For many years we’ve seen the mass advertising conducted by online stock brokerage firms. They offer another avenue for trading stocks and other financial products, often at a comparatively lower rate than in-person brokers and firms.
Several of these online brokerage companies have become household names. But given the regular ups and downs of the stock market, do these firms really offer you the best deal in terms of your overall investing experience?
What Services to Expect – And Not To Expect
When discount brokerages first made the scene into the financial services market, they readily admitted that they offered “no frills” service, in return for little or no investment advice and very low cost trading options.
However, with the advent of more firms offering online share trading, the products and services offered have expanded. For example, where once you could only trade individual stocks, these online firms now offer more research and tools for trading, as well as updated news about the market and investing trends.
As an online investor, you will likely also have access to an online investing “community” where you can interact with other investors. And, some online brokerage firms offer national service centers and even local branch support. So in effect you could be getting the best of both worlds.
Does Convenience Come with a Cost?
As good as some of the services offered sound, however, there could still be a “cost” to you. For example, although you have access to service centers and branch support, you may not work with or speak to the same person more than once. This means that there may not be one particular advisor assigned to your account who is looking out for your specific and personal financial needs and goals.
Calculating Your Needs
One popular tool offered by many online investment firms is a calculator designed to help you determine how much you need to invest over time to reach a certain amount of assets in your portfolio. This tool could help to offset the lack of personal investment support, and for those who prefer to take control of their own investment accounts, this tool is a great feature. However, for those who do not wish to follow the market’s every move, then it may not matter what the results of the calculations are if you are unable or unwilling to take the time to act on them.
How Much Advice Do You Need?
The lower cost and convenience have made it possible for just about anyone to control their own investments with online brokerages. As some will tell you, however, even though these firms provide access to research and advice, you may still have to take the time to dig for exactly what you need. If this is something you are not prone to doing, then placing your funds with a full service brokerage that provides real time human advice may be your better option.
Research is Key
Most online trading firms do offer a good amount of access to market research. You will often have access to real time market information and quotes, as well as analysts’ opinions of whether a specific stock or fund has a Buy, Sell, or Hold rating. Again, if you have the time and desire to track your own investments, this research is a must. However, all the information in the world won’t help if you do not or cannot take the time to read it and make the proper buying or selling recommendations.
What to Look Out For
Just like most advertising, take the online brokerage firm commercials you see at face value. For example, an online investment firm that offers trades for “as low as” $7 may only offer this price to someone who makes a certain amount of trades per month or opens a specific type of account at the company.
Therefore, be sure to read all of the fine print before opening an account and handing over any funds. Often it’s too late to back out if you later discover these requirements.
Tips to Invest Successfully Online
With the wide myriad of pros and cons to investing with an online brokerage firm, what it really comes down to is the time you have to spend monitoring your accounts. Similar to many other products and services, if you have the time and the desire to spend on your investing activities, then working with an online brokerage may be just the thing for you. If not, however, your higher commission dollars may be better spent with a full service broker who will regularly monitor your funds and take the appropriate actions when necessary.