Online Stock Trading vs. Trading with a Broker: Which is for you?
By Jonathan Wagner
The stock trading industry is always evolving, and the technology that has enabled online trading has now begun to infiltrate the marketplace. Online trading is becoming increasingly popular, while trading stocks with a broker has now been relegated to a more niche market. However, the question still remains: Which method of trading will work best for you? Do you prefer the flexibility and low cost frills available to you with online trading? Or do you prefer the expertise of a broker? There are certainly pros and cons to each approach.
In this day and age where information is available at the simple click of a button, it certainly makes sense to consider whether or not online trading is right for you. With online trading, you call the shots. You can execute trades in real time during the stock market’s open hours with no lag time.
Brokers are often required to manage stocks for a large number of clients simultaneously, and this means that accurate and timely communication may suffer. Online trading enables you to cut out the middleman, thus reclaiming valuable time and control. If you are a cost-conscious consumer, you will also enjoy the low cost of online trading. Several of the top-rated low-cost online trading options are reviewed on Top 10 Trading Sites.
There are numerous advantages to trading online, but there are some very specific drawbacks as well. For instance, online trading can be much riskier than trading with a broker. If you are not educated on stock trading or are uninformed about market conditions, you should consider using a broker. Numerous online trading companies also offer several research options. Equipping and informing the investor is an important aspect of online trading platforms, but it is your responsibility to utilize the tools at your fingertips.
Trading with a Broker
Trading with a broker is the more traditional approach to stock trading. This approach is the preferred method of numerous individuals who would rather entrust their finances to an expert than forge upon the do-it-yourself approach of online trading. You may be hesitant as to whether you have the expertise to make informed decisions about which stocks to purchase or sell. Stock brokers must complete rigorous training and pass a comprehensive exam in order to obtain the certification to trade stocks. Furthermore, stock brokers have the benefit of studying the stock market professionally.
Or course, the expertise of a stock broker can be quite costly. Trading with a broker will often require a larger deposit. Brokerage firms typically set minimum investments ranging from $1,000 to $5,000. Brokerage fees also vary greatly, while online trading typically has straightforward pricing.
When settling on a broker to trade with, it is important to seek out someone you can trust. Brokers are tasked with finding the best solution for you, the consumer. However, many brokers come to a crossroads at which they are faced with an ethical dilemma. This specifically occurs when they are paid higher commissions for specific stocks and funds. This could lead to a broker steering you toward a stock or fund that is not in your best interest. Laying out clear expectations, establishing trust, and building an ongoing relationship are essential when using a broker.
If you’d like to learn more about the many online trading providers that are available, be sure to check out our comprehensive reviews!
About Jonathan Wagner