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Low commissions are no longer the only
thing we look for when selecting an online broker. Commissions now range from about $30 to
$5 per stock trade, with an average of $15.75 for the top 20 or so brokers. These days,
you need to look for a broker that matches your investing style.
A frequent trader has different needs from a buy-and-hold investor; an experienced
investor needs less hand-holding than the novice. You can use the many broker surveys to narrow the
field to those brokers that match your style. Once you have a short list, use these 15
points to help you home in on the right online broker.
1. Size
matters.
If you regularly make trades of 100 or 500 shares, check the commission schedule for
trades of those sizes. That highly touted rock-bottom rate may apply only to trades of
1,000 or 5,000 shares. Or it may require that you maintain a minimum level of assets in
your account or make x-number of trades a month.
2. Look for hidden costs.
Nasty surprises may be lurking on the fee schedule: Fees for delivery of stock
certificates, fees for late payments or bounced checks, transfer fees, wire fees, IRA
fees, annual maintenance fees, termination fees. To name a few. There's also a pesky
little transaction or postage & handling fee that a few brokers still tack onto all
trades. (We've noted these on our Broker Guides because they
actually raise the commission by that amount.) So be sure to check out the fee schedule.
SmartMoney.com gives a separate rating for fees in its broker survey.
3. It depends on what you mean by zero.
Some brokers do not require a minimum investment to open an account. But funds must be in
a new account before you make a trade, unless you establish a credit line. All stock
trades must be settled by the third day after the trade.
4. If you want kiwis, be sure to plant a kiwi tree.
Broker surveys and our own broker guides are geared toward stock trades. But maybe you
want to trade options or bonds or mutual funds. Maybe you like penny stocks
or Canadian stocks or ADRs. If so, be sure the broker you choose trades
those securities. And check out the commissions. Even if the broker trades them, they may
not be traded over the Internet and may incur a higher than desirable commission.
5. Real-time is the best time.
Real-time quotes are becoming more prevalent on the Net. But understand what your broker
means when it offers free real-time quotes."
Is it just for each trade you make? Or for accounts of a certain size? Are there bonus
quotes with each trade, to be drawn upon as needed? Can you update your portfolio with
real-time quotes? Do they have streaming real-time quotes?
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