Best Broker for Online Stock Trading and More


Choosing the Best Broker for Online Trading,
from Stocks and Options to Futures and Forex



The best broker for online stock trading – and handling other types of assets ranging from bonds and options to futures and forex – depends on the matchup between the offerings of the vendors and the needs of the investor. As an example, a novice in the stock market who deals only with equities ought to favor a simple system with a user-friendly interface. By contrast, a veteran who uses a rolling sequence of futures contracts to cut down the volatility of the common stocks within the same portfolio would require a system of greater versatility and efficiency.

Even in the case of a particular trader, the proper choice of platform will vary over time. The factors at work include the shifting mix of financial resources and the latest views on retirement planning.

As a backdrop, the brokerage industry relies heavily on the tools of information technology. Due to rapid advances in hardware as well as software, the trading platforms have a way of morphing over time. The same is true of the schedule of transaction fees. 

In this roily setting, there is no single package that befits all investors. In fact, the best choice of platform may well vary from one year to the next even in the case of a particular person. As a result, picking a broker for online trading is not a one-off decision that remains forever fixed, but an ongoing task that evolves over time.

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With increasing frequency, investors are turning to Web-based platforms in order to trade stocks online. The same applies to other types of assets ranging from bonds and options to futures and forex. 

Despite the mass uptake of online systems, though, it’s rarely a simple matter to pinpoint the best choice of brokerage firm. For one thing, a suitable platform depends in large part on the intended use of the brokerage account. As an example, a long-term investor who seldom buys or sells stocks should be more concerned about the dependability of the brokerage firm than the fees charged for each transaction.

Even in the case of a particular type of trader, the decision depends on a number of factors. As an example, one popular firm charges a fixed fee per transaction regardless of the number of shares traded. In that case, an account with this broker would be useful for a trader with a modest portfolio who buys and sells a lot of low-priced stocks.

Given this backdrop, the prudent investor mulls over a raft of issues in seeking out a broker for online trading. The top choice depends not only on the properties of the packages on offer – in the form of platforms as well as services – but their alignment with the needs of the user.


Features of the Platform and Service


In selecting a suitable broker, the crucial issues include the functionality of the trading platform, the friendliness of the user interace, and the array of transaction fees. At the low end of versatility, for instance, a trading system might handle only a single type of asset such as stocks or currencies. In that case, the platform would be inadequate for an investor who deals with multiple types of assets within a single portfolio.

On one hand, a newcomer to the financial arena would expect the properties of a trading package to be compatible with the functionality of the system and the needs of the target audience. As an example, one would expect the quality of service to match the level of commissions. 

Sadly, though, the reality can differ a great deal from the ideal. All too often, the design of the software and the schedule of fees is out of whack with the functions of the platform and the needs of the target audience.


Confounding Broker for Online Stock Trading


As a general precept, a basic platform for online trading can afford the luxury of simplicity. Remarkably, though, the brokerage industry serves up glaring exceptions to the rule. 

A case in point is a discount broker whose platform caters to the amateur investor in the marketplace. In line with its narrow focus, the trading system offers a skimpy set of functions. 

Sadly, though, the package is far from plain or straightforward. As if to mask the patchy nature of the platform, the user interface is crammed with gobs of extraneous materials. The busy screen bristles with signs and notes touting the supposed benefits of the system.

An example in this vein is the existence of an online forum where interested folks can hang out and talk to each other by way of bulletin boards. The interactive facility is surely a great resource for everyone, no?

Or maybe not. As it happens, a slew of virtual communities are available to all comers at numerous sites on the Internet. The outfits that host such facilities span the gamut from financial portals and news centers to tutorial hubs and investment clubs.  

In dealing with the clunky platform, the user has to sidestep a heap of clutter in order to find their way around the system. As an example, the hapless customer might have to click on a dozen buttons in a more or less random fashion in order to reach the main page that displays the stocks held in their trading account. 

Due to the mounds of detritus, even the simplest task can turn out to be a challenge. For the blighted system, the clutter is as profuse as the functionality is scanty.

The moral of the story: a basic platform is not necessarily a simple or friendly one. For this reason, the mindful investor has to check out each package in depth and confirm that the ease of use is compatible with the level of functionality.

The same is true of the other aspects of a digital platform or trading account. The customer could easily end up with more than they desire, or less than they expect, or a combo of both.


