How to compare stock brokers with one another

There are many different kinds of investors and naturally there are many different kinds of stock brokers and financial management companies to service the different kinds of investors. Investors vary tremendously in their appetite for risk, the type of assets they want to invest in, and the types of conditions that they would invest their assets. As a result, there are many different investment management companies that cater to this large market. There are some that are broken down by regions, some service only Asia and others specialize in Europe, while even others focus more on the Americas. There are also investment companies that focus only on specific types of investments. There are just so many directions you can go as to specialization, diversity and focus.

Filter stock trading services based on your needs

In terms of finding an online stock broker that is right for you, you have to keep this diversity in mind because just as there is a wide variety of financial service companies offline that serve different types of investors, there is a similar amount of diversity online. There are certain online equity firms that focus on certain types of stock. There are others that focus only on specific geographic exchanges. Even others focus on particular industries. There is a lot of strength in this diversity because this shows you that if your needs are specific, you could come to a specialized online stock broker that meets your particular needs. While there are large similarities and to a certain extent some online stock brokers can cover a wider range of transactions, it is good to know that there are many niche service providers in this market that can fit your particular need.

Beware of top-down or cookie-cutter recommendations

Because of this large number and various kinds of online stock brokers, ereviewguide.com has positioned it online stock broker guide, not in terms of specific recommendations and other top-down type of suggestions for brokers; instead it focuses on particular functionalities and features. Read this guide by analyzing and applying the questions raised based on the feature breakdown that is listed. By doing so, you will have the right questions in mind when considering a stock trading service provider. Oftentimes the right answer is not supplied by any one person doing a recommendation, but can only be arrived at by you asking the right questions. Only by doing so could you select stock trading option that meets your particular needs and fit your particular situations.

What can Online Stock Brokers offer with their services?

At the most basic, these are the common services that online stock trading services bring to the table. The more sophisticated the investor, the more fine tuned this list should be, but these are the basics.

Buying and Selling Stocks

A stock trading service allows you to buy stocks and sell equities. In addition, it also would allow you to trade in options, mutual funds, exchange traded funds, and even fixed income securities like bonds and certificates of deposit. Depending on the service you go with, some even offer free assistance when you are making the trade. The person helping you is an actual broker. Of course, the assistance does not take the form of the broker making decisions for you as to which equity to buy or sell. The assistance takes the form mostly of walking you through the buying or selling process. Also depending on the exchange, you may need broker assistance there as well.

Investing

Quite a few stock trading services offer you different investment options in addition to investing in the securities discussed above like exchange traded funds, fixed income securities, mutual funds, options, and equities. Some of these other investment options include educational investment funds, retirement investment funds and of course the individual retirement accounts (IRA). These fall within a separate category and not all stock trading services offer this service. If you are looking to use an online service to manage your IRA, educational or retirement fund, look for a service that supports these types of investment options.

Monitoring and Tracking Stocks

Most online stock trading services allow you to graphically monitor and track stocks that you bought or stocks that you are looking to buy or sell short. Regardless of what you plan to do with the equity, most stock trading services offer software tools that you can access online. Look for these key features when analyzing the tools. Not all stock monitoring services and features are the same. Some are more robust than others. While most stock tracking tools share the graphical tracking interface where you can see the price movement of the stock that you are monitoring, others are more robust.

Robust Monitoring “Extras”

They include E-mail alerts if the stock that you are monitoring makes a sudden move up or down. Others offer watch list where you are simultaneously watching and monitoring a large collection of stocks. A few online stock trading services even offer third party analyst reports either at a discounted rate or at a full rate. The great thing about having third party analyst reports on stocks is that they help get you the information you need to make an informed decision regarding your equity buying or selling. In this situation, two heads are always better than one. The more information you have, the higher the chance that you would base your decisions on solid information. Well-informed investing move has a higher likelihood of succeeding or producing happy results than taking a shot in the dark. Be very careful though with third party analyst reports. Just because it is being offered to you by the online stock trading service does not necessarily mean you have to take their word for it and accept their recommendation.

