Looking to invest beyond your 401(k)? Opening a brokerage account could make sense. These accounts allow you to buy and sell a variety of investments, from stocks and bonds to ETFs, mutual funds and even cryptocurrency. And unlike retirement plans, they do not have limits on contributions or withdrawals.
You may find, however, that there are also seemingly unlimited options when it comes to brokerage accounts to choose from. Here are the key criteria to consider on your quest to finding an account that supports your investing goals, whether it be learning about stocks or building wealth (or both).
Investment and trading options
“Not all brokerage accounts offer the same menu of investments,” so “knowing what you want to invest in will help you narrow down your choices,” said The Motley Fool. Some may focus their offerings on more hands-off investment options, like mutual funds, while other brokerage accounts are tailored for investors participating in more advanced strategies, like futures trading, in which case execution quality may matter more. Do not overlook the platform itself, either — you want to make sure it feels navigable and in alignment with your intended uses.
Commissions and fees
Cost is an important consideration when choosing a brokerage, as there can be some variance when it comes to trading and management fees. But do not automatically assume the least expensive option is right for you. Discount brokerages “charge significantly lower fees than their full-service counterparts but also offer fewer services,” and they will require you to make your own investment decisions, said Investopedia. Some investors may prefer the guidance of a full-service brokerage, despite the added cost.
Tools, research and educational resources
Especially “if you’re new to investing, it may be best to look for a brokerage that offers free educational resources, such as live webinars, thorough how-to guides, video tutorials, glossaries and more,” said NerdWallet. Investors pursuing more complex, advanced strategies, on the other hand, may be looking for in-depth market analysis and monitoring and analysis tools.
Customer service
“Ask your broker what the firm does to support its customers. Does the firm return calls promptly? Does it offer explanations when something goes wrong?” said U.S. News & World Report. When your money is on the line, you want to know. Also consider what your preferred format of communication is, whether that be live chat or a phone line, and if a particular brokerage offers that.
User experience and reputation
If you have found a few potential accounts that seem to meet your needs, digging into a brokerage’s reputation and general user satisfaction can be a deciding factor. What types of investors are typically using the platform? Are there any widespread, notable complaints? You will also have the choice between newer names and longstanding institutions. While not having years under their belt “doesn’t mean these newcomers are untrustworthy,” keep in mind “it does mean they may be unproven during a variety of stock market scenarios,” said NerdWallet.