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Table of Contents
Disclaimer 2
Introduction and Purpose of Guide 3
Type of Stock Brokerages 4
Find the Right Brokerages 5
A List of Brokerages 7
What to do at Sign Up 9
Research Resources and Tools 10
Final Thoughts 11
© 2008 The Wild Investor 2
Disclaimer
Entering the stock market can be a very rewarding experience, but it should only be taken with the utmost care and regard for your current risk threshold. Take into account your own current financial situation before continuing any actions.
The writers of this guide have no financial certifications or licenses, but do have experience with the market. They take no responsibility for your own personal interactions with the stock market.
© 2008 The Wild Investor 3
Introduction and Purpose of this Guide
Let me congratulate you on taking your first step to taking control of your own financial growth. While trading stocks is not the only way to increase your wealth, it is a very broad and general option that will open up other avenues for you.
The purpose of this guide is not to teach you direct methods on how to make money in the stock market (that will be coming in later books), but rather to help you gain access to the right tools and resources that will let you begin your ascent into the market.
The goal is to break down the barrier of entry that scares many off, and show you that it only takes a matter of a few simple steps to begin trading your money in the markets.
Some of the questions that should be answered in this guide include:
What type of stock brokerages are out there?What brokerage is right for me?How do I gain membership into a brokerage?Where and how do I conduct my research into picking stocks?
Hopefully by the end of this book you should have your account(s) setup and ready to begin trading.
© 2008 The Wild Investor 4
Types of Stock Brokerages
It seems as though every day a new stock trading service is popping up. With so many different options, fees, and/or limits, how is one supposed to choose the right brokerage?
I like to break up brokerages into two main types: full service brokers and discount brokers. At its real core a full brokerage offers you many different types of services and tools, while trade commissions are usually higher. Discount brokerages don’t offer a lot in services or tools. Essentially they are just offering you a medium to purchase stocks through.
An analogy for this would be the difference between a health club (full broker) and a gym (discount broker). In a health club you have many different facilities, such as: basketball courts, weights, swimming pools, etc and cost of membership is higher. On the other hand, a gym usually just has the weights and cardio equipment, but the membership is cheaper.
On most accounts people who plan to trade in and out of holdings numerous times a day and are more experienced prefer discount brokers, while the average investor will gravitate towards a full broker. The majority of people reading this guide will most likely choose a full broker, but how do you know which one to choose?
© 2008 The Wild Investor 5
Investing Tip
You can have multiple accounts with different brokerages, so don’t feel trapped with one.
Finding the Right Brokerage
Before we begin our search we must ask ourselves a couple questions:
How much money do I have to start with?
Do you plan to start out with $1000, $2000, $30000? This is important for a couple different reasons. Most brokerages offer some sort of deal or promotion to entice people to sign up; however, most of the time there is a minimum that must be entered into your account upon activation. It is usually $2,000.
Another reason you need to determine the amount of money is because some brokerages change their fees depending on the amount in your account and/or they don’t even allow you to have an account with less than a certain value.
What services am I looking for?
Do you plan to just buy and sell stocks? Are you thinking about shorting and/or playing with options? Although you may not want to start with that from the very beginning, it could save you some time later on when you want to broaden your skills.
Some brokerages require you to apply for certain services, while others have different commission based on what you do. For example, Zecco is known for their free trades; however, some of that money is made up through their option fees.
Does the broker you are looking at allow you to grow the way you want to?
What tools do I need or want?
Many brokerages offer some sort of trading platform, whether it be web-based or some actual platform you can install on your computer; however, some are very minimalist and others cover everything you ever need. Sometimes these firms even offer you platforms for you phone.
With many free third party services offered, that may not be important to you, although it could mean the difference between making more money. Many times the free services have quotes that are delayed, while your brokerage offers real time numbers.
Do I want some sort of support?
© 2008 The Wild Investor 6
It may not seem that important. After all everything you need to know could always be found on the internet; however, support goes much further than just answering your questions. Maybe you want your brokerage to offer some sort of online classes or market huddle.