High Cost Means Low Efficiency


Turning to a different issue, the efficiency of the broker is a vital concern for the small investor as well as the heavy-duty trader. In this regard, every vendor has its own take on the subject. 

For instance, one brokerage house might levy a slim fee for the purchase of a few shares, and charge more for a big transaction. By contrast, another firm may exact a sizable toll regardless of the number of shares traded.

Worse yet, a trading account could be slammed with a fixed fee on a periodic basis. An example lies in an administrative charge at the end of each quarter in which the investor has not executed any trades. Another instance is a mandatory fee each year in order to maintain a retirement portfolio. 

In this day and age, though, there’s no good reason why any investor should have to pay their broker a membership fee just for the privilege of being a customer. In the olden days before the advent of the computer, keeping a bunch of manual records close to hand could cost the brokerage firm a painful tab in excess of a couple of cents each and every year. 

In the modern era, though, holding an extra record in an online database costs nothing to speak of. Actually, the net cost should be less than nothing.

More precisely, the boon to publicity and marketing should outweigh the cost of maintaining the account. The brokerage firm gets a boost to its bragging rights about the number of customers and the stockpile of assets under its care.

On a positive note, the mandatory fee regardless of activity has been going out of fashion – slowly but surely – in the brokerage business. At the dawn of the millennium, no one should have to offer a periodic tribute to their broker just for the opportunity to be a paying customer.


Traits of the Investor


The profile of needs and wants for each investor plays a fundamental role in the choice of trading platform. The issues at hand include the level of experience and the types of assets to be traded. Other factors range from the frequency of trading to the average volume per transaction.

As an example, a rookie in the financial forum ought to give high priority to the simplicity of the system along with the ease of use. On the other hand, a veteran who complements an equity position with the sale of a call option will plainly need a platform that can handle both types of securities with dispatch. 

As we noted earlier, the frequency of trading and the size of transactions also play key roles in the appraisal. For instance, a standoff investor who rarely buys or sells securities should care less about the schedule of commissions than would a rapid-fire trader.

Instead, the aloof player ought to be more concerned about the robustness of the account. An example of this sort is the financial strength of the brokerage house along with its life expectancy as a going concern. Another sample involves the stockade of defenses designed to protect customer records against online attacks by malicious programs or human vandals. 


Multiple Accounts for Online Trading 


In the brokerage business as in any other domain, mishaps do occur from time to time. As an example, an investor may be unable to access their account via the Web due to the denial of service perpetrated by online raiders.

On occasion, the user may have even more reason to worry about their brokerage account. As an example, a successful attack against a broker may enable a cracker to steal confidential information such as usernames and passwords.

In this unsettling environment, the heedful investor takes steps in advance to curb to the prospect of a devastating loss. A simple and obvious measure is to split up the nest egg across two or more brokerage firms. 

Depending on the country of residence, an investor might be required by law to segregate their ordinary savings from the funds in a retirement account sanctioned by the government. In that case, the principal would have to maintain at least two different pools even if the accounts were held at a single institution. 

In line with the defensive move of dispersing assets, it would make sense for the investor to select at least a couple of brokerage firms right from the start. In that case, one vendor would be used to house an ordinary portfolio, and another to maintain a retirement account.


Compound Strategies with Multiple Assets


With the passage of time, the level of financial savvy tends to rise throughout the population. As a result, a growing number of amateur investors have been taking up intricate techniques that were once the preserve of professional traders. 

A simple example lies in the sale of a call option on a stable stock which is held within the same portfolio. The purpose of the gambit is to earn the premium on the option contract as well as any dividends issued by the underlying stock. 

If the option were sold on its own, without the backing of the target equity, then the trader would face an excellent chance of driving the entire portfolio into the ground. On the other hand, the dual position enables the gamer to reap a steady income while avoiding the risk of a complete breakdown.

In the years to come, a growing throng of players will use techniques of greater sophistication. A case in point is the tracking of a stock index through the purchase of a futures contract, along with full support for the open position by a bedrock of government bonds. 

The compound scheme allows the investor to collect the dividends on the bonds while keeping up with the performance of the stock market. Depending on the nature of the index and the conditions in the marketplace, the hybrid ploy could turn out to be more lucrative than a straightforward position in common stocks.

Admittedly, the foregoing tactic entails a measure of risk – just like any other scheme in the financial forum or everyday life. On the upside, though, the full backing by government bonds blunts the massive leverage entailed by a futures contract, along with the hairy risk of a total wipeout.  

