Everyone wants the best of everything, so it’s only normal (and pretty logical) if you also expect the best online stock brokers for beginners. If you expect a profitable investment, you need to choose a brokerage service that shares the same ideas and ideas with you, including the learning style, the educational needs, and also your investment goals. For new and beginner investors, choosing the best broker online meeting your requirements can have a huge significance between frustrating disappointment and also exciting (new) income stream.
Online stock broker has been one of the best (and also most profitable) innovations that are brought by technologies. For beginner investors, these online stock brokers are advantageous because not only they have tons of educational resources, but they are also low in cost. The only challenge is that there are tons of brokers out there. How do you pick the right one for you? How do you know that it’s the one? Hopefully, the next explanation and descriptions can help you find out the best online stock brokers for beginners, including help you in narrowing down your options.
Stock Broker: What Is It?
The term refers to a (financial) professional buying and selling securities (like mutual funds, bonds, stocks, and others) by representing their clients (or in simpler words: They do it on the behalf of their clients). The stock broker refers to a middleman handling transactions for the investor. A broker typically works for a brokerage company or firm. He/she will be responsible for handling transactions for various clients, which may be institutions (such as organizations or businesses) or individual investors. A broker will get commission for every transaction they handle.
Before you learn more about best online stock brokers for beginners, why would you need a stock broker, anyway? Can’t you buy the stocks (or securities, in general) from the public company directly? You can, actually, but it would be easier to get it from the stock broker. Plus, the broker usually provides extra security for the investor as well as the company. For instance, the stock broker would ensure that the company (whose stock you are about to buy) is legit and legal. The stock broker will also check the investor, making sure that they don’t have any criminal background or fraudulent identity, such as being involved in terrorism or organized crime.
In short, you should be able to find online stock broker that isn’t only trusted and reliable, but also shares the same concept and investment goal with you. There are a lot of (online) stock brokers out there and they don’t have to be expensive. You’d be surprised to find many professional brokers that can provide exceptional performance and outstanding outcome without you having to dig further into your pockets.
There are different brokers for different clients or buyers, such as beginner investors who want to have buy and hold investments in long term to active (and quite advanced) day traders who know exactly what they want. Although it may take some time to find yourself the best online stock brokers for beginners, your hard work will pay off in the end. It takes some due diligence and extra digging to get the most satisfying result from your investment.
Basic Step: Know What You Want
Why do you start investing? Do you have some kind of an investment goal? Some people invest for future years, such as preparing for retirement. Some people want to improve their (current) standard of living. Some people want to make extra cash. Knowing what you want can be a good foundation for your next investment plan. There is no specific amount of how much you can allocate for your investment, but you need to be honest with your ability to invest. Some people may be able to put aside quite a lot of money for investment, while some may be only able to set a few dollars. That’s fine.
After you know the reason for investing, now you need to decide what kind of investment that you are interested in – and it usually depends on your experience. For beginners, they may be interested in simple trading with priority features like practice trading, supportive staff and how easy it is to reach out to them, accessible educational resources, and comprehensive glossaries. For some traders who have basic experience but wanting to get serious, they may want to get access to resources from professional analysts and investors and higher level education. They may also want to learn more about technical and fundamental data, along with good selection of them.
For the more professional and seasoned ones, they may want conditional order options, advanced charting abilities, and also the ability to trade stocks, fixed income securities, commodities, mutual funds, and derivatives. Now, ask yourself: Are you more interested in learning about day trading? Do you want to invest for the sake of passive income? Do you like experimenting; tailoring and tweaking your own portfolio? Or do you prefer letting a professional to do it for you? How do you feel about entrusting your funds to someone else? Are you the type of person who wants to handle and manage your own money?
What to Expect from a Brokerage
You can always check the online resources to get the best online stock brokers for beginners, but still… there are many of them out there. So how do you narrow down your options?
- The brokerage should be a member of SIPC (Securities Investor Protection Corporation) or FINRA (Financial Industry Regulatory Authority). Also check the FDIC (Federal Deposit Insurance Corporation) coverage. If the brokerage offers investment products (like retirement accounts) investing in annuities, options, bonds, and stocks, they won’t be insured by FDIC. However, if they offer MMDAs (Money Market Deposit Accounts), savings and checking accounts, or CDs, they should be insured and covered by FDIC.
