How to Choose the Best Broker for the First Time

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Contents

It is a fact that a brokerage account is essential for starting any investment or trading. You can open such an account only with a broker. So, selecting the most knowledgeable and reliable broker is as vital as selecting the right commodity to invest. This vital task is not completely different from choosing a commodity or stock, as it needs muchmeticulous contemplation.

Perhaps, this is because not all brokers are suitable for all investors. Each investor has its own unique priorities based on which she or he selects an online or a brick-and-mortar broker. A few investors do not mind paying higher commissions, while others have a priority of lower overall cost. Here are some factors to consider and weigh as per your priorities for selecting the best broker.

Your Trading Style -> Full-Service or Discount Broker

Before you look for any brokers or online reviews, find out your trading style or how will you trade. You might choose the buy-and-hold strategy or move-with-the-market strategy to trade more frequently. Regardless of the chosen approach, do a thorough research on it, evaluate the current market state, and then pick a broker that can offer all services and tools for your strategy.

Here, you get two choices: Discount and full-service brokers. While discount is tempting, it is not always a great deal. It is more reliable to choose a full-service broker. Such brokers provide more services and have enough knowledge to guide the beginners.

They do much groundwork, offer timely advice, and give personalized recommendations. Thus, you can easily gain confidence for trading and knowledge of different markets.

However, a full-service broker charges handsomely. So, if paying brokerage fees is an issue, you can go for a discount broker.

Recognition/Endorsement -> The Key to Trustworthiness

It is essential to choose a licensed broker with good experience and loyal customer record. Having such a broker increases your probability of making profits. Well, licensing and loyal records only follow a certified/recognized broker.

Pricing -> Quality Functioning

Selecting a broker just because its commission is the lowest one, is unwise. Remember, you get only what you pay for. This is how price indicates quality. If you choose an online service, an ad fine print states the services for which the advertised rate is applicable. So, do read it! Mostly, fees are high for limit orders and options.

Availability for Service -> The Key to Reliability

Best Binary Options Brokers 2020:

Binarium

The Best Binary Options Broker 2020!
Perfect For Beginners!
Free Trading Education, Free Demo Account!
Get Your Sing-Up Bonus Now!

Visit Broker
Binomo

Good Broker. Only For Experienced Traders!

Visit Broker

Ideally, a broker should be available to help whenever you need it. You can check out the work timings for that purpose. In case of an online broker, try visiting the site at different times, particularly during the peak hours of trading and see how fast is the loading speed. Further, test some links to ensure that there are no navigating issues. As a tip, check out this aspect in the specific reviews, such as trade.com review.

You can even call a company and ask for help to see how promptly it gives the response. At least, you will know the waiting time.

Extras -> Diversified Portfolio at Economic Rates

Choose a broker that offers extra freebies or goodies as well as different products such as bonds, options, gold, futures, and financial services. He will be an economical choice for you.

10 Best Online Stock Brokers for Beginners of April 2020

At NerdWallet, we strive to help you make financial decisions with confidence. To do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations. Our opinions are our own.

When you’re a beginner investor, the right brokerage account can be so much more than simply a platform for placing trades. It can help you build a solid investing foundation — functioning as a teacher, advisor and investment analyst — and serve as a lifelong portfolio co-pilot as your skills and strategy mature.

What are stock brokers?

Stock brokers are people or firms licensed to buy and sell stocks and other securities via the stock market exchanges. Back in the day, the only way for individuals to invest directly in stocks was to hire stock brokers to place trades on their behalf. But what was once a clunky, costly transaction conducted via landline telephones now takes place online in seconds, for a fraction of what full-service brokers used to charge for the service. Today, most investors place their trades through an online brokerage account. (A little lost? Check out our explainers on brokerage accounts and buying stocks.)

on TD Ameritrade’s website

TD Ameritrade

cash credit with qualifying deposit

on TD Ameritrade’s website

cash credit with qualifying deposit

Commission-free stock, ETF and options trades.

High-quality trading platforms.

No account minimum.

Good customer support.

Large investment selection.

Costly broker-assisted trades.

on Interactive Brokers’s website

Interactive Brokers IBKR Lite

No promotion available at this time

on Interactive Brokers’s website

No promotion available at this time

Large investment selection.

Strong research and tools.

Over 4,300 no-transaction-fee mutual funds.

NerdWallet users who sign up for IBKR Pro get a 0.25 percentage point discount on margin rates.

Website is difficult to navigate.

Inactivity fees on IBKR Pro.

on SoFi Invest’s website

SoFi Active Investing

career counseling plus loan discounts with qualifying deposit

on SoFi Invest’s website

career counseling plus loan discounts with qualifying deposit

Commission-free stock and ETF trades.

Fractional shares available.

