Finding a Broker"/>

Getting Started

Once you have made the decision to begin investing, the next step will be to decide the degree to which you wish to get involved (i.e. how much time do you want to put into the process). Given that this Web site is dedicated to those who wish to manage their own finances, I will only say that there are many good and reputable companies (and people) available to help with the task of building wealth. One of the places I have, personally, chosen to manage some funds that my wife and I have put aside for our daughter’s futures is Vanguard. The reason I chose Vanguard was because of its low expense ratio and because of its conservative investment philosophy.

For those who want to take a more hands-on approach to their investments, one will need to decide if he or she wants to open an account with a full-service or discount brokerage firm, and whether or not that account will be online. It is my intention to focus on, both, full-service and discount brokerage firms that offer their services online. That said, the first step for those interested in investing online will be to procure a decent computer and a reliable Internet Service Provider (ISP). Given that the only way (at this time) for one to view this site is through an Internet connection, suffice to say that a detailed discussion on the subject is not warranted. The next hurdle, however, does require some time and attention and is where I want to focus.

Finding a Broker

Finding a broker is like finding a lifelong soul-mate. Similar to a spouse or loved one, trust plays an important role. Fortunately, there is fairly long list of trustworthy firms from which to choose. If you perform a search online you will find a number of Web sites that do a decent job of evaluating the various firms and the services they offer. Personally, I have accounts with Scottrade, Fidelity, Vanguard, optionsXpress and Interactive Brokers — though not all of them are active. My favorites are Interactive Brokers (IB), optionsXpress, Fidelity, and Vanguard. My primary accounts are with IB. The reason I chose IB over all the others is because of its extremely low trading fees and its superb trading platform, Trader Workstation (TWS). Be cautioned, however, there is a bit of a learning curve to TWS and the numerous updates can pose certain challenges to those who are like me — creatures of habit.

All of the brokerage firms have their own strengths and weaknesses and your final selection(s) will very much depend on the services you seek, the price you are willing to pay for such services, and the level of comfort you have with the firm(s) you interview. For example, optionsXpress is the master of the house when it comes to options trades and information; Fidelity is the king of research information; and Vanguard is alpha when it comes to low cost mutual funds. Given the importance surrounding such decisions, it is worth taking your time to do some research. A short list of some of the questions you will want to ask are:

  1. Fees
    1. What are the trading fees?
    2. Is there an account inactivity fee?
    3. Are there any fees for closing an account?
    4. Are there any fees associated with transferring securities to another brokerage firm?
  2. Trading Platform
    1. Is the trading platform Web based or standalone?
    2. If a standalone version is available, what are the minimum requirements to run the application?
    3. Have there been any outages (i.e. has the system ever gone down) and, if so, are there any backup mechanisms in place?
    4. Does the firm offer a Paper Trading Account (i.e. a practice account), and can I access the account without having to open an actual account (i.e. so that you can try before you buy, so to speak)?
  3. Services
    1. Does the company offer a dividend reinvestment program (DRIP)?
    2. Does the company offer 24/7 tech support and, if not, what are the hours of operation?
    3. What is the average hold time for technical/brokerage assistance? How many call centers are available?
    4. Which markets (especially with regard to foreign markets) are available for trading?
As I mentioned this is just a short list, but it should be enough to get you started. It is a big decision to make; so, take your time and do your homework.
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