6 things to look for in a brokerage account
Open a brokerage account? Here’s how you can make sure you’re picking the right one. Image source: Getty Images.
You’ve decided to start investing, which is one of the smartest financial decisions you can make. The next part is where it gets tricky – you need to open a brokerage account.
This is where many budding investors have become overwhelmed with options. You think finding a broker will be a quick process, only to find that there are a seemingly endless number of them.
Although there are many brokerage accounts to choose from, you can narrow them down by looking for a few specific things.
1. Various investment options
To choose a broker, you need to have an idea of how you want to invest. Here are some of the typical investment options that most brokerage accounts offer:
- Individual stocks
- Exchange Traded Funds (ETFs)
- Mutual fund
ETFs and mutual funds are popular investment choices because they include a diverse range of assets. If you’re considering investing in either, you need to make sure the broker has a wide range of funds and offers ETFs or mutual funds that you can buy for free.
If you plan to trade futures or foreign currencies, you should also look for a brokerage account that offers access to these, as not all accounts will.
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2. Reasonable commissions
Commission is the fee you pay each time you make a transaction. You don’t want to opt for a brokerage account that costs too much because it will reduce the return on your investments.
Many of the top online brokers have joined the zero commission movement eliminating commissions for standard online stock trading.
3. No unnecessary additional costs
Although commissions are standard for buying and selling stocks, you should avoid brokerage accounts with additional fees. Here are some examples :
- Annual fees
- Fund transfer/withdrawal fees
- Inactivity fees
There are many brokers without these types of fees, so don’t settle for one that has them.
4. An affordable minimum account
The account minimum is the amount of money you need to deposit to open the brokerage account, and it varies a lot from broker to broker.
Some brokers require you to deposit at least $500 or $1000 to open an account. Some require several thousand dollars. And for investors who don’t have a lot of loans to deposit yet, there are also brokers who don’t have an account minimum.
In this case, “affordable” means affordable to you, so just be sure to choose a brokerage account that has a minimum that you can meet without financially straining yourself.
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5. Research and Teaching Resources
You will need a lot of information to make the best decisions with your investments. Ideally, you want a brokerage account that puts the information you need at your fingertips. Depending on the broker, this may include:
- Third-party research
- Analysis of the performance of different stocks and funds
You can still get it elsewhere online, but it will be more convenient when you have it available in your brokerage account.
6. Reliable online and mobile access
The last thing you want is to not be able to trade because you can’t access your brokerage account. This is why it is important to check that a broker has a reliable and easy-to-use website, as some brokers have crashed at inconvenient times.
It’s also a good idea to have an account that you can access using a mobile app. After all, you may need to review your account and transact even when you can’t access a computer.
Find your brokerage account
Opening a brokerage account is undoubtedly a big decision, as the hope is that you will be using this account for years or even decades to come.
To sum up, you should look for brokerage accounts that offer the investment options you want with competitive commissions, no questionable extra fees, and an account minimum that fits your budget.
Once you’ve found a few potential account options, see what kind of resources they offer and be sure to choose a broker that you can access whenever you want via your computer or phone.
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