Three Ways to Find the Cheapest Online Broker

There aren't quite as many online brokers available now as there were a few years ago during the dot com bubble, but there are still plenty of choices. Many of the top online brokers have merged with smaller competitors, which has allowed them to incorporate the strengths of multiple websites into one single brokerage. More investors are choosing online brokers than ever before, and the single biggest reason for that is the cost efficiency of investing online. Traditional brokerages can get very expensive in a hurry if you do much trading at all, but there are plenty of cheap online brokers that are more than adequate for most investors. Let's take a look at three steps to help you find the best cheap online broker for you.

Three Steps To Finding The Cheapest Online Brokerage

1. Determine Your Investment Needs- You should always consider what it is you are going to need from the online broker first. If you don't know what type of investing plan you are going to have, then it will be difficult to select the best online broker for you. Sit down and decide what your investment goals are and how you plan to reach them. Every person's financial situation is unique, and it won't be evident to you which broker is the most cost-effective unless you have an idea of how you are going to try to accomplish your goals.

2. Check out Online Broker Reviews- I am a strong advocate of thoroughly looking through reviews before ever committing capital to any broker. There are some terrific sites out there that have done the dirty work for you, so make sure you use this information. A site like TradeWiser reviews online brokerages on an annual basis. By looking at reviews such as these, you will be able to find the strengths and weaknesses of each online broker. Depending on your trading patterns and portfolio size, you should be able to determine which brokers will be the cheapest in your individual case.

3. Don't Forget Account Fees and Other Expenses- While online brokers are certainly cheaper than their traditional counterparts; they aren't above charging account maintenance fees or inactivity fees. If you aren't considering fees and expenses such as these, then you are making a big mistake. While that $50 annual fee might not seem like a lot at the beginning, it can really pull down your total returns in the long run.

While finding a cheap online broker is desirable, you'll also want to make sure your broker provides the tools necessary and quality customer service. There are plenty of solid options available, so choose wisely!

Sources:

TradeWiser.com "Online Broker Review 2011"

Investopedia.com "Don't Let Brokerage Fees Undermine Your Returns"