Selecting the right stock broker for your particular needs and preferences is extremely important, and being with an ill-fitting stock broker can break a trading strategy that would have yielded a nice profit with another broker. It is not possible to recommend one particular stock broker that is better than all the rest, since it is all about finding the stock broker that is best for your situation and trading strategy. Below, we will take a look at a few examples of things that are good to keep in mind when choosing a stock broker online.
Do you really need all the extra fluff?
It can be tempting to go with a broker that offers all the bells and whistles, but will you actually use all these features? Is this the best stock broker for you when it comes to costs?
If your trading strategy doesn´t involve technical analysis, you wont benefit from a super duper comprehensive assortment of charting tools. If you only want to trade stocks listed on NYSE and LSE, having access to Bursa Malaysia and the Johannesburg Stock Exchange wont actually help you.
When you select a stock broker online, select one based on your current needs and preferences. If you later decide to branch out and start investing on the Botswana Stock Exchange, you can always sign up with another broker that is perfect for that.
Thinking you need one single broker to fulfil all your current and future needs is a common beginner´s mistake.
Don´t miss out on tax-advantaged account types
In many jurisdictions, your taxes will depend on which account type you use for your investments and trades. There are for instance the tax-advantaged ISA account and SIPP account in the United Kingdom, and the ISK account in Sweden. Before you chose a broker, make sure you are well-informed about your tax situation and which account type or types that would be best for you. Then, go with a broker that offers that.
This is not just about minimising tax payments; it is also about minimising administrative work. Investment account types created to encourage ordinary people to invest in stocks are typically easy to maintain from a tax-perspective.
Will you be allowed to hold cash in several currencies?
For international investors, being able to hold cash in several different currencies in the trading account can be highly beneficial. If this pertains to you, make sure you check in advance before you sign up with any broker.
- Does this broker offer a multi-currency account?
- For which currencies?
- Will there be any extra charges for this?
Test-drive the trading platform before you make a deposit
Reputable brokers and trading platforms will typically allow you to test-drive the trading platform for free, using play-money. That way, you can ”trade” and also explore the various tools without risking any real money. This is time and effort well spent, and we strongly advice you to do it even if you are super eager to jump into real-money trading right away.
Once you have made a real-money deposit into a trading account, it will be more difficult to simply turn your back on a clunky trading platform.
Important: Don´t test-drive on your computer if you plan on doing most of your trading on your phone and vice versa. Make sure the platform is easy to navigate and use on the type of screen you will use for most of your real-money trading.
Customer service is important
This is one of those things that are easy to overlook when choosing a stock broker. No one signs up with a stock broker online expecting to spend a lot of time dealing with the customer support. However, when an issue comes a long, good customer support is of essence. Therefore, it is a good idea to pay some attention to the customer support before you chose any of the stock brokers available online.
- How will I be able to contact the customer support? Is this my preferred method? Examples of common routes are phone call, email and live chat.
- What would a phone call cost me? Do I have to make an expensive international call? Is call-back service available?
- When is the customer support open? Of course, you can send an email 24/7, but when can you get help in real-time through phone or live chat?
- Is customer support available in a language that I am comfortable using?
- If I send a question to the customer support, how quickly do I get a reply? Was the answer helpful?
HedgeThink.com is the fund industry’s leading news, research and analysis source for individual and institutional accredited investors and professionals