Assessing Stock Analysis Reports

As “official” as the analyst report may seem to be, request free samples. Look at reviews online regarding the analyst report. How many times have they been right? How many times have they been wrong? Are they specific to certain industries? Are they strong in certain industries and weak in others? What are the names of the people behind the reports? What are those people's track records? When it comes to due diligence regarding third party analyst reports, you should really take your time because considering the amount of money and possible headaches and even heartaches involved, it is really worth going slow and really digging deep and analyzing the analyst. It is your money. You worked hard for it. Do not just throw it away by taking a reckless risk based on somebody's recommendations. Always double or triple check analyst reports that are offered to you.

Analysts Reports: Remember that the Choice is always yours

You do not have to go with your online stock trading service recommendation for analyst services. You could research it on your own and find a better option that fits your particular risk appetite, your financial goals and projections, and your overall comfort level. However, having a third party analyst option is a good sign that the online stock trading service that you are going with is trying to offer a full suite of services. It definitely does not count against them, but it does not mean that you have to go with their recommendation.

Investment Calculators

Besides monitoring and watching stocks, another freebie or additional feature you should be on the look out for are investment calculators. Some stock trading companies offer free investment calculators that factor in important tax and legal factors that you should be mindful of. Capital gains tax is a very important factor when you are trying to decide to leave a particular stock position and sell. If the numbers are not right when you factor in your taxes and when you factor this into your target ROI or return on investment, you probably may need to hold off on making the move. In this particular situation, having an investment calculator really helps. If nothing else, it at least reminds you that there are other considerations to factor in to a buy and sell decision other than just the stock price because sometimes when a stock moves, you think you made profit, but if you do not make the right calculations, you actually are just breaking even or after factoring in taxes, processing fees and other "hidden fees" is actually losing money. It is a good sign if the online stock trading service that you are considering has investment calculator. However, keep in mind that even if your stock trading service does not carry all the freebies or features listed above, it does not necessarily disqualify them from your list. Depending on your level of investment sophistication, experience, or if you have other information sources or you already have investment system, you might not need these tools. However, we would recommend that you should at least look for service that has a robust alert or watch list system. Unless you are using a third party software that allows you to do this, having these basic freebies help you to at least get your stock tracking and monitoring efforts standardized and predictable.

Investor Education

Not all online stock trading services offer an education section. While it would be nice, it is definitely not mandatory and not all investors would really benefit from it. Why? Many have already done their research. Many just need a bare bones basic service that allows them to buy a stock and sell it quickly with no fuss and no muss. However, other investors are still learning or they are looking to deepen their understanding. Regardless of where you are in terms of investment savvy and sophistication, it is a nice gesture when your online stock trading service offers an education section. Keep in mind that you should not get your hopes up in terms of the level of quality of such educational sections. While some online trading sites have really deep and powerful investor education programs that really seek to train you into becoming a super investor, others offer very basic information about stock trading. Others do not even offer anything. Depending on how much information you need, you have to factor this in because the amount of offerings out there covers all points in between from a lot of information and involved education that is almost interactive stock trading, training all the way to just basic glossary of terms and basic chart of rates, there is just a wide space in between. In addition to the depth of information that is being offered to help you hone your investment skills and deepen your knowledge about investing in securities online, the service can offer this information in many different forms. The most common forms are investment glossaries and stock trading definitions, investor forums, trading seminars, investment blogs, newsletters and seminars.

Glossaries and definitions step you through just what certain common terms are involved in the buying or selling stock online. It is a good idea to familiarize yourself with these definitions so you know what you are doing. In addition, this will let you know what kind of fees they are taking out and what those fees represent.

Investor Forums

Investor forums are quite helpful because as we mentioned earlier, two heads are better than one. You may think you have it all figured out and you have read a lot of reports, but oftentimes it is productive to see an opposing view or to see another person who looks at the same situation from a different angle and see if you come to view the situation the same way. Either way, a diverse point of view is absolutely another source of education for you.

