How to Choose a Stockbroker

Nowhere is it more apparent that the investment world has vastly changed in the last decade than in the realm of stock trading.

Traditionally, stock trading was transacted with a paper based system through a stockbroker at a brokerage firm and the average investor was limited in what types of investments were available to him.

Nowadays, it only takes a few mouse clicks for the average investor to trade stocks, currencies, commodities and indicies thanks to the internet and online brokerage services.

Deciding which brokerage service is best for you can be a confusing process with so many choices.

Consider these factors when choosing a stockbroker:

Are you comfortable trading online? Clicking a mouse and buying stock is easy but some traders want to speak with a stockbroker either in person or on the phone.

Some online services base their fees on the volume of transactions you make so consider how often you will be trading each year. There are sometimes fees if you don't trade regularly.

Do you want the advice of a professional before you trade or will you be doing all your own research to make your investment decision.

Consider how much of your own time you want to spend researching and then on your computer trading.

There are three basic types of stock brokerage services.

An advisory services advises you which investments to buy whether you meet your broker in person or speak on the telephone. The stockbroker will discuss your investment objectives and recommend the investments she feels will best meet your needs.

A discretionary service will take the money you give them and invest it on your behalf. In this case the stockbroker does not have to inform you of every trade made on your behalf before executing it. This is a completely "hands off" way of investing. It can also lose you every penny if the broker is unscrupulous.

An execution only service merely executes the trade on the buyer's behalf. The broker gives no advice. Online brokerage houses are execution only services.

Once you determine which type of brokerage service you desire, research the fees involved with each. Online brokerage services vary greatly in the fees they charge and the minimum amounts required to open an account. All of that information is available on their websites.

By carefully determining what your own needs are and researching what each brokerage service offers, the task of choosing a stockbroker will be much simpler.