Stockology

Brokerages are a dime a dozen. But while the selection is great, choosing the one that’s right for you isn’t a walk in the park. First off, know that there are basically two types of brokerages: the discount brokerage and the full-service brokerage. I’m only going to cover discount brokerages because frankly, if you can afford a full-service broker, you can probably get the rest of the information on this blog from them.

So fear not! I’m going to break down brokerages for you nice and easy…

There are two main criteria when considering which brokerage to open an account with.

The first is commissions. Commission is what the brokerage charges you for making a trade. If you’re going to be trading with a lot of money, commission probably won’t be a major decision-driver for you. Otherwise, it’s no coincident that “low commissions” is what all discount brokerages advertise. If you trade a lot, commissions can really add up and eat away at your returns.

The second criterion is tools. ‘Tools,’ in this case, is a loaded term. It includes trading tools, research tools, and whatever other tools you can think of (I can only think of those two at the moment). Some brokerages have proprietary research tools. That means they have their own analysts who do research and you can read those reports. Other brokerages have third-party research tools, so you can get research reports from other investment banks, asset managers, and whatnot. Trading tools are less of a concern these days. All brokerages have real-time tickers so you can follow your stocks as they move up and down during market hours. Some offer real-time charts, Level II quotes, or proprietary trading platforms. I’ll get into these in more detail later.

Naturally, the more advanced trading tools and research tools a brokerage offers, the higher its commission. At least that’s the way it used to be. These days, it seems every discount brokerage has pretty low fees and pretty decent tools.

Here’s a good tip: DON’T PAY MORE THAN $10 PER TRADE.

E*Trade, TD Ameritrade, and Scottrade are probably the most popular discount brokerages. Even Charles Schwab, which touts itself as “a full-service brokerage at discount prices,” only charges $12.

So, as personal preference really is, well… personal preference., I would recommend going to each of those sites and signing up for a free account. Browse around and see if you like the look & feel, the research tools it offers, and the platform it uses for trading. And make sure there aren’t any inactivity fees or anything like that. The brokerages I mentioned above all shouldn’t have any.

And that’s it for brokerages.