Beware of “promoter bias”

Be careful though as there are many people on these forums that spam particular stocks. These are paid stock promoters who make their money by getting people excited about certain equities. The problem is those equities may not be the strongest investment. In many cases, they are actually quite poor investments. Be very careful of what you read at forums. Always take it with a block of salt and always cross reference. If somebody makes a recommendation, verify the claims being made and look at the inside track of the company that is being promoted. This is especially true when it comes to penny stocks. If you cannot find information regarding a particular stock, look at the industry. See how the industry is doing or look at the public filings of the company that is being promoted. The biggest danger of dealing with investor forums is to act on impulse. You certainly cannot make sudden moves based on what somebody post online. It is understandable to do that if you move quickly based on something you read at Forbes or The Wall Street Journal, but it is a different situation entirely if you feel the same compulsion when based on something you read off a forum from an unknown source.

Investment Seminars

Investment seminars are live offline meetings that involve training or public seminar done by an investment professional. These can be quite productive. However, you have to choose carefully as to which seminar you go to. Research the speaker. Is that person going to be covering a topic that you would be interested in? Look at their background. Do you think this person is qualified? Also what kind of industry or specific investment does this person cover? Exercise a strong amount of due diligence and ask a lot of questions when trying to qualify whether a seminar is worth going to. Also consider the cost. Many seminars take place in Las Vegas and others take place overseas. At a minimum, you would have to fly there or there will be a lot of travel cost. Conduct a cost-benefit analysis with the benefit of going to the seminar outweighs the cost of airplane travel, hotel and lodging and incidental transport cost. Also factor in other benefits that you might get by going to the seminar. Is there a chance that you would be able to network with other people that are in your line of business or line of work? That is an added bonus.

Weigh your seminar options carefully – don't just jump in

Look at things from many different angles before you make your move. Do not feel too bad if you do not go to one particular seminar because frankly, they are a dime a dozen. Look at reviews of people who wen to this seminar in the past. How well did they do in the stock market? Did they walk away with something that added to their bottom line or is this seminar just a product of hype? Stay away from those if you just heard of the seminar because of hype or because your online stock trading service is pushing it to you. Chances are high that if they are advertising it heavily that they are getting a commission. Keep that in mind.

Investment Blogs

Investment blogs are just like forums, but unlike forums where the discussion is focused on a particular post and there are people interacting with the post, blogs are miniature articles about a particular company and there is a whole series of them. Once again, just like in analyzing forums, pay careful attention as to who is posting the information. Does the information being posted on the blog credible? Has the logger made predictions in the past that turned out to be true? Bottom line is that is what you are looking for in a financial blog. How accurate is the information? Are the information, conclusions and recommendations being offered worth your time and hassle? You can easily find out just by looking at their recommendations and seeing the movement of the stock. Also be careful as many blogs can be back dated so it looks like they posted a particular prediction at a certain date and it actually came true when it reality, they just tracked how a stock actually behaved and they back dated their post to track that. You are at a severe disadvantage because there is no way you can tell if the logger is doing this trick. The best way to protect you is to look up the blog on the internet and see how many other loggers consider that blog as an authority. Look at the person making these recommendations and see if they got published in Forbes, Fortune, The Wall Street Journal or any other credible publications that could vet them. The stakes are too high for you to depend blindly on some random blog post because any fool can blog. You have to focus on authority or else you are putting your money and your peace of mind at risk.

Investment Newsletters

Some stock trading services and platforms offer investment newsletters. Again, these are just like seminars, forums and blogs. Pay careful attention to the services or products being pushed there. Remember that the entity you are dealing with, the online stock trading service, exists to make money and as part of that mission, they will advertise to you. Much of the stuff in the newsletter will be links to places that are trying to sell you a product or a service. Just because they have a profit motive in doing this does not mean that they are bad people. This does not mean they are trying to scam you or rip you off. What this does mean is that you have to be more proactive in researching the products or services that are being offered.