No account minimum.

Free financial counseling.

Small selection of tradable securities.

Limited track record.

Want to compare more options? Here are our other top picks:

Summary of Best Online Stock Brokers for Beginners of April 2020

on TD Ameritrade’s website

cash credit with qualifying deposit

on TD Ameritrade’s website

Interactive Brokers IBKR Lite

on Interactive Brokers’s website

No promotion available at this time

on Interactive Brokers’s website

SoFi Active Investing

on SoFi Invest’s website

career counseling plus loan discounts with qualifying deposit

on SoFi Invest’s website

in Transfer Fee Rebates

cash credit with qualifying deposit

in cash bonus with qualifying deposit.

no promotion available at this time

No promotion available at this time

No promotion at this time

cash credit with a qualifying deposit or transfer

More resources for new investors

Need some background? Read our guide to how the stock market works.
Unsure of how to build your portfolio? Learn more about how to invest in stocks.
Interested in instant diversification? Understand how investing in mutual funds can help.
Want to join the passive investing revolution? Consider index funds.

Last updated on April 6, 2020

Methodology

To recap our selections.

NerdWallet’s Best Online Stock Brokers for Beginners of April 2020

Frequently asked questions

It doesn’t take a lot of money to get started; many stockbrokers allow you to open an account for $0. Many brokers also will waive any minimum investment requirements if you sign up for regular monthly contributions of $100 or more.

If you don’t have a lot of cash but want to try your hand at do-it-yourself investing, using commission-free exchange-traded funds can be a cost-effective way to begin building your portfolio. ( Have $500? Learn how to invest it .)

To buy and sell assets like stocks, bonds and mutual funds, you need to open an investment account through a stockbroker. That account is called a brokerage account, and it holds the cash you’ll use to buy and sell investments, as well as the investments themselves once you own them.

If you have a 401(k) or other employer-sponsored retirement account, you already have one kind of investment account. Many investors find it beneficial to open additional stock brokerage accounts when:

Saving for retirement. If you want or need to save for retirement in an account separate from your employer, you can open an IRA. These come in two flavors, a traditional IRA or a Roth IRA. ( Read more about the differences here .) One thing to note about both: Contributions are limited to $6,000 a year ($7,000 if you are age 50 or older).
Investing for other goals. If you’re saving for a goal other than retirement — or you’ve topped off your 401(k) and IRA contributions — a taxable brokerage account is a good option. As the name implies, this doesn’t carry the tax advantages of retirement accounts. You will have to pay taxes on any capital gains each year.

On the plus side, you don’t face any of the restrictions for withdrawals that come with tax-advantaged accounts. If you need money in a hurry, a taxable account would be your first line of defense before dipping into retirement accounts and potentially paying early withdrawal penalties.

A brokerage fee is charged by the stockbroker that holds your account. Brokerage fees include annual fees to maintain the brokerage account or access trading platforms, subscriptions for premium research, or even inactivity fees for infrequent trading. You can avoid or reduce brokerage account fees by choosing the right broker.

The difference between a full-service stockbroker and a discount stockbroker comes down to the level of service and how much you want to pay for that service.

Traditional full-service stockbrokers do more than assist with the buying and selling of stocks or bonds. They often offer a wide array of services and products, including financial and retirement planning, investing and tax advice and regular portfolio updates. But they can charge substantial fees and transaction costs that can erode long-term investment gains.

If you have more money than time, a full-service broker may be for you. For most investors, however, it can pay to look at discount stockbrokers. These brokers allow you to buy investments online through their website or trading platforms. You’ll pay less in trading commissions and fees at a discount broker.

Other brokers, called robo-advisors , offer a combination of access to financial planners and automated investing technology. Companies in this category include Betterment and Personal Capital , and they build your investment portfolio for you for a fee. If you want a service to make investment decisions for you, robo-advisors are a good option.

Yes, but it will take more time than getting cash from your ATM, often a few business days. Your broker will need to sell securities (like stocks, bonds or mutual funds) equivalent to the amount you want to withdrawal, so it’s not as simple as removing cash from a savings account.

If you’re taking all of your money out — whether transferring to a different stockbroker or cashing out to move to Tahiti — there may be account closing fees.

The rules for withdrawal of retirement accounts like an IRA are different, depending on your age. Most withdrawals carry a 10% penalty before the age of 59½ and will be taxed as ordinary income the year you cash out. ( Roth IRAs, which are funded with after-tax cash, are more forgiving of early withdrawals.)

The nonprofit Securities Investor Protection Corporation insures cash and securities up to $500,000, with a $250,000 limit on cash losses. But this protects you only in the event your stockbroker fails. Any losses and gains of your investments carry no protections.

