Online Broking: Things You Must Keep In Mind Before You Do
More than 1/4th of the US population of adults trade online. This is about 54 million adults, the Aite group points out. By 2018, the report says desktop and web based trading will fall sharply, with mobile on the rise. An under 35 audience is expected to go online and trade.
"To properly serve the segments of the US retail trading market that trade the most often and have the most assets, brokerage firms should understand and act upon the hot buttons of traders under the age of 35, not those of the 40-somethings who today receive inordinate attention," says Javier Paz, senior analyst in Wealth Management at Aite Group. (Source: AITE group.com)
As a customer of online broking service, it would be worthwhile to keep some points in mind.
Changing brokers is easy:
Unlike earlier where forms would have to be submitted in triplicate in order to change brokers, it is quite easy now. A request placed online will get the job done, with funds being transferred electronically.
Robo advisors:
If you are a small investor who would not like to shell out big brokerage fees then robo advisors could be the answer for you. Algorithmic based softwares manage portfolios with no human interference and are called robo advisors.
Some companies use robo advisors for specific pre-sorted funds only. Take a look at these parameters before you sign up for a robo advisor - cost, type of custody (custodian or brokerages), account type (for example are they tax-deductible for self-employed), investment flexibility (pre-fixed choices or open), taxes (tax loss harvesting features) and stocks (do they allow investing in individual stocks).
Minimum investment:
Some online brokerage firms will not invest till there is a minimum threshold of cash. In this case if it is so the money sits idle. Save in an account till the amount is reached and you earn more interest than if it were sitting in an online broking account. Transfer the amount to the broker when you have the minimum investment fund to start.
Commission-free Broking:
Certain online brokers allow for the purchase of stock without commissions. Choices though are limited and may not contain a trading platform. This option is suitable if you want a bare basic broking account.
Promotions:
The heating online broking market sees players vying each other for promotions. This may seem extremely attractive to customers but very often they are expected to be sitting on deposits greater than $50,000. Customers can by changing traders avail the deals even if it is for a short window.
Trading Platforms:
Online broking firms offer trading platforms. A basic account may have limited options. Premium customers (high deposits and several trades per month) are given access to powerful trading platforms.
Some companies offer multiple trading platforms and customers have to be willing to pay big commissions for this.
ETFs:
A number of broking firms will pre-select commission free ETFs for the customer. Others usually charge a commission as high as 10% off each trade. Be sure to go with those who charge no commissions for ETF’s.
Fine for Inactivity:
An account that is sparsely used may attract an inactivity fine or inactivity fee. A threshold amount in the trading account or a certain number of trades will not attract this fee. Be sure to inquire with your broker in this regard.
Pressures on margins, slow global trends, management fees, the availability of robo services all are part of the fast changing broking world. Be sure to keep pace and read your service contract well before you commit.
