This post is for you if you’re a new investor considering investing in some stocks to get your feet wet. “First” is the operational word in that headline. It assumes that you are just starting out as an investor. It also assumes that you’re not very seasoned with practical investing – although it definitely helps if you have some “play investing” background which would indicate that you know the ropes a little bit. Investing is a really good way of making your money work for you, as they say. So here goes …
1. What intelligence do you get from the broker: You’ll need help. Help in making decisions about which stocks to pick and how to time your trades best. If your broker does not give you the right education about the market and does not help you evaluate a stock quickly and deeply, you will forever be less confident about the decisions you make. Most traditional brokerage websites and apps are geared towards high value investors and active traders so a lot of information they give might actually be difficult for you to make sense of. So it’s important that the broker understands you and presents data and intelligence in ways that you can digest easily. At the same time, you need to make sure the broker has enough intelligence to offer – ‘coz a lot of smaller and younger brokerage firms don’t really give much in terms of intelligence.
2. What is the per trade commission: This is pretty straightforward. If you’re starting to invest just now, it’s quite likely that you will start with small amounts. So if you’re putting 100-200 bucks in, even a $9 commission will set you back – that’s $18 in fees before you realize any returns. You will need your stocks to really skyrocket for you to get any decent returns at all. Not something that happens frequently. Also, tread carefully ‘coz some of the cheaper brokers may not have the execution capabilities or the data hygiene you need.
3. Does the broker offer fractional stocks: If you want to invest with any degree of seriousness, diversification is important. When you’re starting out with stocks and looking to diversify with a small amount of capital it’s tough to invest in blue-chip stocks as most of them are expensive. Google is $840, Apple is at $138, Fedex is at $191 and Goldman Sachs is at $251 as of the time of writing this post. Therefore it’s tough to have multiple stocks in your portfolio if you have $200-500 to invest. So look for brokers who give you the ability to buy and sell stocks in fractions! US is one of the very few markets offering this luxury.
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