Key questions to ask regarding newsletter offers

Does it really offer a real value to you? Does it have a track record? Is it branded? Employ the same analysis applied to blogs, forum posts and seminars above in order to really filter through the financial advice being offered because there are a lot of scams out there. The stock investment industry capital market is a huge market worth trillions of dollars and whenever there is that huge amount of money on the table, you can count on the fact that somebody will try to take some of that money through shady means. Do not become a victim. Pay careful attention to what is being offered in the newsletter. Also many newsletters include free content on supposedly helping you how to trade. That is fine and well, but always double check what they are teaching you. Make sure that this is sound advice. It might be teaching you steps that are geared towards more sophisticated investors and if you are just getting your feet wet in online stock trading, you might lose money. Study the newsletter's contents carefully before making a move.

Webinars

Webinars are seminars or live presentations streamed online. They are a great alternative to seminars because obviously you are saving money by not having to travel to the location of the seminar. Also a lot of webinars could be saved on YouTube and other video hosting sites so you can review them at a future date. In terms of content, you should analyze and approach webinars the same way you would information found in forums, seminars, blogs and newsletters. Again, the stakes are too high. You worked hard for your money and you sacrificed for your money, do not just throw it away by jumping on the first idea or first suggestion or advice you get from a webinar. Once again, always look at the credentials of the person giving the online seminar. Is this person on the money? Has this person predicted trends and movements and specific stock buys in the past that panned out? Were the predictions verified and corroborated?

Look for outside corroboration

Look at Bloomberg, look at Fortune, Forbes Inc. and other magazines and do a thorough job figuring out if the person giving the webinar is legitimate. There are other types of webinars that just try to teach you how to trade stock. As long as this is basic information, that is fine. However, if the person is going to be making specific recommendations or offering specific services or products, then again you have to do some due diligence on that person. Before you invest more of your time, you need to make sure that the webinar is worth an investment of your time and money.

Differentiating Online Stock Brokers

When choosing between differing stock trading firms, make sure you consider the factors discussed above, but focus primarily on the information below. There are differing online stock trading services because they offer different products, they target different markets and they are segmented differently. The discussion above focused mostly on what they have in common. The discussion below will focus on what differentiates them. These are the core pieces of information that you would need to zero in on a provider that makes the best sense for your particular situation and your particular financial goals. Evaluate online stock trading firms based on these criteria.

Fees and Commissions

You have to pay real careful attention to this factor because this is the detail that creeps up on many would-be investors. They get so caught into the brand name of the online stock trading company that they are dealing with that they end up actually losing a lot of money and finding out the hard way that the fees and commissions that the trading company charges eat heavily into their stock trade profits. Pay careful attention to what commissions and fees does online stock trading service charges. Ask for a full list of fees. This is usually mandated by law to be on their website. Zero in on the location of this information and read it very carefully. Factor in all the conditions that you might probably run into and see what kind of impact those conditions and situations would have in the amount of money you would have to pay to the service provider. Service providers charge fees for making trades for you. If you need the assistance of a broker, that costs money unless there is a free broker assistance program. If you plan to trade options, that has a specific fee schedule as well. In essence, any move that you make online, whatever buying, selling or borrowing move you make online, there are fees.

Margin Calls can be a hassle so make sure you understand the rates

Also pay careful attention to margin rates. A margin is when you buy stock and your online stock trading firm will extend you a line of credit to buy other stock based on value your stocks have accumulated. This is a great help because it is free credit. However, it does not come for free and in some cases it does not come cheap. Pay careful attention to the margin rates that they charge. Compare services' differing fees and margin rates and you would be surprised. Make sure that you are comparing apples to apples because some services label a particular feature one way while another service labels another feature or service another way. Make sure that you are looking at function. If one service labels stock selling by a certain label and another company labels it another, if you pay attention to what is actually happening, which is you are selling stock, you can then compare the rates. Finally, make sure that you are aware that these services also have minimum account balances. Find out what those are and what fees they charge if you go under them. These can easily cut in to your stock trading profits and could become quite a headache. Also if you do not factor in the rates properly, you might think you are making money with your investments when on the final analysis you just broke even or actually lost money. Pay careful attention to these items.

