One of the more overlooked pieces of smart investing is choosing an online broker that fits your needs. People get caught up in researching the stocks and mutual funds they plan to invest in to no end, including trends, expense ratios, and everything else they can get their hands on, but sometimes overlook something as simple as the cost of the current broker you’re using. Minimizing your cost to invest should include the cost of making trades, so make sure to calculate that into your total cost.
There are many choices for online brokers, and there are a lot of things to consider when choosing one. So how does a new investor get started? Here are a few ideas that might fit into your newly found investing needs.
Sharebuilder
Sharebuilder is a well known discount broker that offers some of the lowest cost stock trades available. They are great for newer stock investors because of their low rates and the ability to buy fractional amounts of stock. This means that if you only have $100 to invest, you could invest in 1/5th of a $500 stock, instead of having to wait until you had the whole $500. Sharebuilder was recently bought by ING Direct, so now they offer a a limited amount of mutual funds that you can invest in as well. Prior to ING, you couldn’t invest in mutual funds via Sharebuilder. For new investors looking to put some money into mutual funds, this option probably won’t be for you. But for a new investor looking to get their feet wet investing in stocks, Sharebuilder is a nice option.
Vanguard
If you’ve read some of our articles about index funds and target retirement funds, you might have interest in getting a trading account with Vanguard. Vanguard funds are some of the most popular mutual funds around due to their high performance and extremely low expense ratios. The bonus of getting an account with Vanguard directly is that you won’t have to pay any transaction fees when you buy Vanguard funds, which you would at just about any other broker. Transaction fees can vary, but paying on average $45 or more for each mutual fund transaction can add up very quickly. For new investors that plan on investing strictly in various index funds and primarily Vanguard funds, then this is one way to keep your costs very low.
Wells Fargo and Bank Of America
If you have Wells Fargo or Bank of America as your primary bank, then maybe you should look at their brokerage options. Both are offering some sort of free trade special depending on how money you have in their accounts and how much business you do with them. Bank of America is offering 30 free stock trades a month and Wells Fargo is offering 100 free trades a year, including stocks and mutual funds. Personally I have chosen the latter, and it has been fantastic. If you’re not looking for a day-trading account and already have your primary accounts there, it makes it extremely convenient. You just really can’t beat free. With the Wells Fargo promotion including free mutual funds as well, it’s really a great offer. Not having to pay transaction fees makes just about any mutual fund family accessible to you without penalty. Having that type of freedom to invest is a big win.
There are a lot of brokerage account options out there, and this article is by no means exhaustive. But these are some options that are available to you, and depending on your investing needs, they can help you start your investing off with a solid, low cost broker so that you can concentrate harder on your investing decisions.
