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COLORADO SPRINGS, COLO. -- Money Coach Bill Stanley says that if you're thinking of playing in the stock market, it's best to do some research to determine whether you want to deal with someone "live" and "in person" or if you can handle doing transactions online.
First, and perhaps most important, is the definition of broker. A broker is "someone who buys and sells assets for another." Notice that "giving advice" was not included in this definition.
A broker, by definition, does not give advice. If you want financial advice, go to a fee-only financial advisor; go to a money coach. There should be a big wall between giving advice and brokering a transaction; it should not be done by the same person because it leads to conflicts of interest, according to Stanley.
He says that in selecting a broker, choose a firm that can follow the client's direction quickly and accurately and at a low cost. This means you want a "discount broker" or a "deep discount broker." An investor should pay no more than $10-$15 to purchase or sell a stock or an Exchange Traded Fund (ETF).
Stanley says the first question to ask yourself is: "Do I want a place to visit in my town or am I comfortable with dealing with people on an 800 number?"
If you want a real person, Stanley recommends Scottrade, a deep discount broker with two local offices. Stanley uses the 800 number firms of E*Trade and TD Ameritrade. Mutual fund companies like Vanguard and T. Rowe Price also have brokerage accounts.
Additional tips:
* Research several firms before you decide
* Send for information
* Review Web sites
* Call and ask questions. You must be comfortable with the firm and you must be sure the firm will not pressure you to buy specific products.
If you have a "full service" brokerage firm (those are the ones who combine giving advice with brokering) all you have to do is take your current statement to a discount broker and they will do the rest. Some will even pay the "termination fees."
Here are some rules when you have a brokerage account:
1) Always do the trade yourself online; never ask a person to make a trade for you. A $10 online trade could cost $40, $80 or $110 if you have a person do it. One trade a month could cost an investor $1000 or more in fees over the period of a year.
2) Always trade when the stock market is open, 7:30 a.m. to 2 p.m. locally. When the market is closed, the price someone is willing to buy or sell an ETF may not be to a buyer's advantage.
3) Know what you are doing. It may be overwhelming when a person places the first stock purchase online, at home, alone. Study up -- call or visit the broker and they will walk a person through the process at no extra cost.
Most of Stanley's clients either call him or go to his office. They make the trade; he stands over their shoulder to ensure all goes well.
Money Matters airs every Tuesday on FOX21 Morning News. Contact Bill Stanley via e-mail: moneycoachbill@aol.com