Investment Products Being Offered

When you are dealing with online stock trading service, the primary investment that they are offering you is stocks and you buy equities from the particular exchanges that they cover. That is the general offering. In addition, most online stock trading services allow you to buy and sell options, buy and sell exchange traded funds or buy and sell mutual funds. The difference is the amount of coverage. Some online trading services focus only a small amount of market. Some even just focus on one market. Pay careful attention as to which markets are being covered because this severely limits your choices of investments. There are many highly profitable markets that are very volatile and quite lucrative, but not all online trading services cover those markets.

Consider multiple-market support

Make sure that if you have your eyes set on several different markets that the service that you are going with services them. Just as importantly, if you see your trading needs changing in the future where you see yourself trading at other markets, keep that in mind in selecting your online stock trading service. Another factor to consider is that besides the basic securities offered by online stock trading services like exchange traded funds, mutual funds, options and stocks, you might be interested in IRAs or education and retirement funds. If not now, maybe in the future. You might want to future proof your choice of an online stock trading service by going with a service now that covers these securities, so that way when you need them a few years from now, you do not have to migrate. Migrating service providers can be a stressful process. Try to future proof your choice by doing the necessary research now.

What Kind of Tools Do They Offer You?

As we mentioned earlier, in terms of stock tracking tools, many stock trading services offer stock tracking and stock monitoring tools. However, depending on how much information you need, what your specific strategies are or how finely tuned the information that you are looking for is, these types of tool might be too shallow. Some stock trading services allow a built-in comprehensive tool that not only allow you to buy and sell stocks and other securities, but also helps you track momentum, track volume and also allows you to correlate differing points of information. Again these types of tools vary from one provider to another. If you see yourself needing this kind of tool, select your provider accordingly. Also some would offer such tools for free while others charge money. Others would offer it for free for a certain number of uses and then the rest would be charged. Pay careful attention as to how they package these tools and what rates, if any, are involved. At the very least, you should look for brokers that offer you graphing tools and alerts. It would also help you if the service provider gives out investment calculators so you can effectively track whether you are making money or not.

Interface Quality

Not all investors are very tech savvy. Some investors have a philosophy that the simpler the interface, the better. Pay careful attention to how easy it is to use the investment tracking tools, and the buying and selling platform of your online stock trading service. You do not want to be in a position where they give you a lot of bells and whistles, but you are so intimated to use the interface and it does not have enough technical support links where you could easily learn what all these functions do that you get intimated. As a result, instead of using the tool regularly or exploring the tool to your maximum benefit, you are just scared to use the tool. You do not want to be put in this position. In addition to all the factors that we discussed above, ease of use is extremely important. Given the amount of financial security and peace of mind involved, make sure that you subscribe to a system that you feel you can use, that you feel you could be at ease with.

The Bottom Line

Online stock trading is not just a question of buying or selling. Much of it involves gaining your confidence. Are you confident with the interface? Are you confident with making life-altering decisions using that interface? Are you comfortable with the set of tools that are provided to you? Does the service give you what you need to grow as an investor? These are very important factors to keep in mind and online trading is not an activity to be undertaken lightly. You have to factor in all the elements that we mentioned above so you can make an informed decision. The most important factor is your particular situation, your schedule, the amount of time you have to learn, the amount of time you have to explore a trading interface and resources. Factor these in all together to arrive at the answer that is most beneficial to you. We cannot supply it to you because there are many conflict-of-interest issues with that. We can only guide you through the selection process and you let the details of your particular situation determine the right decision for you.