This video breaks six types of brokerage firms, bit by bit, piece by piece, so you will no longer be confused!
When hiring a broker, there are many important things that you should consider and look out for. Here are just a few examples.
1. Is there a minimum balance for starting an account with the broker?
Some brokerages require clients to open an account with a minimum amount of money. This might be anywhere from $500-$1,000. It is important that you understand any of these conditions before doing business with a broker.
2. How difficult will it be to withdraw your money?
Before handing your money over to a broker, you should be aware of how easy or difficult it will be to withdraw your funds. Some brokers require a fee for withdrawing money or won’t let you take out any money that will cause your balance to drop below the account minimum.
3. How much experience does the broker have?
Another important question to consider when hiring a broker is how experienced he or she is. While the number of years the broker has under the belt is important, it is also important to know what kind of experience he or she has. Has the broker primarily worked with clients who have the goals as you or would he or she take you down a road you might not be comfortable with?
4. What is the broker’s track record?
If you know of anyone who has used the broker, inquire to them about his or her track record. Ask the reference about the broker’s overall philosophy as well as about his or her appetite for risk (or lack thereof.) Also be sure to check with regulatory agencies to be sure that the broker has operated in a legal and ethical fashion and has not been fined or reprimanded by any of the regulatory agencies.
5. What designations does the broker hold?
There are many designations a broker could obtain. It is important to be familiar with what designation a broker has, as well as what the designation means. Some of the more common designations include: Certified Financial Planner (CFP)-CFPs must complete at least 18-24 months study, pass an examination and work three years as a financial advisor or complete a two year apprenticeship with another CFP. Chartered Financial Analyst (CFA)-To become a CFA, brokers must pass three six-hour exams and have four years of experience.
6. What is the broker’s fee structure?
When selecting a broker, it is important that you understand how, and how much, he or she will be paid. Will the broker work by the hour or receive a commission? A combination of the two? Something much more complicated? Ask all of the right questions and make sure you understand how the fees work before deciding to work with a broker.
7. Is the brokerage considered “full-service” or “discount”?
The distinction between a full service brokerage and a discount brokerage is important. A full service brokerage offers many more services, such as research and one-on-one advice, than discount brokerages do. Naturally, you can expect to pay more for the assistance of a full service broker. A discount brokerage offers much less in terms of service, but is also much less expensive.
Many investors and active traders are still not aware of the highly rated deep discount brokerages in the U.S. that come with a very cheap cost of buying or selling stocks and/or ETFs in a flat rate pricing and as low as 1$ for every trade in a pay-per-share pricing plan. Since the introduction of stock trading at only $30 per trade by Charles Schwab, stock trading commissions have dropped down a lot. Competition among various brokerage firms is currently very strong with new brokerage firms coming out almost every year pressuring firms that have already established themselves in the brokerage business with very aggressive pricing.
Deep discount brokers will also offer a pay-per-share commission structure and with it, traders will pay for every trade share. The more shares a trader buys with the pay-per-share structure the higher the cost will be. All deep discount brokers usually have a minimum charge per trade of at least $1.00. Below are some of the top 5 deep discount brokerages in the U.S. today.
1. Trade Station
Trade Station is a discount brokerage firm commonly known for the lowest rates it offers to its traders. The firm only charges $0.01 per share for the first 500 shares and $0.006 per share after that with $1.00 minimum per trade. Options pricing in Trade Station can go as low as $4.99 with an extra $0.20 per contract for each active trader. Mutual funds in Trade Station have been priced at $14.95 per transaction.
However, one of the main downfalls of using this broker is that if you have not traded at least 5,000 shares within the previous trading month, a $99.95 fee will be charged for using Trade Station’s trading platform. But the fee does not apply for accounts with a balance of $100,000 or more. Barron’s magazine has rated Trade Station as ‘The Best Broker for Worldwide Traders’ and ‘Best Broker for Frequent Traders’.
2. Options House
Options House is one of the top discount brokerage companies available today which charges a flat rate of $4.95 for ETF trades or stocks regardless of the number of shares in a specific order. There is also an additional surcharge of $0.005 for stocks that are not options eligible and priced at $2 or less. Options House also offers options trading with $4.95 plus an additional $0.50 for every contract rate. The mutual funds are priced a bit higher than Trade Station at $20 per transaction.
