“Rule No.1: Never lose money. Rule No.2: Never forget rule No.1." - Warren E. Buffett

Saturday, October 18, 2008

How to choose an online broker

How much it is hard to choose a right stock at a right time, it is that much hard to pick a good online broker, its ironically becoming more tough when you have so many brokers to select from. You have to be more careful when choosing an online broker than when you are choosing an offline broker, since online broker not only should possess the knowledge of stock market but should also be fluent with the technology and other Internet related issues, which is more important, and all this while servicing a client well!
Online broking is not about choosing the lowest rates alone. That is just one part of the overall cost you pay for a transaction (you cannot close your hands for taxes, duties, charges besides brokerage). So it is a must that people should consider these very important factors before choosing an online broker, what they don't consider most of the time.

Scale and technology:
Check for capability of the broker on handling sudden increase in the volumes. Remember, always what took you so much of time toiling to build up can be wiped out on that one day when markets crash all of a sudden and with the website of your online broker.
So check first whether your choice is possessing the necessary skills that is required to handle such a situation and manage technology.

Advice and its worth:
Check for the advice offered from your broker's research team. Do you feel does the broker's research team give you enough advice with quality, for you to depend on it and act accordingly. Does it have a proven track record for you to depend. Because after opting an online broker you should not be depending on your friends and friendly neighbour's and news channels to pick up stocks.

Check for the broker's customer service orientation, it is a fact that normally 50% of online brokers doesn't even care about customer service orientation. You should be in a position to connect to their managers or higher ups in case of any emergencies - are your calls responded to within a strict timeline? Do they revert on major issues?

Does the broker have enough transparency in the way you are charged for your transactions? In case of any problems or any doubts can you decode transactions and demand a reply? Has it been encouraged?

Quality of interface:
Does the website allow you to put through trades quickly? And in an easy fashion without having to be a master in computer science.

Product offerings:
Does the broker offer a choice of products for you or are you stuck with plain ordinary plum products?

Offline or Online:
It is wise to choose a broker who has been around for a while and would be able to offer sound advice in the event that you did need to talk to a real person. Nothing works like experience after all whether it's online or offline broking.