Amid the headway in trading techniques, a growing cohort of players is turning to versatile platforms that can handle several types of instruments within a single account. Depending on the modes of investment, the asset classes in hand may span the gamut from stocks and bonds to options and futures.

Given the expansion of know-how amongst the investing public, a single broker may offer a variety of trading platforms. In that case, each package features a pointed set of functions catering to a specific segment of the financial community. 

As a result, the proper choice of service provider will depend on the lineup of trading platforms on offer. In other words, the broker as well as the system need to be examined in light of the trading strategies that the investor plans to pursue.


Benefits of a Sizable Account


Another factor to consider lies in the array of supplements offered by a brokerage firm. A case in point is a series of free reports compiled by an external outfit renowned for its analysis of global markets. 

Another example is a checking account or a debit card that a client may use in order to tap the idle cash sitting in the portfolio. An example of this sort is the pool of dividend payments generated by the stocks and bonds held in the account.

The bouquet of perks offered to the customer may depend on the size of the portfolio. In this light, a common practice is to set the benefits in line with the combined value of the assets in all the accounts held by a single patron.

As an example, the broker may offer a reduction of commissions if the combined value of the accounts adds up to $50,000 or more. In this setting, the schedule of costs and benefits could well color the best choice of brokerage firm for a particular investor.

The clutch of perks that comes with a largish portfolio is of course a good reason to aggregate a bunch of small accounts at a single institution. In other words, the investor should not keep a slew of bitty accounts at a raft of brokerage firms.


Dearth of Useful Dope


On the whole, a convenient way to seek information on any topic is to scour the Internet with the help of a search engine. Unfortunately, the usual scheme does not work well when it comes to the subject of brokerage firms. 

The reason is that scads of content dredged up in this fashion turn out to be scrappy and misleading. A diligent surfer could sift through the materials for days or weeks without obtaining a clear view of the brokers or their platforms. 

The mountain of dross on the Net is an outgrowth of a marketing ploy embraced by many a broker of modest caliber. More precisely, the hustlers in the brokerage business offer financial rewards to anyone who sends visitors over to their Web sites. 

Spurred on by the fees, an army of touts on the Web drums up mounds of content slanted toward the bounty payers. Not surprisingly, the biased materials – whether in the form of articles, videos or other matter – are dressed up as balanced reviews of the vendors rather than the contrived pieces that they are. 

In a promotional piece of this sort, a common ruse is to talk only about a small selection of brokers with an emphasis on the fee-paying sponsors. In other words, the marketing blurb sidelines most or all of the leading lights in the brokerage industry.

On the other hand, the most reputable firms do not have a habit of dangling carrots in front of promoters in order to peddle their wares. For this reason, there is no compelling reason for anyone on the Net to churn out scads of content to talk up the demure brokers.

Due to the lopsided distribution of materials on the Web, the hapless surfer would be hard-pressed to pick out the worthwhile nuggets by the straightforward use of a search engine. The dearth of trusty content on the Web is applicable to investors at all levels of experience, from the greenhorn to the old-timer. In scrounging around for the top picks amongst the brokers, the mounds of baloney make it difficult to glean the wheat from the chaff.


Oasis of Sound Information


The good news, though, is that a reputable source offers a level-headed review of the brokerage firms. A handy resource for the financial community lies in annual survey by a publication named Barron’s

On one hand, the publication as a whole is directed mainly toward gung-ho investors. On the other hand, the survey of brokers is relevant to all manner of players, from newbies to oldsters. 

The scoop on the brokerage business classifies the vendors into a handful of groups. An example of the latter is the best set of brokers for long-term investors, or the top crew of candidates for international trading. 

The survey does a good job of rating the brokerage firms. As an example, Fidelity Investments (fidelity.com) often ranks high in the annual reports. The renowned firm in fact happens to be a sound choice for newcomers to the world of investing.

On a negative note, the yearly survey covers only the service providers based in the United States. On the upside, though, the stalwarts in the brokerage business tend to welcome investors of all breeds regardless of their country of citizenship or residency. 

A trading account based in America can be used as a vehicle for investing in assets across national borders. An example in this vein involves an index fund for gold bullion, whose price is determined by buyers and sellers within a global marketplace. Another sample is the equity of a foreign company whose shares are traded in the U.S.

