Advantages of Opening a Brokerage Account
There are important benefits of working with a stock broker and opening a brokerage account, which we detail below.
Professional Assistance
Many stock brokers offer professional assistance and provide helpful answers to any questions you may have. This expertise can help you make educated investing decisions and even aid in determining your goals.
Even if you’re a direct investor and you do everything yourself, it’s valuable to be able to reach out to experts with questions if need be. On the other hand, if you prefer a totally hands-off approach to investing, there are also full-service brokers that can handle everything for you. This includes picking investments and making trades.
Diverse Investing Opportunities
Another advantage is that most brokerages offer a wide variety of investment opportunities. This includes assets like stocks, crypto, options, mutual funds, certificates of deposit (CDs), and bonds.
Due to this diversity, you can choose the exact way you want to invest. Some people may invest solely in one thing, while others will choose to invest in multiple. You can generally make all of these investments within a single account, as well.
Flexibility and Freedom
The flexibility that brokerages provide is another benefit of opening an account. First of all, there are typically no limits to how much you invest, as long as your account isn’t a retirement account. You can generally withdraw whenever you want and make as many trades as you’d like. All of this gives you full control over your investments, with no need to worry about strict rules.
Research
Online brokerages can make it easier to perform research and stay up to date on the various happenings in the market. Many contain helpful charts and live information about thousands of different assets, so you can get updated in real-time.
This can help you make informed decisions and give you more context and information about potential trades beforehand. However, some stock brokers may charge an extra fee for access to this type of data.
Online Access
These platforms provide a ton of convenience as they are easily accessible online. All you need is a device like your laptop and an internet connection to invest in a wide range of different assets. Many may even have mobile apps that let you make trades on the go.
You don’t need to worry about making an appointment or call to complete a trade. With this level of access, there’s nothing holding you back from investing whenever and wherever you want.
Automated Investing
The ability to invest automatically is another advantage of an online brokerage. While not all brokers allow for it, automatic investing can ensure you’re still making smart investments, even if you get busy and forget to do it manually.
You can decide to trade at certain times, but may also be able to trigger an investment when certain conditions are met. For example, you can make a stop order—an order to buy or sell a stock when it reaches a specific price that you’ve set.
You Can Invest With What You Have
Many other investments (such as real estate) normally require lots of funding up front to get started, but that often isn’t the case with brokerages. A majority of online brokers let you start investing with as little as you want, or have reasonable minimums.
This means even if you only have low starting capital, there’s generally no barrier to entry and you can normally begin investing without a problem. Some do have larger initial investment requirements, but they aren’t as common. Of course, if you have a substantial amount you can still benefit from using a brokerage account.
Growth Potential
Investing with stock brokers can be great for growing your wealth over time. While it’s possible to make short-term gains with things like stocks and crypto, people often use online brokerage accounts to build up funds over the long term. Even investing small amounts on a regular basis can lead to a lot of growth over the years and decades if you’re consistent.
Education
While not always the case, many brokerages provide educational resources to help users learn more about investing in general. This comes in the form of articles, videos, how-to guides, podcasts, or forums.
These resources teach you everything from how to choose investments, what to look for, how to navigate the platform, things to do before you invest, and more. Resources like glossaries and FAQ sections are wonderful for educating investors, especially those that are beginners.
Get Notifications and Alerts
Several platforms give investors the chance to set up real-time notifications and alerts for their investments. Unless you’re glued to market charts all day, there may be some opportunities you miss. By getting alerts, you can ensure you’re instantly aware of any significant events that occur with an investment you own.
You can choose which assets to be notified about, and can set up notifications for when prices change, when trading volume grows, and numerous other parameters.
Easy to Deposit and Withdraw
Depositing funds into your investment account is easy, and most stock brokers give you several options to ensure the process is seamless. You can often deposit with a bank transfer, wire transfer, and even with a check in some cases. When it comes time to withdraw, most brokerages will again offer numerous ways to receive your funds, such as bank transfer, Paypal, Venmo, and others.
