It is hard enough to make money in the stock market. Many have picked the right stock, sold at the right time, only to see a good percent of their profits go to their broker. Even more painful is watching this money be paid for large commissions on a losing trade. There is no longer a need for this to happen with the proliferation of discount stock brokers.
In the early days of Wall Street there were only full service brokers. A full service broker would give you advice, select your stocks for you, and place your trades. This would often come at a steep price. Not only in terms of commissions but also in the form of bad, sometimes self serving, stock picks.
For many years this was the case. You had to call your broker, wait on hold, the only have him forget your name upon answering. Service often fell short of “full” but commissions but fees did not. Recently, however, this all changed. With the advent of the Internet the choices have expanded.
Today, there are a list of available brokerages as long as your arm. The old style full service brokers still exist. For those with very high net worth receiving advantageous terms and access to special opportunities like IPO’s it may be worth it. However, for the rest of us, it is not. Most of us should look for a good discount brokerage.
There are many factors to consider in this search. The first is commissions. Analyze closely the various commission structures as they can be tricky. Look at a base rate fee. Scrutinize the applicable per share charges, if any. Calculate what the commission would be in different trading scenarios. Most importantly, gauge what the resulting commission rates would be assuming your given trading style.
Other fees can be present. Look at fees associated with deposits and withdrawals. Look at others which can be triggered by account inactivity. The form of the fees are limited only by the imagination of those who devise them. Do not be tricked by a surprisingly low commission rate only to be socked with hidden fees.
The next important factor are executions. Low commissions and fees can be quickly made moot if a trade with that given brokerage takes 2 hours to execute. Speed of execution can be critical. This is especially so for those prone to trade a lot seeking defined entry and exit points. It is akin to running a race carrying a large rock.
There are many choices for you. Discount stock brokers have low commissions and fees. Some even offer free trades with various stipulations. Whichever you choose, be a smart consumer. Do your research, read independent reviews, and keep your profits for your family, not your broker!