How to Compare Online Stock Trading Companies

by Jordan Meyers

The convenience of online trading makes it possible to buy and sell stocks and other investments from the comfort of your home or office, without even dialing your phone. Choosing the best online trading company can influence the ease with which you manage your investments and the expenses you incur in relation to investment activities. Selecting the right company can also affect the safety of your investment funds and sensitive information like bank account numbers and your home address.

Research minimum account balance requirements and select an online trading company that offers minimums you can comfortably meet. Some companies require a minimum of from $2,000 to $10,000 or more to open an online account. If you want to get started with investing but don’t have a lot of upfront cash, look for discount brokerages that have a much lower minimum balance requirement. Keep in mind that opening an account with an online broker that does impose minimums means the firm may charge a fee whenever your account balance falls below the minimum.

Compare online trading companies based on the website security mechanisms each firm has put in place. All sites will require you to enter a username and password to access your account, but a broker can keep your information and funds more secure by requiring security questions and images that you identify as part of the login process. Code recognition procedures add another level of security to your account.

Evaluate companies based on the availability of customer service. Ideally, an online broker will offer a few different ways you can get customer service, such as by phone, email and possibly online chat. Compare the hours of customer service availability as well. Offering customer support during normal business hours is standard, but you may find companies that offer extended customer service hours or 24-hour availability more convenient.

Determine whether the online trading companies you consider offer local help. Although you want to trade online, situations might arise where you want to speak with a broker in person. Companies that maintain offices near you may prove attractive.

Compare the features offered by each online broker before you make a choice. Many companies offer real-time charts and data to help you make investment decisions; some also provide tools for analyzing investments and strategies. You can even choose a company that offers real-time news. Compare and make your choice based on which features you think you will use, the free options offered and the cost of any features you want but for which the broker charges a fee. For example, many online trading companies offer level 2 data for a fee. Level 2 data includes information like highest bid and lowest ask prices across different markets.

Weigh reputation in your comparison. Use Forbes.com to read reviews of online brokers you consider (see Resource 1). Visit Standard & Poor's or Moody's website to learn the ratings for each company and research information about the online broker's financial health (see Resource 2 and 3).

Tip

  • If you are new to investing, look for a company that offers free training courses or online manuals aimed at beginners.

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