said, with the above tips to consider, you should now be ready to choose the right broker for you to start your investing journey.
Ella Marcotte
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