Step 6.Otkroyte account with a broker with low commission

Step 6.Otkroyte account with a broker with low commission
Five reasons for parting with the full commission broker
1. I know that you will find yourself someone else.
2. And who would think about my needs?
3. I see that I am an adult and you do not.
4. I'm just not ready for the long-term contract with short-term trader.
5. No, no, it's not about me but about you.
Brokers with a full Commission
Brokers full commission are those expensive dressed individual, who work for Merrill Lynch, SalomonSmith Barney, Morgan Stanley Dean Witter, etc. These companies can afford to turn the TV commercials in prime time basic television, because they make really big money. Most of the amounts they receive from the service, "investment bank" (ie helping other corporations to solve their financial problems), but a very substantial share of their profits comes from the "retail" side, through individual brokerage.
Brokers with a full commission (or "full service") are the intermediaries through which you can submit your orders to buy or sell on stock exchanges or electronic trading system. You give them orders, but they are trafficked to their children at the exchange, which directly execute the order for you.
The words "broker's full-service" means that in such a brokerage firm employee must be found that satisfies all possible needs of customers who have opened this office in your account. This includes the generation of investment ideas for you, giving you the stock price at any time when you request them, managing your account (in many cases), ensure you research reports on market and individual stocks, assistance in terms of taxes and other services.
In return for this full range of services such broker will charge you a higher fee for selling shares in your account. Where a broker with low commission (we'll talk about them more in detail) usually charge $ 5 to $ 20 per online transaction, you may have to pay about $ 150 for an average transaction made with a typical broker with a full commission. Further, the company's full-service often charge an annual fee "for their support," with which Uryvaev yourself a big chunk of your assets. In other words, they provide a very expensive "services".
So, here are two major problems. (In fact, there are a dozen issues, but for brevity we restrict ourselves to the two main ones.)
The first problem is that the majority of brokers (or so-called "financial advisors"), giving you advice, really - just a successful sales team, dealing with their business in brokerage offices or expensive mutual funds. Brokers receive a percentage (commission) with each purchase and sale transactions that they perform. While on earth, there are some well-known brokers, who earn income for their clients, most of the others really are not good investors, and can not boast of any extraordinary or even medium-sized historical results of operations.
The second problem is that brokers are full service typically receive a commission for each transaction made through them, that is, their compensation is directly dependent on how often perpetrated auction off their customers. In other words, part of the fee that you pay a company may evaporate directly into the pocket of your broker. Thus, your broker with a full-service gets the money not for how well are you doing (which would be in your best interest, of course), but for how often you trade (which is directly contrary to your interests). Unattractive situation. That is why the "brokerage firm with a full-service" rather quickly forced out of the market as a growing number of investors are convinced of the advantages of online brokers.
Industry brokers full service will be able to save themselves only if their remuneration will be based on rates of return on your investment, but not at the frequency of trades. Your broker should work hard to provide you with the best long-term permanent income (higher than market average), and must receive a bonus based on the percent of your profits in the long run. Instead, he gets the money for something that convinces you to rush from one stock to another, spending money on a commission per transaction. While the situation is the case, we will continue to watch as more and more customers away from brokers with a full commission, preferring to invest. Which brings us straight to the next topic ...
Brokers with lower commission
If you explain in simple terms, the brokers with lower commissions provide a more suitable and convenient means for investors wishing to make a deal. Brokers with lower commission intended for self-investors. The idea of ??self-management of their funds attracts those who like myself to change oil filters, or plug the leak in the roof. (And we found that self-management of money and attracts those who do not have any sort of carpentry skills.) Idea to pay astronomical amounts of money to some broker with a full range of services for what he earns below the average rate of return, unbearable for this independent, self-soul. However, in the same way as before the repairs you need to think about choosing the right tools and materials, as well, and before you undertake the investment, should be in something to understand.
Brokers with lower commission there are so many. In fact, so many of them that might not be so easy to choose the one you like, if you are a beginner. Perhaps we can alleviate some of your problem, citing the opinion of one experienced investor on how to choose a broker with low commission:
"I think your first step should be to restore order in his head. Trader or investor of any type you want to be? This is important because you do not want to pay extra money for the services of a broker, you do not need, but at the same time You do not need a broker who does not perform all that you expect from him. Therefore, to begin with will be examined in itself.
