Choosing a Brokerage Account for Your Investing Style

When you are choosing a brokerage account, you are going to have many different variables to consider. You need to choose an account that meshes well with your individual investing style. Here are a few things to consider about choosing a brokerage account for your investment style.

Fee Structure

Before you choose a broker, you need to understand the different fee structures that are available in the market. Discount brokers are going to charge you a low fixed rate every time that you make a trade. A full-service broker is going to charge more for each trade. Some of the full-service brokers could charge you a percentage of the value of each trade instead of a flat fee. 

Buy and Hold

If you are an investor that uses a buy and hold strategy, you are not going to be making very many transactions. Because of this, the structure of the commissions is not as big of an issue for you. You can work with a full-service broker that has a higher commission rate. By doing this, you are going to be able to get more individualized attention from your broker. When you are employing a long-term strategy, your stock broker can work in conjunction with you to build a successful portfolio. You can leverage their expertise and learn how to be successful in the market.

Active Trader

There are more and more investors that are becoming active traders. This means that they regularly buy and sell stocks. Many times, they will make several trades a day. When you are an investor that fits into this category, your main concern should be the amount of money that you are paying for commissions. If you make several trades everyday, you are going to be eating up a lot of your profit in commissions to the broker. Every time that you incur a commission, your trade is going to have to go that much better to make up for it. If you are working with a broker that charges high commissions, you might find yourself staying in trades longer than you should just so that you can make up for the commission that was charged. There are brokers out there that will allow you to place a trade for as little as $4. If you are an active trader, this is most likely going to be more important to you than getting a lot of individual attention from a broker.

Mixed Strategy

Some investors utilize a mix of these two strategies. Some of their investments are long-term while others are more short-term. If this is your style, then you will need to consider what is most important to you. If you are a very independent person that does all of your own research, then you may not need to pay the extra for a full-service broker. However, if you do not know much about the markets, you may find it beneficial to have someone looking over your shoulder.

blog comments powered by Disqus