How to Choose a Real Estate Broker

As a new real estate licensee, the first step you’ll need to do is choose a real estate broker. The process of picking a broker can start early, as some states require that you be sponsored by a broker when you take your real estate exam. Don’t let the process of finding a real estate broker to work for intimidate you. We’ve put together some information to help you learn how to choose a real estate broker that’s right for you.

How do you select the best brokerage for your new career? Review the following five steps to learn how to choose a real estate broker.

Step 1: Ask about the commission split

Most real estate agents get paid on commission. When you’re not selling, you’re not getting paid. But when you’re selling, you’re going to split the proceeds with your broker. Brokers offer different commission structures. (And some brokers offer salaried positions, but these are few and far between.) While factors like company culture, resources, market share, reputation, and support will also come into play, you’ll want to pick a brokerage that offers you a commission split you can live with—keeping in mind that commission splits often get better with experience and sales volume.

Here’s how commission splits work: Let’s say you sell a $300,000 home and the average commission in your area is 6%. That 6% is first split between the buying and selling agent. Now you’re down to 3%, which works out to be $9,000. Next, you’re going to have to share that with your broker. If you’re on a 60/40 commission split, you’re taking home 60% of that $9,000, or $5,400. Of course, this is before expenses and taxes.

What’s a good commission split? That depends on the business, your market, the broker’s support and resources, and a number of other factors. Just make sure you understand the split and how you might get a bigger percentage over time.

Keep in mind that some brokerages these days are offering real estate agents a salary and benefits, or a hybrid model, so you might want to shop around if this approach to compensation appeals to you.

Step 2: Evaluate the brokerage culture

Before you choose a real estate broker, ask yourself: What kind of company do I want to work for? How much support do I want from my coworkers? Just like other businesses, real estate brokerages develop a company culture that informs the way they do business. Are you looking for a small, mom-and-pop brokerage with an intimate, family-like brokerage culture? Or would you prefer a big-box franchise brokerage that’s more likely to let you fend for yourself? Are you looking for weekly get-togethers and company caravans on open house day? The best ways to know and understand a company’s culture are to chat with agents who work there or attend a company function.

Step 3: Decide between a franchise or independent brokerage

When it’s time to choose a real estate broker, another big question to consider is whether you prefer to work for a franchise or independent brokerage. Big-name brokerage houses like RE/MAX or Keller Williams have offices all over the country. A mom-and-pop brokerage might have been serving a single community for generations. Franchises tend to exert more control over their agents than an independent firm, but they usually offer more support and training. Independent firms are usually locally based and consist of a small- to mid-size team. The benefit of working for an independent broker is that you have more freedom to conduct your business the way you want to.

The National Association of REALTORS® reports that the majority of REALTORS® (53%) choose to work for independent firms. If you relish your independence and dislike corporate culture, an independent brokerage may be the way to go. The main advantages of a franchise are the many resources they offer in terms of information and marketing support—and the name recognition.

Step 4: Learn its reputation and niche

When you start your research, begin with a simple Google search as if you were a buyer. Search for “homes for sale in [community name]” and see who comes up. You want the brokerage you select to have a strong market presence and a quality reputation. If they have a high market share, you can depend on them to help you find leads. And we all know how important a brokerage’s reputation is.

Just as important is the niche your brokerage is in. Studies show that the right brokerage can triple your income. The right niche for you will probably be a combination of your interests, lifestyle and the opportunities available in your area.

Step 5: Make sure it will offer support

Some brokerages are very hands-on and offer extensive mentoring, free training, and marketing collateral. Other brokerages are just places to hang your hat while you get to work growing your own business. You might take the occasional sales training class or meet for a monthly brokerage meeting, but otherwise, you’re on your own. You’ll find many variations between the two extremes, and it’s largely a matter of finding the corporate culture that you prefer.

When you’re ready to choose a real estate broker, keep these considerations in mind. Finding the right brokerage involves research and interviewing. Don’t be afraid to sit down with several real estate brokerages in your area to see who fits the best with your learning style and business goals.

Why it’s necessary to choose a real estate broker

Why is broker selection so important? In your first year as a real estate agent, you’ll have a ton of questions, uncertainties, and getting-your-feet-wet experiences. You’ll need to choose a real estate broker that will be there with you each step of the way.

When you’re first starting out, you won’t have the funds to compete with the big real estate brokerages when it comes to marketing, lead generation, and conversion. You’ll need a broker’s help getting your name out there, and you’ll want to use the broker’s tools and systems to kick start your career.

Best Binary Options Brokers 2020:

Binarium

The Best Binary Options Broker 2020!
Perfect For Beginners!
Free Trading Education, Free Demo Account!
Get Your Sing-Up Bonus Now!

Visit Broker
Binomo

Good Broker. Only For Experienced Traders!

Visit Broker