One of the brokerage firms is a solid candidate for the worldly investor with plenty of experience in the financial arena. A go-getter named Interactive Brokers (interactivebrokers.com) fields a bunch of offshoots round the planet in addition to its base in the U.S. The pacesetter has set up subsidiaries in places ranging from Britain and India to Hong Kong and Australia. 

Thanks to the global reach of the brokerage house, a cosmopolitan investor could open an account at a local branch or a nearby country. Moreover, a single account may be used to trade securities in a medley of asset classes as well as geographic regions. As an example, the customer could traffic in stocks and options as well as futures, currencies and other types of instruments based in far-flung markets.

On a negative note, the trading platform is not meant to serve all comers. The primary audience for Interactive Brokers is the professional trader. 

As a result, a tenderfoot in the financial forum will find the system to be a bit – okay, a lot – daunting. In particular, the user interface will seem cold and gruff, abstruse and off-putting. 

For these reasons, the prospective customer ought to pack at least half a decade of experience under their belt before turning to this platform. On the cheery side, though, the high functionality coupled with the low cost of transactions make the package a worthy choice for seasoned traders.

The periodic survey by Barron’s is illustrated by the article listed below. On one hand, the circle of winners is subject to change over time due to the endless ferment in the marketplace. 

An obvious mode of turmoil lies in the evolution of the trading platforms along with their respective traits. Another sample involves the schedule of transaction fees. 

On the other hand, a measure of stability persists in the midst of the tumult. Despite the changes in detail, the relative rankings of the brokerage firms do not vary a great deal from one year to the next.


Cutting Out Trading Commissions


In some cases, an investor may be able to trade stocks without paying any kind of commission to the broker. This type of setup is showcased by Wells Fargo (wellsfargo.com) of California.

According to one program for investors, a customer who keeps $25,000 or more in a bank account can execute 100 trades per year for free. The allowance for free trading is far more than the number required by the bulk of sober investors for a personal portfolio. 

On one hand, a fidgety trader may feel compelled to dart in and out of the market day after day. On the other hand, a genuine investor with a longish horizon could easily go for months or years without making a single trade. 


Formula for Choosing the Best Broker


The foregoing sections covered a potpourri of issues in picking out the best broker for trading stocks online, or handling any other type of financial asset. This segment sums up the main points in the form of an orderly recipe.

In a nutshell, the prudent investor has to match up the features of the brokerage accounts against the specs based on individual circumstances. The procedure below presents a systematic way to approach the task.


1. Take Stock of Personal Needs and Preferences


The thoughtful investor begins with a review of personal circumstances. For this purpose, the first step is to decide on the nature of the instruments to be traded. Will the trading platform be used to handle stocks or some other kind of securities, or a combo of asset types?

A second task is to conjure up some idea of the pattern of trading. How often does the investor expect to move in and out of the market? Will it be once every few years, a couple of times a month, or some other level of interaction? A ballpark figure will suffice for the frequency of trading.

A related task is to get some sense of the number of securites per transaction. Will the usual trade involve a couple of units at a time? Or is the average trade likely to cover a handful or a dozen items, or perhaps a hundred or a thousand?

In many cases, additional issues will come to the fore as well. A case in point is the robustness of the brokerage house along with its propects for staying in business over the next couple of decades at a minimum. 

Another factor concerns the platter of perks offered to the customer. For instance, one investor might appreciate a program of online tutorials, while another could take a shine to the availability of debit cards. 


2. Gather Information on the Top Prospects


When it comes to brokerage firms, the Internet is chock full of patchy and biased information. As a result, getting the lowdown on the best brokers can be quite a challenge. 

On the upside, though, a good point of departure lies in a yearly survey conducted by Barron’s. The report covers the leading brokers and assigns the vendors into sundry groups. 

An example of the latter is the best set of brokers for long-range investors. Another sample is the leading crew of candidates for trading in international markets. 


3. Evaluate the Trading Platforms in Light of Personal Requirements


The top choice of platform depends in large part on the intended use of the brokerage account. As an example, a demure investor who rarely buys or sells securities ought to be more concerned about the dependability of the broker than the commission charged for each transaction.

To take up another example, one popular firm imposes a fixed fee per transaction regardless of the number of shares traded. In that case, the broker would make a good choice for a trader with a modest portfolio who buys and sells a lot of low-priced stocks.

