 |
A Message from Kimberly Clouse, Financial Expert:
I have worked in the financial services industry for
nearly a decade in many capacities, most recently as
a financial advisor for individuals. Over the course
of my career, I have had the privilege of working with
a diverse range of people, from the single mother just
starting her own business to the dot.com billionaire.
Based upon my experiences, I have learned that the same
basic principles and lessons apply to a successful and
healthy financial life, whether you're starting out
or cashing out. These guiding principles include simplicity,
a long-term perspective, and above all, knowing that
you have control of your financial destiny, and all
the information you need is well within your reach.
Choosing the Best Online Broker for You
Over the past few years, the growth of online investing has
been explosive, to say the least, and the trend is expected
to continue. According to a January 2000 Robertson Stephens
report, close to 31 million e-brokerage accounts will be open
by 2003, from just under 4 million in 1997. Moreover, Jupiter
Communications predicts that online brokerage assets will
grow to more than $3 trillion by the end of 2003, a seven-fold
increase from $415 billion at the end of 1998.
With the recent investor appetite for online trading, more
and more brokerage firms are entering the fray, giving investors
plenty of choices for selecting an online broker. How, then,
to choose? Besides seeking out low commissions, choose a broker
that matches your investing style. Frequent traders need different
services than do buy-and-hold investors; experienced investors
have different requirements than novices.
Consider the following when selecting the best broker for
you:
- “I Said 100 Shares, Not 1000.”
Commissions and fees will likely differ for 100-share trades
versus 1000-share trades. Or, the brokerage may require
that you keep a minimum balance in your account or make
at least a certain number of trades. Be sure that your investment
behavior will qualify you for the brokerage’s best
rates. That attractive trading rate advertised so heavily
on TV and in the paper may not apply to you and the way
you trade. Check the commission schedule for your type and
volume of trading.
- What About ADRs?
Most of the current online investing world is oriented toward
stock trades. But what if your portfolio also consists of
ADRs (American Depository Receipts, which are receipts for
stock in a foreign company), mutual funds, and options?
Make sure that the broker you choose can trade the securities
you want to trade, in the way that you want to trade--over
the Internet--and for a reasonable price. Similarly, be
sure that you pick a broker who accepts the types of orders
that you like to use. For instance, if you use stop or stop
limit orders to protect your profits, be sure you pick a
broker who accepts these types of orders.
- Beware Hidden Costs
On the surface, brokerage services might look cheap--as
low as $8.00 per trade in some cases. But, as with all fee
schedules, read the fine print. Some brokerages impose additional
fees for services such as delivery of stock certificates,
late payments, transfer fees, wire fees, IRA fees, annual
maintenance fees, and termination fees.
- Rates, Rates, Rates
Most brokers offer money market accounts for any cash that
is not currently invested, and depending on your investment
portfolio, the amount of this interest can be substantial.
Be sure to ask your broker the following:
- What interest rate will my cash earn?
- Are any cash funds automatically swept daily into
a money market?
- Can I write checks--for free--out of this account?
The other rate to examine is interest rate on margin loans.
A margin account allows an investor to borrow against the
equity in his account to buy stocks, thereby stretching
his or her buying power. Margin accounts vary widely across
brokerages, so be sure to comparison shop.
- Support and Stress
In Internet Utopia, systems would never fail, and Web sites
would have so much easy-to-find useful information that
all customers’ questions and concerns would be answered.
Until we get there, however, customer service is important.
Before opening an account with X Brokerage firm, make sure
the firm offers satisfactory customer service. Is there
an 800 number to call for help 24/7? Does a live person
answer that number? After how long? Does a broker respond
to your e-mail inquiry?
Also, what is the broker’s emergency back-up plan in
case of emergency? If the broker’s system crashes,
do they have back up systems that can handle trades? Will
you be routed to another company? The best possible back
up is second or even third accounts at different brokerages.
And of course, begin the process of opening these accounts
well before you need to access them, since accounts can
take weeks to open.
In the end, selecting a broker is a matter of personal taste.
Do you like the look and feel of Site A better than Site
B? Is it easier to navigate? Have better tools? Before you
commit, use the free trading demo at the broker site to
get a feel for trading online at that site. And importantly,
remember that you, as the customer, are in the driver’s
seat. Competition for new accounts has become so fierce
that some brokerages are offering perks such as frequent
flyer miles, free trades, gold credit cards, or even cash
in your account.
|
|
