How do I Choose the Best Online Stock Broker?

A. Leverkuhn

When individual investors want to pick the best online stock broker for their financial activities, they often look at diverse aspects of online trading services, from costs to access and technical support, in order to make the best decisions. Day traders and experienced money managers are not the only ones who can benefit from a good online stock broker service. Beginners who want to invest some of their money in order to make gains will often select simple online trading services that will help them build a better portfolio.

There is an element of risk in all stock trading, including transactions done online.
There is an element of risk in all stock trading, including transactions done online.

The online stock broker replaces a more traditional system that included a greater necessity for physical communications. Before the rise of online brokerage accounts and related technology, brokers often had to communicate with their clients by phone, while also contacting exchanges and trading floors. Today, with online brokerage services, much of this communication is no longer necessary, since most parts of the buying and selling process can be effectively automated.

A stock broker buys and sells stock on behalf of investors.
A stock broker buys and sells stock on behalf of investors.

For those investors who are considering taking advantage of these innovative online stock broker systems and trading platform options, one of the basic issues is cost. Although cost is important, experts do recommend not basing your entire choice on the startup cost of trading. For example, some of the online stock broker services that want to pick up more of the common market will offer a series of free trades in order to get customers in the door. Free trades can be valuable, but not if the customer gives up adequate customer service and a solid online trading platform in exchange for some initial commission free trading.

Beyond cost, those who want to choose the best online trading options will examine access to the software. User-friendly graphic interface or GUI design can make all the difference in giving beginning investors the confidence boost they need to really implement aggressive trading strategies. It also helps to have the best customer service on the other end of the line, in case investors do encounter problems, such as misunderstandings about financial variables that inevitably get involved in trading.

To understand some of the issues that really make the best online trading services stand out, it’s helpful to know when a beginning investor is likely to run into problems. A lot of common misunderstandings have to do with the tax burden on different investments. Investing in equities and financial products is not always taxed “up front”; as a result, beginners can run into serious problems involving a “cost basis” or original cost, as well as technical reconfigurations of cost that online stock broker firms often provide in order to comply with IRS regulations. The bottom line is that investors will not always understand exactly what is going on with trades, and when problems crop up, having good support and human guidance for an online system can make all the difference.

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