In short, the selection process has to take into account a host of personal factors even in the case of a particular type of trader. For this reason, a dandy choice for one investor could turn out to be a lousy pick for someone else.


4. Decide on the Best Fit under Current Conditions


The outcome of Step 3 above will narrow down the candidates in light of personal circumstances. Some of the brokers in the beauty pageant will be serious contenders, while others could be rejected from further consideration.

In certain cases, a couple of brokers might rank so closely that the investor finds it difficult to make a final decision. If there is scant reason to favor one candidate over another, then the decision maker could just as well make an arbitrary choice.

In this situation, the simplest course of action is to pick one of the top platforms at random and try it for a while. For this purpose, a couple of years ought to be enough to provide a good sense of the strengths and weaknesses of the trading package. 

An alternative tack is to select a couple of promising platforms at the same time. In fact, an investor with a sizable porfolio may want to distribute their assets over two or more accounts in any case. 

The motivation, of course, has to do with the cutdown of extraneous risk. The bogeys of this sort have little or nothing to do with the vicissitudes of the financial markets or the real economy at large. 

An example of a bolt out of the blue is an attack on the broker by pillagers on the Internet.  In the past, bandits have raided brokerage firms and stolen confidential dope such as the passwords set up by the customers. This sort of breach will doubtless continue to pop up from time to time. 

Another reason for splitting up assets stems from the limits to protection by government agencies. To begin with a counterexample, a legal provision might safeguard a small account in full in case the brokerage firm should break down without warning and leave the customers in the lurch. On the other hand, a large portfolio is unlikely to enjoy a government guarantee to a similar extent.

Given this backdrop, a single blowup associated with a trading account or a brokerage house should not put the investor’s entire savings at risk. As the nest egg grows over time, splitting up the assets across a bunch of accounts can go a long way toward ensuring peace of mind.


5.  Repeat the Entire Procedure after a Few Years


The financial sector, including the brokerage industry, makes heavy use of information technology. Due to rapid advances in hardware as well as software, the platforms and services evolve at a breezy clip. In this dynamic setting, the lineup of trading platforms is subject to an endless cascade of changes. The same is true of the schedule of transaction fees. 

To add to the turmoil, the profile of personal circumstances for every investor has a way of morphing over time. An obvious example lies in the changing mix of risk and return that befits the principal as they edge closer to retirement with each passing year.

In this shifty environment, the best choice of broker is not a fixed target but a moving quarry. As a result, an investor on the ball will revisit the task of picking an apt platform once every few years. 


Wrapup for Picking the Best Broker


The top choice of brokerage firm – along with the best form of trading platform – depends largely on the needs of the prospective customer. The issues at hand include the types of assets, the frequency of trading, and the volume per transaction. Other factors include the size of the portfolio mustered by the investor and the selection of perks offered by the broker.

As an example, a novice who invests only in equities ought to favor a simple package with a user-friendly interface. By contrast, a maven who uses a series of futures contracts to tone down the volatility of equity positions within a single portfolio will require a platform of greater versatility and efficiency.

Even in the case of a given trader, the proper choice of platform will vary over time. The factors at work run the gamut from the shifting pattern of income streams to the latest views on retirement planning.

From a larger stance, the brokerage industry relies heavily on the tools of information technology. Due to speedy advances in hardware as well as software, the lineup of trading platforms has a way of morphing over time. The same is true of the array of transaction fees. 

Amid the diversity of product offerings as well as individual requirements, no single package is suitable for all investors. In fact, the best choice of platform could well change from one year to the next even in the case of a given individual. 

For these reasons, the best choice of broker for online trading – for sundry assets ranging from stocks and options to futures and forex – is not a rigid decision that remains forever fixed, but an ongoing task that evolves over time.


Further Resources


An annual review by Barron’s compares the leading vendors in the brokerage business. The survey is exemplified by an article by T. W. Carey titled “Cut the Cord”.

Certain investors may be interested in trading packages fielded by commercial banks that happen to offer brokerage services as well. A case in point is a program for favored customers by Wells Fargo. 

Under certain conditions, the outfit charges no commissions for buying and selling basic securities. The setup is part of a larger package, as explained in an overview of the company’s programs on online brokerage.

The package is designed mainly for casual investors focused on the equity market. For this reason, an adroit player – who handles not only basic assets such as stocks and bonds but works with advanced instruments such as forex, futures, or options on futures – should look elsewhere in seeking out the best broker for online trading.
 
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