Using brokers to manage investment portfolios is not a new concept. For decades, investors have relied on financial advisors and brokers operating on behalf of banks and other financial institutions to advise them where they should place funds to maximize their return on investment. Only recently has this facility moved onto the Internet and become sufficiently regulated for investors to have confidence in the services offered by online brokers. Nonetheless, it is still recommended that you check the credentials of anybody offering online brokerage services before engaging in any transaction.
About Online Brokers
Online brokers provide a wide range of savings and investment opportunities – often more than a broker seated in an office may have access to. This include stocks, funds, bonds, certificates of deposits and investment trusts, and the best online brokers will also be able to advise you on tax efficient investments such as health savings accounts, investment retirement accounts and education savings accounts. Ideally, the best online brokers should be able to take the investment funds available to you and create the investment portfolio which is best suited to your personal circumstances.
Discount Online Brokers
All online brokers charge fees for their services, and it is well worth investigating what costs you will incur by using the services on an online broker. Discount online brokers can often be the best online brokers for beginners to investing online, and one of the optimum ways of establishing whether this is the best online brokers for your needs is to email them, asking for a schedule of their charges (even if it appears online) and seeing how long it takes for them to respond. Their customer service – or lack of it – may reflect on the haste with which they would deal with more important matters.
Online Brokers Promotions
The cheapest online broker may not necessarily be the best- and not just because they fail to respond to an email. Many online brokers attempt to attract new business by offering sign-up promotions and ongoing customer loyalty programs. These typically will include welcome bonuses, commission free trades or a valuable referral offer for new clients you bring to the online brokers, and exploiting these promotions to your full advantage can prove lucrative and have a positive impact on your total investment profitability.
Choosing the Best Online Brokers
As well as studying the services offered, the fees charged and the promotions available through online brokers, you should also try to find out from third parties if the online brokers fulfill their promises and will actually provide a valuable service to you. Seek recommendations from people you know who already use online brokers, ask questions in relevant forums and request that the online brokers in which you are most interested provide you with testimonials from existing clients. Often it is best to avoid the opinions offered by affiliate web sites, as the potential exists for receiving inaccurate or out of date information – leading to your ultimate disappointment and, potentially, a financial loss.
Summary
Ultimately, the best online brokers are those with whom you develop a good relationship, experience the best returns to your investment, and who charge you the least for the privilege. Only time will tell whether you have chosen the best online broker wisely, and possibly the best way of minimizing your risk in this respect is to commence online trading with just a small fund, and increase it as results justify an expansion of your investment portfolio.
