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Showing posts with label Discount Broker. Show all posts
Showing posts with label Discount Broker. Show all posts

5 Things Every New Trader Should Do

By Neda Jafarzadeh, a financial analyst with NerdWallet Investing.  NerdWallet Investing helps investors select better mutual funds for their 401(k) plans, find the best 529 plan, and make smarter investment decisions overall.

By its nature, investing is an exercise in uncertainty and risk and when your hard-earned dollars are at stake, the pressure gets higher. That doesn’t mean you should avoid online investing – on the contrary, a measured and responsible approach can greatly enhance your earnings and help you reach your financial goals. As you dip your toes into the investing waters, be sure that you keep in mind the following five steps:

1. Decide what kind of investment you want to make

First, you have to decide exactly how much money you’re going to use for investing purposes – settle on a set dollar amount to begin with and don’t let yourself exceed that limit. It is important, too, that you know exactly where that money is coming from, be it a savings account or a sum you’ve received as a gift - and don’t invest more than you can afford to lose. Apart from this being a responsible approach, settling on an amount will help you choose a broker, as many have minimum balance requirements.

2. Have a safety net in place

Before investing, make sure that you really can afford to do so – even beyond making sure that you only invest what you can afford to lose, you should ensure that you have an emergency account or fund set up that is readily available should an unforeseen expense arise. Many experts recommend that your savings be able to sustain you for at least six months. Consider stashing this money in a regular savings account, or perhaps in a money market account (which will have a higher interest rate, generally).

3. Choose a broker

There are wide ranges of brokers from which to choose and picking the right one for you will depend on the amount that you’re investing and how active a trader you plan to be. Planning to make frequent trades – say, at least ten a month? Consider a lesser-known broker that offers discounted trade execution fees – even as low as $1. Looking for tons of resources and high-quality customer service? Then an account with a household name such as Schwab might be the right fit. Keep in mind that the SEC and FINRA hold all brokerage firms to the same standards - so you should be able to fully trust any certified broker.

4. Do the research

Whether you’re hands-on or more laissez-faire, you need to be making informed decisions with your money – and that means doing your own research. Peruse any research reports and don’t be afraid to choose index funds over active funds; many studies have shown that active managers don’t perform better than that the market index. In addition, always look at a fund’s expense ratio for a better idea of after-fee returns. Not only will you find better stock picks this way, you’ll feel more confident and less hesitant about your choices.

5. Stick to your principles

Now that you’re invested, don’t lose sight of your goals, or of the strategies you’ve chosen to help you reach them. Purchase a range of securities, from stocks and commodities to obscure funds, to ensure that your portfolio is fully diversified. Identify markets that you find interesting, as that will make them easier to understand and more enjoyable to research. Most importantly, pick a reasonable goal – such as a 10% profit after one year – and then choose and invest decisively, confident in your ability to make informed selections. There is no room for hesitancy or second-guessing in online investing.

3 Ways You’re Overpaying for Your Brokerage Account

This guest article was written by Neda Jafarzadeh, a financial analyst with NerdWallet Investing. NerdWallet Investing helps investors select better mutual funds for their 401(k) plans, find the best 529 plan, and make smarter investment decisions overall.

Investing online is a great way to grow your assets but it’s also has become a huge industry for brokerage firms looking to do the same at your expense. While you may need a broker to assist you with placing your trades, you can still make sure he keeps his hands out of your pockets as much as possible. Here are a few ways that your current brokerage firm might be taking more than their fair share:

1. Charging high rates for things you don’t want, know about, or can get elsewhere

What do Scottrade, TD Ameritrade, TradeKing, and Cobra Trading have in common aside from providing brokerage accounts? They all use the same third parties for trade execution services: Knight, Citadel, UBS and Citigroup. Scottrade and TD Ameritrade are name-brand brokerage firms that charge high rates on trades while TradeKing and Cobra Trading are deep discounters offering the same service at a lower cost.

