It’s alright if you answered no to either or both of these questions, after all, we’re here to answer them together. Using an online broker service is a great choice for those who are still starting in the investment area. But it requires a bit of previous knowledge so that you don’t fall into any traps while looking for the best investment.
That means you must keep reading this article! We’ll explain what an online broker is, as well as their main pros and cons. To top it off, there’s a list of the best brokers of 2022 for you to choose from at the end of the article.
What is an online broker?
An online broker is a type of middleman between the individual investor and their investment. They exist to make the whole process easier for the buyer or seller, especially if they’re still new to the business. You probably know some brokers that work in investment firms. These online options are a lot like them, but using some of the ease of technology to make everything happen online.
Let’s say you’d like to buy some ETFs using the services of an online broker. For that, you’ll have to register and access their platform and put in the order. This replaces the traditional phone call that people used until the late 1990s.
The relationship with these online services is minimal. Unless you happen to need some support, the human contact might not even happen since you do everything via an online platform. Some users find this uncomfortable, but we can only thank how practical this becomes for investors.
Why use an online broker?
By now we already figured out that an online broker is actually a platform that works as the middleman for transactions. But why should you use it? Wouldn’t it be better to look for a traditional broker that does the trade for you and gives you some advice? Well, that depends an awful lot on your investment profile.
There are many reasons to work with an online broker, as you’ll figure out below. But don’t worry, we’ll get into the problems as well further ahead.
1. Lower fees for your investment
Since the online broker doesn’t require an actual human answering your phone call, it can cut some fees. This makes investing a lot cheaper, faster and simpler. And the more you save up on fees, the more you actually invest.
You will have to pay a brokerage charge for the transaction, of course. But it’s a lot less than the conventional stock broker fee, for example. Since everything happens online, the charges are simplified and you can calculate them before giving your money to the platform. Being aware of how much exactly is spent on fees helps to plan your next financial moves.
2. Easy access to your online broker’s tools
An online broker is available to you 24/7. A human broker, however, eventually turns off their phones and goes on with their lives or even sees other customers. You can’t just get those few minutes before going to bed to invest with a human advisor. But you can do just that with an online option.
If you choose the right online broker you’ll have access to much more than just the tools to make a trade for your investments. Many sites and online platforms offer learning content that teaches you more about finances in general. So you can use the sites throughout all of the day to understand a lot more about the new investment world you’re walking into.
3. Keep track of investments in real time
Are you an anxious investor who wants to know what’s happening to their money all of the time? Then an online broker is certainly ideal for you. You can use the platform to keep an eye on stocks and other investment prices to make sure you find the ideal time to buy or sell.
By logging in with your account, there’s a possibility to see real time gains or losses. So you can always stay one step ahead of the competition and keep up with investments. This is great for those who are still trying to learn how the market works as well.
4. Faster to invest as much as you want
You can invest as much as you want, whenever you want by using an online broker. These platforms allow you to always trade immediately, it doesn’t matter if you’d like to sell or buy. It’s much better than waiting for someone to pick up the phone to put in your order.
Cons of using an online broker
An online broker is great and you really should consider it as an investment choice. But it isn’t for everyone. Some people have different risk profiles or a bit of hardship dealing with online platforms. Which means they might run into trouble when attempting to use this option. Find out the main problems you might find with the online services we mentioned.
1. Easy to go overboard with investments
The problem with immediate investing is that you might not stop to think it through. Even if buying some stocks or ETFs could give you profits in the long term, you must have enough money to pay your debts, mortgage and other financial obligations right now. Exaggerating the amount invested could be a problem.
2. Addictive nature for some investors
Investing online can give a certain high to some people that’s really similar to gambling. If someone starts getting quick returns they could get addicted to these platforms and end up investing way beyond their financial means.
Those who already have a tendency to addiction might want to stay away from an online broker platform.
3. Depends on a good internet connection
If you travel to a far off island for a holiday you’ll likely lose contact with all of your online investments. They need a stable internet connection to happen, so being on the road or living somewhere where that’s hard to come by is certainly a turn-off for most investors.
Best online broker of 2022 for beginners
Choosing your online broker will certainly be a challenge as these services are more widely available nowadays. There are many financial service providers trying to catch your attention and you must find the best one to get actual returns for your investments. We prepared a list of the best reviewed online traders for the year, check it out!
1. TD Ameritrade
TD Ameritrade is a great online broker even for someone who has zero experience in the market. It has a learning platform where new investors can research all sorts of trades in a smooth, easy way.
This isn’t the cheapest platform out there, but it’s certainly worth it. You can start without a minimum investment and just learn your way through it or put some extra cash into the broker to get better short term returns.
You can easily access your investments and account details through TD Ameritrade’s website or mobile app.
2. Interactive Brokers
Interactive Brokers, also known as IBKR, is an online platform that’s been around for a few years. It allows you to make international investments, but we recommend these extra features only to those who already have some experience.
If you’re a beginner, IBKR can also offer you some perks, as well as access to cryptocurrency trading. The interest rates are also great, going way below most of its competitors. It already earned Investopedia’s and NerdWallet’s best Broker awards.
3. Fidelity Investments
Fidelity Investments is an online broker that works with a client first approach that’s great for beginners. It’s years ahead of competitors with its investment management tools as well as portfolio analysis. If you sign up for this platform you can be sure of constant updates to make their service even better.
Are you looking for an online broker that gives you cheaper fees and prices? Then Fidelity Investment is also great. At least 87% of their transactions happen at less than the national best bid offer.
Those who are still learning can get even better. There is an unlimited stock of learning material in their portal for you to start your new investments.
4. Tastyworks
Tastyworks has $0 fees for stock trades and some of the lowest fees in the market for everything else. The platform is complete with educational content and very intuitive and easy to use tools for investments.
It also has a risk analysis tool for those investors who aren’t sure of their footing yet. So you can buy only those stocks that are safest and more stable to begin with.
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