Options House is one of the best choices for day traders and active traders looking for a flat rate commission account that will allow them to make larger and cheaper trades which are normally expensive with the pay-per-share pricing plan. This discount brokerage company also offers to its traders virtual trading, a free checking account, and real-time quotes. There are also no extra fees for IRA accounts and for inactivity.
3. Interactive Brokers
Interactive Brokers is a discount brokerage company that offers to its traders a pay-per-share commission structure. Traders at Interactive Brokers normally pay $0.005 for each share that has a $1.00 minimum for every SMART routed order. This generally means that orders of up to 200 shares will cost traders $2.50 per trade while orders of 1,000 shares will cost $5.00 per trade, and orders 2,000+ shares will cost $10.00 per trade.
Options trades at Interactive Brokers are typically priced at $0.70 or less for every contract including exchange fees while mutual funds cost $14.95 for each transaction. There are also additional costs that can be incurred when trading with Interactive Brokers such as a $10 monthly fee if an account is inactive which can also go up to $20 if the balance of the account is less than $2000, and if a trader’s trading commissions are less than $10, then he or she will incur a $10 monthly fee for market data. This means that investors who don’t trade often could end up paying up to $360 every for being inactive.
4. Options Xpress
Options Xpress is another great discount brokerage company with a name that suggests that it mainly deals with options. However, besides options, traders have the option of trading in almost anything such as future contacts and stocks. Stock trades at Options Xpress cost $9.95 which is slightly more than what some discount brokerage companies have to offer and trade options have a $12.95 flat fee for up to 10 contracts. Margin rates are normally from 6.00% to 8.25% and the mutual funds are priced at $9.95 including loading fees.
Options Xpress also has no additional costs for broker-assisted transactions making it a very good choice for traders who require help with their trades. This discount brokerage company is also well known for its trading tools which fall into three categories that are designed to help traders locate good investment opportunities, analyze those opportunities, and execute trades.
5. Scott Trade
Scott Trade is a highly ranked and privately owned discount brokerage company that operates both at retail locations and online. It offers a very reasonable cost compared to other deep brokerage firms with stock trades and trading options only costing $7 plus $1.25 per contract, and broker assisted trades $27. The firm also ranks well in most broker surveys including SMART money’s 2009 survey. It also features various types of accounts including IRAs and other retirement accounts. In the IRA account, there is no annual, custodian, opening, or closing fees.
Margin rates range from 5.25% to 7.25% while mutual funds are priced at $17 per trade. The account opening minimum is $2,500 and there are no maintenance or inactivity fees incurred when using this deep brokerage firm. Scott Trade has the largest network of branch offices among the various discount brokerage companies available today allowing most traders in the US to be able to talk to their staff face to face more easily if they need to.
One of the most dynamic and interesting sectors of industry today is the stock market, where you can buy and sell stocks. You can choose to perform the trading yourself or hire a trade broker. This is an individual who handles your orders to buy or sell securities, them being the middleman between you and the stock market.
The term ‘broker’ can be used to mean an individual trader or a company which performs such trades on behalf of their clients. Examples of these companies are Merrill Lynch and Morgan Stanley. It is an alluring career option to choose from today. Do you want to be a successful trade broker? Here are 10 tips on how to accomplish this:
1. Develop A Winning Character
This is the core activity which you should perform if you want to be a successful trade broker. First, you need to be driven and develop the character of a self-starter. Find a way to become intrinsically motivated to perform trades successfully, and learn how to deal with rejection when it happens. Trade brokers work for very long hours and some will even work on the weekends. You must train yourself to have this kind of stamina. Good communication skills are paramount if you want to be a successful trade broker. Moreover, have good time management skills, know how to close a sale and develop the strength to persevere hard times in the market.
2. Get The Right Education
To become a successful trade broker, a bachelor’s degree is required. The most ideal fields of study are business, economics, accounting or finance. A master’s degree is simply a bonus but it is advisable to get one since employers actually prefer candidates who have an MBA (Master in Business Administration). Possessing this level of education allows you to qualify for bonuses, a higher salary and quicker advancement through the corporate ranks. If you desire to manage some client acounts, you have to be a registered trade broker representing your employer. This registation is performed at the Financial Industry Regulatory Authority (FINRA). To register successfully, you need to pass the General Securities Registered Representative Examination.