You might think that another way to avoid paying a lot for execution fees is to limit your trading, but that won’t save you either. Many firms charge annual account fees and inactivity fees - penalties that you’ll only see in the fine print.

In addition, you may also be paying up for real-time market information. While most data can be up to ten minutes old, which isn’t a problem unless you’re a day trader, you may unnecessarily be paying more for real-time information.

2. Discount brokerage firms are every bit as reliable as household names

If you’re looking to save some money but are choosing a brand-name broker because you think the service will be more reliable, think again. Deep discount firms are required to be registered with the SEC and retain membership with FINRA (Financial Industry Regulatory Authority) and SIPC (Securities Investor Protection Corporation). Translation: Every brokerage firm is held to the same stringent regulations, meaning that each firm is as trustworthy as any other.

While the levels of customer service may vary, every firm is essentially providing the same service under the same requirements. So what are these name-brand brokerage firms charging you so much more for? They use the money to pay overhead costs including covering their advertising budgets. According to a NerdWallet study, the three largest online brokerages (Schwab, TD Ameritrade, and E-trade) spent only 12% of their expenses on trade execution with the rest going to cover overhead costs including paying 11% of the money on their advertisements. By comparison, discount brokers spent an average of 59% on trade execution.

3. They’re not telling you that some fees are negotiable

Think of online brokerage firms as open markets instead of chain retail stores – the prices are not set in stone. Since most firms provide the exact same services (see above), they know that you can take your business elsewhere and are often willing to work with you to keep your business – provided your business is worth it to them. If you have at least $50,000 in a trading account or execute at least ten trades a month, things like account fees, trade commissions, margin rates, and data subscriptions may be negotiable. Take the initiative and approach your firm about receiving a better set of terms, and you’ll notice the savings immediately.

My 5 Cheapest Stock Broker To Buy Stocks Online

Investors should know the best online stock brokers to trade with. Out there are many stock brokers which offer stocks to buy online for a cheap commission. In addition, they offer free trades, low margins and best services.  Not all are good, not all are cheap but I've tried to find the top 5 stock broker for trading stocks online. Below are the results.

1. ETRADE was ranked #1 Online Broker 2011 by StockBrokers.com. ETRADE offers trading anytime, anywhere with Etrade Mobile Pro and Power ETRADE Pro offers active traders world class trading tools. The broker, known for its baby commercials, also offers investment guidance with professional representatives. Current ETRADE Offer: Trade free for 60 days (500 free trades max) + Get up to $500 with any new account!

2. TD Ameritrade with its platforms thinkorswim and Trade Architect, won Best Overall Platform and Best Web Based Platform, respectively, in the 2012 StockBrokers.com Review*. The broker also offers a wide offering of 3rd party research reports, no account fees, and a variety of banking services for its clients. Current TD Ameritrade Offer: Trade free for 60 days + Get up to $600 with any new account! 

3. TradeKing offers investors fantastic customer service, ultra competitive trade commissions, and is home to the Trader Network with over 200,000 investors all sharing trade ideas, research, and market analysis. Current Offer: Switch to TradeKing and get up to $150 in transfer fees reimbursed.

4. OptionsHouse was the only online broker rated 5 Stars for both "Commissions & Fees" and "Ease of Use" in the StockBrokers.com 2012 Broker Review*. OptionsHouse offers $3.95 flat fee trades alongside two flexible rates for options trading: up to 5 contracts for $5 or $8.95 + $.15 per contract. Current Offer: Receive 100 free trades with any new account! 

5. Scottrade was honored the award Best Overall Client Experience 2012 with its top of line customer support. Scottrade has over 500 local branch offices for personal service - the largest network out of any of the online brokers - and offers competitive $7 flat-fee stock trades. Scottrade clients can also take advantage of premium trading tools through the Scottrade Elite and OptionsFirst platforms.

An additional broker and not listed here is Interactive Brokers. I use this provider for my most trading activities because I am not a US Citizen. Which broker do you use?