Millions of people who had never bought individual stocks before became bonafide stock investors earlier this year. Conditions were perfect: Stock prices fell to their lowest levels in a decade, a buying opportunity that drove a mad scramble to set up investment accounts. Discount brokers reported as much as a 170% surge in new accounts versus the previous year’s first quarter.
If you were initially attracted to one of the apps that let you get up and trading quickly on your phone (here’s looking at you, Robinhood), now that the frenzy has died down, take a breather and see if the investment account you picked in March is still a good fit.
6 things to look for in an investment account
Investing is a long game. It’s something you do with the idea that you’re buying into a company because you see long-term growth potential. Similarly, if you’re going to stick with it and continue to buy stocks (or mutual funds or exchange-traded funds (ETFs)) on your own, there are certain brokerage account features and tools that will serve you well over time. Here are some things to consider:
1. Investment education, research and management tools
There are a lot of places to do stock research online. If you’re happy poking around the web for your own in-depth research, a bare-bones brokerage like Robinhood may suffice. But if you’re looking for more insights, advice and hand holding, you can get the information and more at the same place you invest — and most of it is free.
Many brokers have top-notch tools built into the brokerage experience. Look for tutorials, portfolio tracking and management tools, research from a variety of sources, analyst reports and stock (and mutual fund) screeners.
2. An easy-to-use platform
Beauty is in the eye of the beholder. Or the investor, if you’re poking around a broker’s site or app. While placing a stock trade is pretty straightforward, how intuitive is it to find other tools and information you need? Does the broker offer tutorials? Does the dashboard make sense and contain what you want to see? Can you customize it?
Consider how you’re most likely to be conducting business (e.g. on your laptop, phone or tablet?). Check out the broker’s mobile app to make sure it plays nice with your phone and understand if there are any limitations (usually found with certain types of option trades).
Ease of use is a highly personal experience. Only you can decide if the broker’s platform feels right in your hands.
3. Low/no trading commissions and account fees
Notice how the price of trading commissions is lower on our brokerage shopping list? We put it here because stock trading commissions have mostly become moot.
All the established brokers — Charles Schwab, E-Trade, Fidelity, Merrill Edge, TD Ameritrade — charge $0 for stock trades and have a $0 minimum deposit requirement to open an investment account. Same with Robinhood’s stock trading app, Ally Invest and many others. If you’re into trading options, they almost all charge the same $0.65 per contract.
Mutual fund commissions can run much higher. We’re talking in the neighborhood of $20 to $50 (sometimes more) per trade. (The companies that manage mutual funds usually waive these trading fees for their brokerage customers and those who buy direct.) Also note that getting human help placing a stock or mutual fund trade will summon the dreaded broker-assisted trade fee that will cost around $25 or more.
Moving on to account fees, you’ll be hard-pressed to find any egregious ones. Most brokers have dispensed with these as well. The broker’s fee schedule will tell you if there are any account maintenance fees, minimum trade requirements or administrative fees you’re likely to trigger. Also some premium research or real-time quote feeds may require a certain amount of account activity or cost extra.
4. A variety of available investments
Buying shares of HAWT stock may be the reason you’re shopping for a stock trading site. But if you may eventually want to accessorize your portfolio with different types of investments — ETFs (exchange traded funds), mutual funds — check to see if the broker can accommodate.
Most brokers offer access to ETFs. We talked about stock trading commissions above. Those apply to ETS as well since they trade like stocks, even though they’re technically like a mini helping of a mutual fund. Not all brokers offer access to mutual funds. And those that do may not offer the brand of mutual fund you want.
5. Reliable customer service
Client support can make or break your investing experience. Does the broker have a robust FAQ? Is there someone to answer your question if it’s not covered elsewhere in the service? How easy is it to get in touch with a human?
There are many means of delivering customer service. Many brokers offer real-time online chat operating during trading hours. Some offer phone support or provide help via email. Go ahead and test out the response time and thoroughness before you open an account. It’s a good way to get a preview of what it’s like for customers.
One other thing to check: How easy is it to quit and move your money elsewhere? Discount brokers make it really easy for new customers to sign up. You don’t want to have to jump through a million hoops — or pay any unnecessary account closing or transfer fees — to end the relationship.
6. Room to grow
Maybe this account is simply one to trade stocks with your fun money, and that’s all. But there’s more to consider if you think you might move all of your investing business to one place. That could mean rolling over an old 401(k), consolidating any IRAs you have at different institutions, or opening new investment accounts.
The hybrid broker-financial advisor model of money management has taken off in recent years. All the names you know — Vanguard, Fidelity, Charles Schwab, TD Ameritrade, Merrill Edge and more — offer some version of managed accounts where a portfolio of mutual funds and ETFs is built based on the customer’s timeline (when you need the money) and appetite for risk (the vomit factor when investments nose dive).
The bottom line, know thyself
Like choosing investments, the chances of your relationship working out long-term is higher if you set expectations upfront. Knowing your needs — the types of assets you intend to buy, how much service you need, etc.— will help you whittle down your many choices.
Don’t worry if you don’t discover that the broker you chose isn’t perfect for your needs. It’s not difficult to transfer to a different brokerage account. But the more you consider what you want before signing up, the more likely you’ll find a good long-term match for you and your money.
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