What is the difference between a trading account at a brokerage firm and an online trading account?
May 28th, 2009
Is there any difference between opening a trading account at a brokerage firm and opening an online trading account? What are the differences? I am new at stock investing but would like to start. I want to make sure that I am doing the right thing and opening the right accounts. Many people I know have accounts at brokerage firms and some of them are not so happy with that. Some people have made a lot of money with online trading accounts but they say there is a learning curve. Can someone advise?
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There are usually some differences such as cost and the services you are getting. So, when opening an account, check what fees they are going to charge you (per account or per transaction etc.) When comparing a brokerage firm’s account such as a Schwab account against an Etrade account, look for the fees as well as what services you are getting. Those that claim to offer a “full service” may be beneficial if you do not want to be so hand-on when it comes to investing.
Some “full service brokers” are:
Merrill Lynch
Edward Jones
Wachovia
Goldman Sacs
JP Morgan
Morgan Stanley
UBS Paine Webber
Smith Barney
etc.. There are lots of them.
These brokers tend to have very little available on the web. Their strength is having a personal broker assigned to you. The weakness is that they are usually extreamly expensive (compared to e-accounts) with sometimes flawed advice. You are basically relying on the advisor to tell you what to do and they can be wrong sometimes!
Some brokers offer advice and online capabilities such as:
Schwab
Fidelity
Most “on-line” brokers offer little advice or none at all, but they are a lot cheaper to open an account and start trading with. These are, for example:
TD Ameritrade
eTrade
Scottrade
ThinkOrSwim
Interactive Brokers
Tradestation
Tradeking
The best way to go about this is to do your research first, compare them all, read several books on Investing stocks or mutual funds. You will learn a lot.