How to Choose the Right Stock Broker
Now that you know the advantages of working with a stock broker, let’s take a closer look at how to choose the right one for your needs.
Fees
One of the initial things to think about when choosing an online stock broker to work with is the fees it charges. While commission fees (fees for each transaction) used to be the main thing to keep an eye on, many brokers today offer commission-free trades.
However, there are still other fees you should keep an eye out for. These include annual fees, withdrawal fees, inactivity fees, management fees, and more. Each broker has its own fee schedule, so take your time to research what you’re responsible for paying before choosing one to work with. Some fees may only appear in the fine print, so read carefully.
Also, think of the minimum investment required to open an account. In some cases, it may be $0 or something reasonable like a few hundred. But other brokerages may require thousands of dollars to open an account, which may create a barrier for certain investors.
Investment Options
Another important factor to consider is the investment options that a brokerage offers. Some of the typical examples include stocks, exchange-traded funds (ETFs), mutual funds, bonds, and options. Plenty of brokerages are beginning to offer cryptocurrency as well.
Many brokerages offer a variety of these investments, but it’s always a good idea to check the exact options they offer on their website. Also, different investments are better for those with different goals. Some may invest for growth, and others for stability, for example. Make sure you know your goals before ever investing.
In addition to different investments, some brokerages may even offer different types of accounts you can invest in, such as retirement accounts like the 401k or IRA. Many of these offer distinct advantages (such as growing tax free or providing tax breaks) but may come with restrictions like lower contribution limits and strict rules about making withdrawals.
Support
Ample support is another important factor to consider when choosing the stock broker you work with. When you experience a problem within the platform, you want to be confident you can get assistance quickly and easily.
If you have to wait days for a response, or the assistance you receive is subpar, it can ruin your experience and hurt your ability to invest the way you want. For example, having to wait days to make a trade because your account is locked or because there’s another issue can lead you to miss out on a stock you had your eye on at a certain price.
Be sure to consider the support hours the brokerage offers and the support options it provides to customers. You can also test the support out ahead of time by calling, emailing, or starting a live chat to see how quickly the broker responds and how helpful its responses are.
Security and Reputation
It’s important to keep in mind how secure a brokerage is. You want to ensure that both the funds you invest and the personal information you provide are protected.
Check that the broker allows for two-factor authentication to protect your account, and take a look at the company’s security and privacy policy. This details the measures the company takes to protect customers and the sort of data it collects and shares.
The site should be encrypted, and the broker should be a member of the Financial Industry Regulatory Authority (FINRA) as well as the Securities Investor Protection Corporation (SIPC). This will probably be clearly noted on the homepage of its website, or you can search for the broker on the FINRA or SIPC website. These organizations both exist to protect investors and keep financial markets fair.
In addition to security, make sure to think about the brokerage’s reputation. Checking out reviews and ratings can give you an idea of the experience that others have had with the platform. It’s also good to do a Google search and see if there are any data breaches or other security-related issues in the company's history.
The Platform Itself
Last but not least, you need to consider the trading platform itself. Not all are created equal, and you should take a long look at the list of features and tools it includes before making a decision. Many brokers include features like live market data, mobile investing, comparison tools, educational resources, fractional shares, analytics tools, and more.
You need to think about the tools you would use, and ensure you choose a platform that offers them. In addition to knowing the tools and resources the platform provides, ensure it’s user-friendly. Navigation within the platform should be streamlined, and look for a search function so you can quickly find whatever you’re looking for.
The platform should also make it easy to place trades, view and manage your portfolio, and fund your account. This is especially important if you’re new to the world of investing, as you want everything to be as straightforward as possible to reduce the chance of getting confused.
Conclusion
Stock brokers are a wonderful tool to let you invest online and build your wealth in a way that is both smart and safe. It can help you make better decisions and give you access to a variety of different investments. We hope this guide has taught you more about stock brokers and has helped you choose the right one for your needs.