by Lyle Daly | Updated July 21, 2021 - First published on Aug. 6, 2019
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Opening a brokerage account? Here's how you can make sure you choose the right one.Image source: Getty Images.
You've decided to start investing, which is one of the smartest financial decisions that you can make. The next part is where it gets tricky -- you need to open a brokerage account.
This is where many a budding investor has gotten overwhelmed with options. You think that finding a broker will be a quick process, only to discover that there's a seemingly endless number of them out there.
While there are plenty of great brokerage accounts to choose from, you can narrow them down by looking for a few things in particular.
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To pick a broker, you'll need to have an idea of how you want to invest. Here are some of the typical investment options that most brokerage accounts will offer:
ETFs and mutual funds are popular investment choices since they include a diverse range of assets. If you plan to invest in either of those, then you should make sure that the broker has a wide range of funds available, and that it offers ETFs or mutual funds that you can purchase without a fee.
If you plan on trading futures or foreign currencies, you should also look for a brokerage account that offers access to those, because not every account will.
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The commission is the fee you pay each time you make a trade. You don't want to go with a brokerage account that charges too much, because that will cut into the return on your investments.
Many of the best online brokers have joined the zero commission movement eliminating commissions for standard online stock trading.
While commissions are standard with buying and selling stocks, you should avoid brokerage accounts with extra fees. Examples of these include:
There are many brokers without these types of fees, so don't settle for one that has them.
The account minimum is the amount of money you need to deposit to open the brokerage account, and this varies quite a bit from broker to broker.
Some brokers require you to deposit at least $500 or $1,000 to open an account. Some require several thousand dollars. And for investors who don't have that much ready to deposit yet, there are also brokers that have no account minimum.
In this case, "affordable" means affordable to you, so just make sure you pick a brokerage account that has a minimum you can meet without straining yourself financially.
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You're going to need plenty of information to make the best decisions with your investments. Ideally, you want a brokerage account that puts the information you need at your fingertips. Depending on the broker, this may include:
You can always get this elsewhere online, but it will be more convenient when you have this available in your brokerage account.
The last thing you want is to be unable to make a trade because you can't access your brokerage account. That's why it's important to check that a broker has a reliable, easy-to-use website, as there are brokers that have had outages at inopportune moments.
It's also a good idea to get an account that you can access using a mobile app. After all, you may need to review your account and make trades even at times when you can't get to a computer.
Opening a brokerage account is undoubtedly a big decision, as the hope is that you'll be using this account for years and potentially even decades to come.
To sum it up, you should look for brokerage accounts offering the investment options you want with competitive commissions, no dubious extra fees, and an account minimum that's within your budget.
Once you've found a few potential account options, see what kind of resources they offer, and make sure to choose a broker you can access whenever you want through your computer or your phone.
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