Saturday, July 06, 2013

Best Brokers for Newbies

Among the top places to get started on investing are Fidelity, Merrill Edge, Schwab, T.D. Ameritrade and tradeMonster.

In my last column, I outlined ways for a wannabe independent investor to assess her risk and brush up on her analytical skills. This week, I’ve created a list of online brokers that I think are best suited for newcomers who think they’re ready.

Educational tools and personal support rank high among my priorities. There are many kinds of online brokers, ranging from those who can provide hand-holding to those who encourage you to work completely on your own. You may start out with a broker that offers a fairly basic online suite of tools, and ultimately move on to one of the technological wonders.

The tools to look for once you’re on a broker’s site are those that will help you educate yourself, and those that help you plan your investments. Most brokers have retirement and goal-setting planners as well as calculators that help you figure out how much you should invest in stocks or fixed income. Poke around and see if you are comfortable with the online broker’s site layout and style of presentation. If a site is disturbing to you aesthetically, you won’t use it.

SOME BROKERS OFFER A bricks-and-mortar presence as well as a virtual one. On the “high touch” end of the spectrum, you’ll find offerings by banks as well as brokers that used to be considered full service (and high cost). If this is appealing, you might consider brokers such as Fidelity, Merrill Edge, Scottrade, Schwab, or TD Ameritrade. Transaction fees for stock trading are $7-$10—a far cry from the high fees that full-service brokers used to charge. Most charge an additional fee of $20-$45 for broker assistance.

Merrill Edge is a subsidiary of Bank of America, and its goal is to have a financial advisor in every BofA branch. Scottrade, Fidelity, and Schwab have hundreds of branches countrywide while TD Ameritrade has about 100. All have financial advisors to whom you can talk, as well as ways to set up portfolios of exchange-traded funds without much work.

Capital One last year acquired ShareBuilder, which allows you to set up automatic investments in stocks and ETFs. Instead of buying a certain number of shares, you purchase a set dollar amount, which is then invested in as many shares as you can get (including fractions of shares). This is a good way to get started, especially in an IRA, by investing some of your cash monthly or quarterly. You can also make real-time transactions at ShareBuilder. Broker-assisted trades are another $13.

TD Ameritrade’s Website is fairly easy to navigate; one consideration here is that it also has a high-end trading platform, thinkorswim, that you could grow into over time. TD Ameritrade customers can also opt to work with an advisor through its AdvisorDirect program, which includes a consultation for no fee. You can design a relationship with an advisor that varies based on the type of support you want. If you’d prefer to go it alone, there are numerous educational tools on the site.

E*Trade also has offices, but they are typically sited in larger cities. Its Website contains numerous planning tools that can help you figure out how much to put away, and where to put it. Fidelity schedules quite a few in-person educational seminars, and it also recently launched an interactive online learning center.

Another broker that I like for novices, tradeMonster, is aimed at options traders. What I like most about the site is the way it has structured the trading process through its TradeCycle. Customers are encouraged to do their homework, develop and test a strategy, and think about how they will exit the position in time.

The goal of tradeMonster’s “I Want to be a Trader” Webinar series is to help traders gain solid investing knowledge and deepen their understanding of how to trade stocks and options. I downloaded an archived Webinar (many are free and don’t require a customer account to access) called “A Constructive Approach to Covered Calls,” which I found very useful.

Once you’re ready to open an account, you’ll need to have your Social Security number and an address to enter (not just a PO box). You can set up direct transfers from your bank account, as well, by supplying the account number and the bank’s routing number, so have those handy.

Published in Barron’s, July 1, 2013. 

Posted by twcarey on 07/06 at 01:42 AM
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