The choice of selecting an online broker to make your trade is not always easy. At first glance, it looks complex with tons of paperwork to fill in. In reality, it is quite easy and you don’t need to go to your bank to do it. You can do it online in your pajama! Here are a few things you must look at before selecting an investing platform that will suit your needs:
Fees
I guess that this is probably hits the nerve of all traders; the transaction fees! If you are going to buy and sell different stocks or ETFs you certainly want to have a low commission broker. This means you are better off with online brokers rather than the brokerage division of any big bank or financial institution.
You can usually find a low commission broker offering trades around $5. If you are looking for examples, you can always try Trade Wiser, a free comparable brokerage site.
DRIPs
Another important point is that your broker allows DRIPs (Dividend ReInvestment Plans). The fact that you can increase the amount of stock in your account through the dividends received is an easy way to increase the value of your portfolio steadily without fees. While most brokers allow DRIPs, it is very important to validate if yours does! I’d say that it is also important to confirm that your broker offer DRIPs for all stocks (some, for some reasons, offer DRIPs only for specific stocks). This will help you avoid potential problems with your investment strategy later on.
Periodic Investment
You can obviously make periodic investments with any mutual fund with any brokers. However, some brokers also allow periodic investments with ETFs. When I did my own research to open a new brokerage account, I noticed that not all of the brokers offer the same service with major ETF companies.
Research Tools
How are you going to do your research to pick the right investments? Looking at financial blogs is a great start but I would push my analysis a little bit further if I were you. Some brokers offer technical analysis services, graphs, historical and even financial analysts’ recommendations and reports.
While you can easily find stats such as dividend payout ratios, history, dividend growth and yield, a more in-depth analysis done by CFAs couldn’t hurt either ;-).
Since the goal is to do dividend investing, I would not pay more for a high tech technical analysis system. Your goal is to purchase steady dividend payers and not to determine if it’s the right time to buy or sell according to momentum.
Action of the day: open an online trading account
Now the fun stuff! : it is finally time to open a broker account! Instead of going on a Sunday afternoon and go through tons of online broker website to try the best one, I’ve done something a lot more powerful for you; I asked 14,364 people what they use. I’ve sent an email to the readers of The Dividend Guy Blog and the Dividend Monk and asked them for their favorite platform. I’ve received thousands of answers. Here are the preferred ones. Note that the two brokers mentioned above are referred with affiliate links.
For Americans, I suggest TradeKing
This broker has been chosen for the following reasons:
– Low commission fees (TradeKing is at $4.95 per trade)
– $0 minimum deposit (which means that you can open your account today and not drop a penny)
– Great Customer Service (from all the reviews I’ve read, both brokers show great feed back from customers)
– Easy to use (this platform are user-friendly. You certainly don’t want to waste your time on learning a platform!)
For Canadians I suggest Questrade
Since Canadians are “stuck” in a ogopoly in regards to financial services, very few “low cost” options are offered. Most Canadian banks offer broker accounts but their trading fees are around $9.95 for most of them. Questrade is a great alternative as their trading commission starts at $4.95 per trade. They are also known for offering great customer service if you need to call them.
Recently made a switch to Questrade, but I am not sure that I agree with the “great customer service” comment; at least, when it comes to opening new accounts! Any service calls are now routed to a “new account team”, which so far has never picked up the phone, which is a very frustrating experience. This department is also only open until 5:00 PM which may pose challenges.
For day-to-day, they have been pretty problem free. The zero commission ETFs (except for ENC fees) are a great way to make money work for you on a consistent basis (i.e. every time I can invest $100, it is immediately used to purchase ETFs — since there are no commissions, this makes it virtually free).
Hello Tendim,
thx for your feedback! It’s been a while since I’ve opened a brokerage account ;-). It is interesting to see how things have been handled recently.
cheers,
Mike.
I’ve found that any formal review of discount brokerages in Canada I’ve read (blogs, Rob Carrick, etc.) it comes out near the top. But if you read the comments they all say the same thing: “Their customer service sucks!”
For that reason, I recently went with Virtual Brokers. And due to a few flubs on my part, I have had plenty of opportunity to test their customer service. So far, so good! They have decent hours, and I can get them on the phone any time I call. And they’re generally quick to respond to emails.
My only complaint with them is sometimes their offers have “gotchas” that may be in the fine-print somewhere.
Ex 1) Referral bonus. After being referred by a friend, 2 weeks after I made my initial deposit, I still hadn’t received the bonus. I emailed, and they said “We’ve sent this to our investigation team to find out why.” About a week and a half later they emailed me back saying “you need to have the money in the account for 60 days to get the bonus,” and they referred me to the details of the referral plan, which is something you may see if you were referring someone, but in my position I wouldn’t have seen it.
Ex 2) Commission-free ETF purchases: When I went to make my first ETF purchase, the last step was to review the details of the trade (the ETF, price, # of shares, etc.) and at the bottom it said “Expected commission: $9.99.” Ummmmm, I signed up with VB because it was free ETF purchases! So I called to ask and they said “Yes, but you need to hold the ETF for a day. So, we take the commission, and if you still hold the ETF in the morning we refund it.
My only real complaint about Virtual Brokers is the inability to move money from one account to another in an automated way. I had to open a ticket to have them do it, or transfer the money back to my bank, then back to VB.