3. Identify Which Type Of Broker You Want To Be, Then Pursue That Direction
If you are taking up this career in pursuit of prestige, then you can go to work for full-service broker firms. Examples of these are Morgan Stanley and Merrill Lynch. These firms normally have a broker payout of 41%. However, you have to earn a minimum of $650,000 for the firm to get this payout. If you desire a more independent approach to your trading activities, you can work for an independent broker firm such as LPL Financial. In this type of firm, you get a higher payout of 89% to 95% but you have to set up your own office. Last but not least, if you want to work in a low stress and friendly environment, then a discount broker is ideal. An example of such a firm is Charles Schwab Corp (SCHW), where you will earn a flat salary. However, you will gain experience by learning and practicing in a wide variety of investment areas.
4. Understand The Best Times Of The Day To Trade
The most ideal time to trade is in the afternoon. This is from 1:00pm to 2:30pm. During this time, most people are at work and have had a chance of understanding and comprehending the important business news of the day. Moreover, corporate reports and government data is released in the morning. As such, you can use these sources of information to make your trades in the afternoon.
5. Strive To Buy Stocks That Cost More Than $10 Per Share
When you are making stock purchases, strive to buy the ones which cost more than $10 per share. Firstly, those which cost less than this have a higher percentage spread between ask and bid prices. This makes it harder to break even. Secondly, companies whose stock costs less than $10 are much more likely to suffer financial problems, for example bankruptcy.
6. The Best Points Of Entering The Market Are Where The Supply And Demand Are Imbalanced
Just like any other sector of business, if the supply is low, there is high demand. In the stock market, this sends the price of the stocks soaring. Find the best point of entry by studying the historical stock patterns. Once you do this, enter at the optimal point where the price is low enough due to excess supply and yet the stock is about to generate demand and rise in price.
7. Research The Ask And Bid Size Before You Make An Order For Buying Or Selling
As a stock trader, you need to invest in a good system for real-time quotes. Ensure that your system tells you the last price of a stock, its ask price and its bid price too. If the bid price is higher than the sell size, that stock has high demand in the market. It is good to sell it as soon as you can.
8. Set Stock Price Targets And Profit Goals Before You Enter A Long Term Position
In the stock market, there are two general approaches of trading; taking short positions or long ones. If you decide to go long, identify how much profit is acceptable to you and create a stop-loss in case the stock begins to dip. After doing this, stick to your initial decisions and don’t sell even if the price rises to tempting levels. If the stock market is performing well, then you can change your stop-loss level and profit target. Otherwise, stick to your original goals.
9. Focus On A Risk-Reward Ratio Of 3:1 As You Set Trading Targets
One of the most important activities to perform as a stock trader is to set a proper risk-reward ratio. This ratio assists you to lose small amounts and win big ones. By sticking to a risk-reward ratio of 3:1, you can always emerge a winner even if you have lots of small losses on your trades. Over time, you can become much better at trading and begin posting ratios of up to 5:1.
10. Understand The Best Time Of The Month To Buy Stocks
The most ideal time of the month to buy stocks is between the 18th and the 22nd. This period of the month is when stock prices are low due to a low ebb in cash flow from dividend reinvestment and pension funds. On the other hand, the best time to sell your stocks is the first and last two days of the month. Moreover, September and October are ideal months to buy stocks and May is the best time to sell.
Becoming a stock trader is an exciting job option. In the dramatic world of finance, your fortunes can change at any time and turn you into a master stock trader. You can find yourself amassing a portfolio worth billions. The tips above can get you on the right path to stock market success.
Are you finally read to choose an online broker? Before you do, check out the following video, but not before you read our article regarding Top 5 Deep Discount Brokerages in the US.
In the aforementioned article, we get into the nitty gritty of things: “Deep discount brokers will also offer a pay-per-share commission structure and with it, traders will pay for every trade share. The more shares a trader buys with the pay-per-share structure the higher the cost will be. All deep discount brokers usually have a minimum charge per trade of at least $1.00. Below are some of the top 5 deep discount brokerages in the U.S. today.”
Please do have a read!
Anyway, before you hire an online broker, watch this video.
Got questions? We’ve got answers! Let’s go!
In one of our previous posts, we discussed what a discount broker age is. However, perhaps you find trading to be complex? Never had the time to delve into the basics? We found a video that breaks everything into digestable pieces. In fact, watch it 2-3 times and feel free to leave a comment. Enjoy!
I love buying stocks because every time I do, I become a part-owner of the company or business whose stocks I purchase. But before I buy stocks of any company, I take the time to monitor and evaluate the performance of that company. With careful research and analysis, I have always doubled my money within months after purchasing stocks.
