When deciding which type of stock broker will work for you, there are many factors to consider. Some brokers have hidden fees, some will allow you to write checks on your account and some will not offer options trading. When it comes down to it, your trading style will be the determining factor, and you may find that you may have up to five different brokers. At the end of the day, you will find that you will either choose a full service broker, a discount broker, or a deep discount broker. Discount brokers have excellent research resources available to investors and offer robust online capabilities. They are the middle-of-the-line brokers in that they are more expensive than deep discount brokers, but they are cheaper than full-service brokers.
Discount brokers do not offer any advice or research and they charge lower fees than full-service brokers. They transact trades with no added extras and they manage fewer products. They sometimes will offer online computer order entry services and they normally paid a fixed salary to execute trades in the stock market. Discount brokers are not paid commissions and they get their business by having lowest prices and the best service. They make their money by doing business in quantity and typically compete on price and on the dependability of their services.
Discount brokers execute stock and option trades and most can trade U.S. treasuries and bonds. They offer a wide array of trades services for those who generally require little hand-holding or advice. Discount brokers are basically licensed to perform what it is that you tell them to do, within reason, of course. If you are looking to do your own research and make your own investing decisions, than a discount broker should be your choice. If you are hesitant in your investment strategies, and are new to trading and investing, you may want to consider a full-service broker, until you are ready.
If you decide that going with a discount broker is the way to go, consider a few things first. First of all, find out if there is a minimum opening deposit required and if so, how much is required. You will also need to find out if there are any stock market trading tools or research tools available as well as the reputability of the broker. You will also need to find out if there will be any accounting fees associated with your account. Other questions you should ask your discount broker include finding out if there will be any fees for the transfer of assets out of your account or any fees for inactive account fees due to infrequent trading. Lastly, you want to find out if they offer 24-hour customer service, and what they typical wait is when calling in for assistance.
The utilization of a discount broker can be a good way for investors to participate in the stock market or in the bond market. If you decide that stock trading with a discount broker is for you, be sure that you understand clearly what type of service you will require and select a broker that will best accommodate those services.