Opening an Account
Every brokerage has different terms and conditions for opening an account. There is a wide range of minimum deposits, varying anywhere from $500 to $2,500. Make sure you read the fine print beforehand. There is nothing more irritating than spending the time to fill out application forms only to discover you don't have enough money to open an account.
So, you're not loaded? Don't worry, more and more online brokerages don't require a minimum deposit at all.
Another option for those with small bank accounts is a dividend reinvestment plan (DRIP). A DRIP allows you to circumvent brokers by buying stocks directly from the companies that offer them.
Commissions and Fees
Every brokerage charges a different price (called the commission) to trade. The price is usually indicative of the service, so cheaper isn't always better.
- The dirt-cheap brokers who charge $5 to $15 per trade get the job done. Prices are going down all the time and quality is getting better, but don't expect great support or perks.
- The mid-priced discount brokers typically charge anywhere from $15 to $30 per trade. These brokers generally offer better customer support and additional services.
- Expensive brokers come with high costs. In some cases you can expect to spend upwards of $100 to $200 per trade. These brokers are known as full-service, and we'll discuss them in greater detail in the next section.
The Hidden Fees
In general, the financial industry is excellent at hiding fees and charges under a layer of jargon. Beyond the commissions per trade, look for the following:
Brokers and Online Trading: Full Service Or Discount?
TradingThis important investment decision happens before you pick your first stock. Find out how to get it right.
Managing WealthA peek into the brokers whose brokerage charges are higher than average in the stock market world.
InvestingIf you're a rookie investor, your first big investment decision should be an informed one.
TradingThe online trading broker market is becoming more and more competitive. Small differences between them can add up to big fee savings for you--or losses.
InvestingFind out what fees and restrictions need to be considered before investing $1,000.
Financial AdvisorAgents charge brokerage fees for facilitating transactions between buyers and sellers.
Financial AdvisorFiguring out what kind of broker to use can be a daunting task. The key is figuring out just how much help you need.
RetirementEach retirement account will have a fee associated with it. The key is to lower these fees as much as possible to maximize your return.
InvestingDetermine what you are getting for your fees and commissions and how to get your money's worth.
Financial AdvisorMake sure you're getting the best service by staying informed and involved.