Today I was thinking about my next move in the stock market and I decided to mow my lawn while doing so. I love mowing with electric lawn mowers because it saves me money and I decide how I want my lawn to look. Perhaps, that’s because in my neighborhood, everyone pays to have their lawn mowed for them.
My worx wg789 cordless electric lawn mower is so easy to use that it somehow motivates me to do the job myself. And in fact, doing so has enabled me to save a significant amount of money every year to put on more stocks. In my former neighborhood, I used to spend up to $200 a month to keep my lawn in shape.
Now back to the stock buying topic…Over the years, I have realized that researching companies that I am personally familiar with is very important. I usually follow playbooks of popular investors like Warren Buffet and read annual reports of every company that I’m interested in.
Generally, annual letters by the managements of these companies to shareholders provides the general narratives of their performances. Additionally, I find information about different companies on the websites of brokers, including updates on quarterly earnings, analyst ratings, recent news and transcripts of conference calls. Some brokers’ websites provide crucial financial information which enables me to compare specific metrics and performances of different companies before making my investment moves.
Making The Decision
I like making my final decision on the stocks to buy without pressure. I never like filling my entire stocks portfolio at once. In fact, I prefer purchasing a limited number of shares at a time to get a feeling of what it is like to be a stockholder in a company. If it feels good, I add more stocks to my portfolio over time. Generally, I buy the stocks of any company because it is a great company and I feel great for being associated with it.
However, it’s important to note that there is a difference between a good company and a good stock. For instance, a company can be a great stock when you purchase its stock but become overpriced with time.
Happy To Be A Stock Investor
Whenever I buy a stock, I enter into a long-term commitment and relationship with a company that I choose. Ideally, all of my stock picks are winners. However, there are rough patches. Nevertheless, I have learned that the key to successful stock investment is bearing in mind why I chose to become a stock investor. To me, investing is fun and I love the idea of making money by being a bona fide, part-owner of different companies.
One of the most dynamic and exciting sectors today is the financial industry. Characterized by big money deals and shrewd investment moves, it is attractive to many who want to make a fortune. The appeal of financial centers like Wall Street is attractive to many. To take part in the buying and selling of shares and other types of securities, you need to use the services of a brokerage firm. This is a financial institution which conducts the buying and selling of securities on behalf of a buyer. It acts as the intermediary beween the buyers and the sellers.
There are two main types of brokerage firms. These are full-service and discount brokerage firms. Full-service brokerage firms help you to make trades and also give you investment advice. However, they can be very expensive to work with. This is because many of them charge up to 2% in commissions every time you buy or sell shares. On the other hand, a discount brokerage charges you very little in commissions when you make a trade. However, they do not give any investment advice. What are the features of a discount brokerage that make it different from a full-service one? Read on to find out.
CHARACTERISTICS OF A DISCOUNT BROKERAGE
They give you full control over your trades
A discount brokerage firm only does exactly what you want it to do. They do not try to convince you to follow a specific opinion by giving you advice. They make the exact trades which you tell them to make, nothing more, nothing less. In this way, you can make your trades based on your own judgment wth no effort from them to convince you otherwise.
They save you a lot of money
Discount brokerages conduct trades for much less than full-service ones do. They do not charge high fees because they are simply making trades on your behalf, nothing more. They do not spend time giving you their opinions on the market or which trades are hot in the moment. They are simply an intermediary between you and the market. Thus, they are very affordable to work with.
They invest more of your money in the effort of making quality trades for you
When you decide to work with a discount brokerage, you can be sure that they will make high qualtiy trades for you. In 2012, NerdWallet conducted a study. They discovered that discount brokerage firms spend a larger percentage of your commissions in making trades for you than full-service brokerages do. According to the study, full-service brokerages spend only about 12% of your commission fees to make trades. The rest is used for company activities such as advertisement and public relations. On the other hand, discount brokerages spend up to 59% of your fees exclusively to make trades. This means that they are capable of making high quality trades for you.
If you are looking to maximize the profits that you make from your investment trades, a discount brokerage is the way to go. They will not complicate your trades with advice and opinions. They will allow you to make the exact trades you desire whenever and however you want.
Penny stocks are stocks that trade at $5 or under, which is great for a beginner. But with these particular stocks, there are problems that plague this market…so do your homework first. If you still are going to invest in them, take a look at this video for some tips!