Investors need the help of middlemen that work between themselves and the stock exchanges. Stock brokers are allowed to perform transactions because they are members of the exchanges. Brokers are not only representatives of investors in the exchanges, they also provide clients with the latest financial information about specific companies. Once investors are comfortable with the level of risk in specific investment plans, brokers send orders to the floor through computer software. After the completion of the transaction, brokers provide clients with updated prices of their stocks. Brokers earn revenue through commission they charge on each transaction.

But can we trust stock brokers? Each time we evaluate the trustworthiness of a professional, we could run into the likely habit of stereotyping. But one bad apple in the basket doesn’t necessarily spoil the rest. Here are things to consider before we choose a stock broker:

  1. Know the stock broker: We should get detailed official information about a stock broker – when its brokerage started, was it involved in any kind of controversies and who is the owner.
  2. Account opening charges: How much the broker requires us to pay to open an account? We could compare its account opening charges with other brokers.
  3. Check its regular and periodical charges: While account opening charges is aone-timeexpense, investors also need to pay a number of recurring charges. There are three different types of stock broker charges:
    • Delivery charges: Investors are charged when they take delivery of the shares.
    • Intraday charges: Investors are charged when they buy and sell specific stocks at the same day.
    • Maintenance charges: Stock brokers require annual maintenance charges as a fee to maintain our account.
  4. Services: Stock brokers should provide adequate services for their clients, such as updated information on stocks. Check past records on whether brokers could provide reliable information and tips on stocks. Stock brokers must allow investors to order transactions through both offline and online means.

Assuming that we are dealing with a legitimate broker, we shouldn’t let this situation lulls us into a false sense of security. We should still be vigilant. Just because the company has good reputation, it doesn’t mean that things would go smoothly. Although we may not get ripped off, these brokers could still provide faulty recommendations and tips on what we should do with stocks in our portfolio. Regardless of their suggestions, we should pay attention to the revenue of each company and other essential factors to make the best informed decision possible.

Stock broker companies spend plenty of time establishing solid reputation in the market and this could only be achieved through minimal problems and maximum customer satisfaction. If the stock broking company has a good reputation we should be able dig up more than a few favourable mentions about previous high-value transactions. However, we shouldn’t limit ourselves only to what the media says about a broker, we could also talk with more experienced investors who have used their services.

Some of you may ask who I use and why. I have been using Scottrade for several years now and I am happy with them. They charge $7 per trade, whether I’m buying or selling. There is no maintenance fees or any fees to transfer balances to and from my bank accounts. Sure the $7 per trade adds up over time, but they have great customer support and so far, have been very reliable when it comes to their tools and the research information they provide. If you would like to sign up and give them a try, use my referral code: VXPP8981

Using the referral code above will give you three free trades and I will also get three free trades (win-win). That saves you about $21, that can be a lot of money for someone just starting out.

Another option that I could recommend is OptionsHouse. They charge just $4.75 per trade, much less than Scottrade. I only started using OptionsHouse, so far they have been great. Their customer service is proactive and they have called me several times asking me if I need help. I haven’t put as much money in this trader as I have Scottrade but I am sure they will turn out to be great. They are also very stable, the interface takes some time to get used to, but I have no complaints.

Other companies out there include E-Trade and TD Ameritrade. They are big names which I have not tried. I would always recommend that you do your research before signing up for any broker. They have different fees and different methods of doing things, make sure you know what you are getting yourself into.

I wish you the very best in investing! Good luck to you all.


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