SIMPLE Framework to Choose Your Broker

Posted by John Smith (Analyst at comparebroker.com)

Date : 1/29/2010

In this article I am going to talk about a simple framework for people who do not want to get confused about enormous amount of information available on the internet about different brokerage firms and ever growing advertising efforts by all such firms. If you are just starting out to invest and are not really interested to spend days and days researching, continue reading and you will have a brokerage firm which you can just trust and concentrate on most important part which is actual trading :)

Independent rankings for Brokerage Firms For Novice Investors

Let me start this discussion with a very simple question. What do you do when you see Etrade ad on TV while watching your favorite movie at night? Is that enough for you that make you feel comfortable opening an account with Etrade? The answer is a big No. All the firms are going to tell you that they are the best. But in order to really make a good decision, you have to compare the offers from different brokerage firms and do a little thinking and figure out what kind of brokerage firm you are looking for.

Analysts at CompareBroker have been researching about user experiences of lot of brokerage firms over the last year to come with a simple decision framework for novice or aspiring investors to pick the firm that is right for them. I am going to provide VERY basic and straightforward decision process for you.

We have basically chosen three categories to rate brokerage firms

1.) Trading commissions and fees: The winning brokerage firm in this category is Options House with its ultra low rate of $2.95 a trade. The biggest loser in this category is E-trade with rates as high as $19.95 per trade on some trades and online activity. But mind you, Etrade is really good for high volume traders because of their speed and advance trading tools. If you are just starting out and looking for a cheap broker, I would say just go ahead and open an account with Options House. You can go to their account details page by clicking here. 

2.) Investment products and mutual funds: There is a two way tie between Options Xpress and Etrade for the winning brokerage firm. Both of them are known in the market for large numbers of offers available. The loser is definitely TradeKing in this case because of lower flexibility in investment options

3.) Customer Service: Tradeking is a clear winner in this case. It has received Barron best brokerage firm in terms of customer service for last 3 years in row.  The worst in this category is Zecco for large number of system issues in 2009.

These are just recommendation of the analysis done by analyst at our firm. We think you should make a decision based on your requirements of which brokerage firm to pick.

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