What you should know before opening a brokerage account

When you begin investing, you must open a brokerage account.It is important to understand that choosing a broker is one of the most important decisions you will have to make. There are specific choices you will make at this stage that could contribute substantially to your investment success. Here is what you should know before opening a brokerage account-

• What are the different types of brokers?Generally brokers fall into one of two different categories.These are either full service or discount brokers. The important characteristics between the two are as follows-

1. A full service broker will: work one on one with you, offer investment ideas, prepare reports about your portfolio, give you reports of how well your investments are doing and most often be available with a single phone call or email to buy or sell stocks, bonds, mutual funds, or other investments for your account. In addition, traditional brokers most often offer a variety of different research sources to their customers. It is important to keep in mind that in exchange for this one-on-one service and guidance, you will be charged a significantly higher commission.
2. Discount brokers are geared toward the do-it-yourself investor. A discount broker will not offer investment advice and they will simply execute orders once you have decided to buy or sell an investment. You should also keep in mind that you will do most of your trading online or if you decide to call in your order, with the first available broker. The biggest change is that recently discount firms have been offering research that is on par with those offered at the traditional brokerage firms. The bottom line is that in exchange for giving up personal contact with a regular broker, investors will be charged a significantly lower commission.

• Online Availability-You should closely consider the interface and easy of use for any broker that you are considering using. Before you open an account, you should visit the web page of each of the brokerage firms you are considering. Keep in mind that if you plan on doing a lot of your research or trading online, the feel of the site is going to be almost as important as the other benefits and services offered.
• Commissions-It is very important to realize that the differences in commission prices between the two types of brokers can be tremendous and even between brokers of the same kind can also be extreme. You should understand that in some cases, the higher price means higher service, faster execution (i.e., your buy and sell orders are carried out in a shorter period of time), and more perks, but this is not always the case. That is why it is so critical to look around and compare brokerage firms before you open an account.
• Minimum Opening Balance and Maintenance Fees-Beginning investors should understand that each broker has a minimum opening balance requirement. Some are as low as $500, most are around $1,000, and several are higher. The general rule of thumb is you should have at least $1,000 dollars when you go to open an account. You should proceed with caution however as some brokerage firms may have a low opening balance but will charge you a maintenance fee if your balance falls below a certain amount. Although the fee can be as little as five to fifteen dollars per quarter, it can significantly eat up your investment returns if you are just starting out.
• Services, Perks, Research, and Investment Tools-It is also important to realize that no broker offers the exact same set of tools, research, and perks to their customers. Comparing the extras between brokers can help you determine who will have the right account to help you become the most successful at your investing.