The freedom that comes from becoming an educated investor means it becomes possible to direct one’s own investments and understand what financial advisors are up to. One great way to direct investments is through online brokerage accounts.

Alternatives available to retail investors are many when it comes to opening online brokerage accounts. But, first of all, it is necessary to choose a reliable and trustworthy online broker. It's better to stick with brand names and make sure the brokerage accounts are insured.

Secondly, that choice needs to offer what an investor is looking for in terms of the markets that are accessible via the chosen brokerage account. Some brokers offer access to multiple asset classes and markets around the world, while others are limited in that access.

Also, the question to ask is whether the broker is offering other account options such as margin accounts options trading, and after-hours access. Moreover, investors need to investigate what research and charts are provided so investment analysis, technical and/or fundamental, can be performed with account access.

Introduction to Online Brokerage Accounts

Self-directed online accounts have become a very popular alternative to wealth manager or broker-directed accounts​​. 

One thing to know about online investing is that there’s no broker advice. Nonetheless, many investors are happy to do their own research. So, it is useful to get access from a broker to decent research including analyst reports, stock screeners, advanced real-time charts, and technical indicators among others. However, much useful information can be accessed online for free from multiple sources.

A very important factor to consider before opening an account is related to transaction fees. These will influence investor’s profits. Brokerage account fees vary from broker to broker, and also depend on transaction types. At some brokers, investors pay a lower transaction free for a market order (buying or selling at prevailing market price) and a higher fee for a limit or stop order (setting a price at which transaction gets executed once that price is reached). This, however, is changing. Some brokers charge the same commission, or even no commission at all.

Moreover, many brokers have different sets of fees for trades with broker’s assistance, which are more costly. Along with these fees, there are fees related to option transactions (buying and selling Calls and Puts), fees for fixed-income investments (bonds, Certificates of Deposit, Unit Investment Trusts, etc.), fees for trading mutual funds (some are no-transaction fee, though), and possibly extra fees for trading penny stocks.

On top of these, there are fees not related to actual trading such as fees for buying American Depository Receipts (ADRs), legal items, stopped payments, historical statements, and so on. Many of these fees will not apply, but it is worth checking what are these potential costs.

If an investor opens a margin account, which means borrowing against the value of investments in order to invest more, the brokerage house will charge interest. Comparing interest charges among brokers is one of important considerations for those looking to invest on margin.

All these expenses are small in comparison to full-service brokerage commissions. Indeed, investors can buy or sell stocks in the United States for a charge as small as $5 or $7. Stock market transaction costs in the United Kingdom are also competitive.

Some brokers offer online banking services. Their clients can get debit cards to easily withdraw funds. Here comes another question: Does the broker pay interest on outstanding cash balances? Good brokerage houses put excess cash into money market funds that earn interest.

To find a suitable broker, it’s a good idea to choose a few well-known names and compare what they offer. Usually, there’s enough information on the Internet, and potential clients can call with questions or send an email. Finally, investors should check the minimums needed for initial deposits before opening accounts. Many brokers ask for small deposits, others require more. A typical minimum for a margin account is $2,000 in the United States. 

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