- They should have their own insurance. If they are the member of SIPC, they can provide the insurance. But they should also have their own extra coverage.
- They are able to provide protection guarantee against fraud. Will they be able to reimburse you from losses of fraud? Do they offer any type of extra protection for you?
- Check for the reviews and feedbacks. It would be better if you can get recommendations from people you know and trust.
Discount and Full Service Brokerage
In general, there are two main types of stock brokers. They are the discount brokerage and the full service type. Before you can get yourself the best online stock brokers for beginners, be sure to understand their differences.
The full service broker will help investors sell and buy securities. But they won’t only help with such a transaction, but they will also provide other financial service. Those services may cover:
- Portfolio management. The stock broker would help investors build a (diverse) portfolio to mitigate risk and build wealth
- Investment advice. The broker can provide suggestion or advice about which securities to avoid or buy for the investors
- Wealth management. The broker would help their clients manage their assets
- Tax planning. The broker helps their clients to maximize their tax savings
- Performance analysis. The broker can analyze the investors’ securities performance, and then makes suggestions about how to improve them
A discount broker, on the other hand, is the common type of brokers online. Thanks to internet, brokerage service is now made available for everyone. Unlike the past time where only the wealthy had access to (stock) brokerage, now everyone can have the same access. This type of broker would sell and buy securities for investors, and they do it for discounted commission. The reason why their commission fees are generally lower is because they don’t offer other financial services. They don’t provide investment advice or wealth management. They only provide help in managing the transactions.
In most cases, the discount brokers could be found through trading platforms online. There is no live broker. In fact, it may be the software that handles the transactions for you. Discount brokers would execute order for their clients. If you are new to this, you may find it difficult or challenging because learning curve can be difficult – as you can’t exactly interact directly with the broker.
However, things have changed quite a lot these days. The differences between the full service and discount brokers are getting blurry. Many brokers today are operating as discount brokers, but they may also offer extra services, such as educational tools and resources to help new investors diversify portfolios and find the right securities.
Other Supporting Factors
Don’t forget that you need to factor in other elements, including the fee. No matter how best online stock brokers for beginners is, you still need to consider several crucial matter.
- You should be able to authorize another person to make decisions related to your account, but it may need written legal authorization. What is the policy within the brokerage that you choose?
- Risk tolerance. Some brokers may require you to state your investment risk tolerance and financial goals. Risk tolerance is about your aggressiveness when it comes to invest – whether it is about risky stocks investing or putting more money within a single stock.
- Cash management. It’s possible that you have inactive fund in the broker account, meaning that it hasn’t been used or invested. It’s likely the money you get from dividends or interest. You could be given choices of what to do with it. Most brokers may allow you to reinvest the funds to mutual funds, leave it be, or transfer it to your bank account.
- Extra fees. Don’t forget that you may have to deal with extra fees that may cover account closing fees, transfer or wire fees (some brokerage may charge a small amount of percentage when you make transfer to external banking account), account maintenance fees, commissions, and inactivity fees. The latter may apply to some brokers who would charge you if you don’t make any transaction for a while.
Some of the Best Examples
Here are some of the best online stock brokers for beginners. All of them are considered the best because they implement $0 account balance, meaning that you don’t have to put money when you open the account). They also provide educational resources.
- It’s great for beginners because the platform is easy to use. It has web and mobile platforms that can provide great access for users.
- TD Ameritrade. This is one of the biggest online services perfect for both beginners and seasoned investors. You can find various educational tools. The mobile app is great and investors won’t be charged cancellation fees if they try the platform.
- E*Trade. This is the easiest online platform offering different platforms: 2 mobile app basis and 3 computer types. The investment features are quite impressive.
These are only some examples of reliable and trusted services, especially for beginners. Hopefully, with the facts and knowledge of online stock brokers, and also the examples of best online stock brokers for beginners, you won’t encounter any issue when choosing the right one for you.