2-08 Brokers and How to Choose the Right Ones

When you are ready to make your first trade you must open a brokerage account. Brokers generally fall into two categories: full service and discount brokers. Full service brokers like to make the decisions for you and will call you frequently with their ideas, suggestions and corporate research—but they will also charge you a hefty commission for the service they provide. Full service brokers generally want you to have at least $100,000 in cash to invest.

Finding the right full service broker is somewhat like locating the right doctor, accountant, lawyer, or psychologist. Sometimes you have to kiss many frogs before you find your prince. At other times, you can get a strong recommendation from a trusted friend or family member for a broker and you may have immediate chemistry with their broker. Much depends on how active you want to be in the investment market and which types of investments you favor (stocks, mutual funds, bonds, etc.).

The very fact that you have read this far indicates that you want to be more of a do-it-yourself type of person, so a discount broker is probably all you need. Discount brokerage accounts are easy to open, and generally require as little as $1,000 open an account.

For more information about how to choose a stock broker, see some of the ones we have reviewed here: Overview of Online Brokers.

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