2 Features I Insist On When Choosing An Online Broker

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With so many options available, there is no reason to go with just any stockbroker.

How many people have I invested money in an online brokerage account. There are many different online brokers to choose from. Before opening my account, I did extensive research to choose the best one for my situation.

While I discovered there were a wide variety of features offered by brokers, there were two in particular that were absolute must-have items for me. In order for me to open an online account with the company, I didn’t want commission fees and the ability to trade fractional stocks.

That is why these two functions are important to me.

1. No commission fees for trades

For years I had to pay a commission to buy and sell stocks. That used to be the norm in the industry and it always frustrated me because it weighed on my profits. It also forced me to wait until I had larger amounts of money before investing, as there was no point in buying a stock or two and paying such a high fee for it.

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Fortunately, there are now many options for trading with zero commissions as most online brokerage firms have eliminated these fees. Since there are many options for companies that do not charge you trading fees, I absolutely would not go with a broker who incurs these types of costs.

2. The ability to trade broken stocks

The second trait that is important to my brokerage firm is the ability to trade fractional stocks. Fractional shares are partial shares of shares. They are bought differently than traditional full stocks.

Previously, if you wanted to buy your way into a company like Amazon, they included how many stocks you wanted to buy. For fractions of stocks, instead, you place an order for a specific amount of money to invest. You then become the owner of any number of stocks that you buy – even if it’s a fraction of a stock.

For example, since Amazon is trading for around $ 3,400, if I indicated that I wanted to buy $ 200 worth of Amazon shares, I would get around 0.059 shares of Amazon.

Not all brokers offer partial stocks as this is a newer concept, but a growing number. And I want to be able to buy stocks in any business I’m interested in, even if the price of the stock is pretty high and I don’t have enough money to buy a full stock. Therefore, I will not invest with a broker who does not offer this trading option.

Some brokers who offer fractional stock trading also have higher limits on the amount of investment than others. For example, you may need to invest at least $ 5 in fractions of shares. Others only allow you to buy 0.001 shares as long as your transaction is at least $ 0.01. I don’t trade that little so that’s not a big problem for me. But I made sure my broker would allow me to buy fractional shares of both stocks and Exchange Traded Funds (ETFs). This is because some brokers are more restrictive than others on the type of investments you can buy fractions of.

Together, the abolition of commissions and the introduction of fractions of shares have contributed to the democratization of investment. Now anyone can buy stocks of big-name companies even if they don’t have a large fortune to invest. I am happy to take advantage of this new financial freedom and I expect my broker to give me this opportunity.

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