But do not limit myself too much and. Consider Him a little further than his first $ 2000 and speculate over what you would do in a year or two. Since you're probably not going to change every few months, brokers, try to choose the right one that will meet your requirements in the future.
Construct a scale of priorities and compare it with the help of a few brokers. Do not follow blindly the advice of others, even if you give very authoritative people: your priorities are very individual, respectively, the individual should be your choice.
Read the message boards known investment sites. It is desirable to view the archive of discussions about six weeks. Yes, we agree that most of the articles will contain the same eternal question: "Which broker is the best?" and the same everlasting answer. But besides that, you'll find a number of interesting comments where people give reasons why they like or dislike a particular broker. You can compare them with their arguments, and besides, you've probably run into a few questions you should ask, but that just did not come to mind. This alone is enough to do the reading.
View sites of brokers that you liked. On most of them have a demonstration model of trading, as well as on-line are almost all kinds of boards and commissions. Call their service by opening new accounts, and check how well they respond to calls.
Please read all these long, sleepy, agreements for service accounts, at least, after you will have a small list you like brokers. You will have to sign a form which will be told that you agree with the text of the agreement, so you should make sure that you actually agree with him (or at least, that nothing in this agreement does not cause you undue surprise).
As soon as the circle narrows your search, do not forget that most likely there are several brokers that will suit you almost perfectly. So, if you make your final choice of the two brokers in favor of someone who talked pleasantly with you by phone, or one whose Web-site you like a little more, do not worry. Perhaps, the second agent is also well you would fit, and you will be satisfied with each of them. "
So, thanks to an investor, sharing with us his professional wisdom. To him, we would like to add ten of his tips that will help you in various stages of your choice:
1. Carefully read the documents, including the fact that the fine print. Some brokers "forget" to indicate in the text size of their minimum fees, while others offer outdated information. Remember that you can always discover the hidden costs, ranging from the minimum amount that must constantly be on your account, to pay for being late with making money, and to pay for a transaction or processing orders.
2. The scale of fees can vary widely, even among the same broker, depending on what type of trading you are doing. If you usually buy 1,000 shares at a price less than $ 10 each, use a deal of this type is to check out your possible future brokers. Look at what fee you will pay each of your prospective brokers in its typical transaction.
3. If you want to trade foreign stocks, options or other exotic securities, be sure your broker is willing to do it.
4. Find out the rate of interest on the margin, if you plan to ever borrow from their broker money to purchase the shares. The rate of interest varies from one broker to another. We remind you that good investors will not even think about how to borrow money and buy stocks on margin, until it will not get many years of experience buying and selling their shares. (For more details on the use of margin, see "Step 12".)
5. The ease and convenience check account status or payment of bills can be very attractive to some investors. Brokers with low commissions, to expand its range of banking services, trying to get as much as possible with each client. Is it true that you should check your account, using the services of a particular bank? Very many investors do not need it.
6. Mutual funds. You've probably already figured out that we are not big fans of mutual funds that earn returns below the market average, but you can not agree with us. If so, and you're going to buy shares of mutual funds, find out what funds are offering each of your prospective brokers.
7. Research and investment tools. On the Internet, you can easily find lots of free research papers, and just a sea of ??free investment advisers, but one of the advantages of a brokerage account is (and should be) to provide access to additional tools for monitoring stocks, research analysts, reviews, charts and graphs of shares, and another.
8. "Cleaning" money in your account, or other interest payable on funds in your account. Investing whether your prospective broker unused money in your account at the financial market at the end of the day? Check it out.
9. Trading on the phone and / or through the local office. In case those are still uncommon, when you can not make a transaction online, you may decide to make it "old fashioned" way - with automated touch-tone dialing, or "living" the broker. In addition, some people feel uncomfortable, if not from them near the local office of a broker, built the present, tangible bricks and mortar. Compare offers and opportunities in these parameters and decide which ones you seem to be most comfortable.
10. Free privileges have free privileges. Some of them are really worth having. You're talking about rebates for the frequency of transactions, free of bidding on your birthday or other extraordinary claims - well, maybe there are little things that tip the scales in favor of one or another broker. Do not sacrifice good quality customer service for any of the privileges that you do not really need. But we need to see all that the broker can offer, and take it into account in its final selection.
What to do when you have chosen a broker with low commission and are ready to buy your first action? Proceed to "Step 7", we look at a few companies "heavyweights" in the index Dow Jones.