To buy stocks on the stock market, you need to employ the services of a broker or stock brokerage company. There are many companies that offer investors the chance to invest on the major stock exchanges. Choosing the right brokerage company is one of the most important decisions you will have to make.
There are a number of things you should consider before opening an account with them. This largely depends on how you intend to be investing. You may want the firm to only execute the buy or sell order on the investments you choose, or work one on one with a broker who will give you advice on your portfolio.
A full service broker will provide you with a range of investment advice on the best way to structure your portfolio. They will provide stock picks and prepare reports on your portfolios performance. You will have access to technical analysis on various companies, and you can ask your broker to buy bonds, options, stock or mutual funds via email or a simple phone call.
Naturally these services will have a higher commission attached to them. Many firms will offer similar services but the costs can vary considerably. For this reason it is advisable to compare the prices between the different brokerages and see what suits you best.
A discount broker will generally offer to execute your trades only. They do not provide advice or prepare any reports for you. It is up to you to choose the stocks to invest in. Because you do not have a direct broker advising you, the cost of commission can be substantially lower.
Account opening balances will differ from one company to another. Some will open accounts starting from as little as $500 while others will require a much higher amount. Always ask if there are any maintenance fees as some accounts will charge you if your account goes below a certain level.
Many brokerage firms trade through Electronic Communication Networks or ECNs, and they may limit you to only using their system. This may limit you from accessing quotes on different systems. Find out what they use and if they route your trade through to another system. See what kind of tools you are provided with. Some firms provide very good tools which offer excellent research data with chart analysis, and a whole range of other data to help you buy stocks.