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Once you answer all these questions, it will be much easier to narrow down what brokerages is right for you; however, you will need to make some decisions.
Do you spend a little extra on fees for top of the line trading platforms?Do you really care about options or other investing vehicles?
It will certainly be a give and take, but, in the end you want to find the one that is best for you.
© 2008 The Wild Investor 7
A List of Brokerages
So you answered all the questions and know exactly what you want and what you can live without. Now it is time to find an actual brokerage that is right for you.
In order to make the decision easier, I have narrowed the list to brokerages that best fit the beginning stock trader and also inserted a chart created by SmartMoney.
Broker CommissionInterest Rate on Cash (%)
Mutual Funds and Investment Products
Banking Services
Trading Tools
ResearchCustomer Service
E*Trade $9.99 3.25
Fidelity $10.95 2.66
TradeKing $4.95 1.88
TD Ameritrade
$9.99 0.1
Charles Schwab
$12.95 2.01
E*Trade
Over the past year E*Trade has taken a hit, but its stock program has remained strong. For the second straight year they were ranked number one, according to SmartMoney. Your account must be funded with $1000.
Fidelity
Fidelity is normally not known for their great service in the stocks sector; however, their great mutual funds have allowed this company to prosper among the average trader.
In my experience, Fidelity is great for those with large accounts. If you are looking at just throwing in a couple thousand dollars, then I would definitely look elsewhere.
Trade King
© 2008 The Wild Investor 8
Investing Tip
No commitment! If you aren’t happy with your current broker, then feel free to change. Other brokers will cover for most or all of the transfer fees
In the past, Trade King has gotten its accolades and it still ranks up there. Unlike other low commission brokerages, Trade King was one of the only firms to receive 5 stars for customer service, which is kind of surprising.
Don’t expect too many extras. This brokerage is perfect for those that already know what they want to trade, and don’t need any special type of platform or tools.
TD Ameritrade
I personally have my main account stashed here, and so far I have no problems. According to SmartMoney’s 2008 Broker Survey, they had the best tools and research capabilities. In 2007 they were ranked number one by Barron.
They have great online seminars that are about either teaching you new ways of investing or just talking about the market in general. This whole feel builds on their idea of satisfying the “free spirited” trader.
There are no minimums to open an account; however, if you have less than $1000, then you will not receive any promotions.
Charles Schwab
There are those out there that don’t want to deal with an advisor, but at the same time they don’t want to mess with finding their own individual investments. Schwab is the best option for these types of investors.
They are known for giving people the freedom to act as their own advisor, but you still have the option of using pre-package investment vehicles. It comes at a price though. The company has one of the highest commissions compared to other brokerages.
***
If you are just an average trader looking to trade here and there, then you can’t go wrong with any of the five brokerages recommended; however, TWI would personally recommend either E*Trade, TradeKing, or TD Ameritrade. They all have the ability to accommodate your growing needs and user friendly commissions.
It is also important to remember that you are never trapped into a brokerage. Everybody wants your business, so if you want to switch to company X, then X will fund you for most or all of the transfer fees. That being said, there is no reason why you should be worried about being committed to a broker.
© 2008 The Wild Investor 9
Investing Tip
Watch for hidden fees. Some brokerages require you to keep an account above a minimum. Although they do offer some sort of grace period, eventually you will start occurring a penalty
What to do at Sign Up
Obviously sign ups vary from service to service; however, they are pretty much all the same. Contrary to what many think, it can only take a couple minutes. Most everything is done online.
Besides normal information like name and address, you will also need social security number and some form of identification. Depending on service, you will have to answer some background questions, so they can see if you are who you say you are. If they aren’t able to determine that after the questions, then you will either have to fax a copy of your license to the local dealer or take it to them directly.
Once you have completed these simple steps all that is left is to add money into your account. This can usually be done through a direct bank transfer. You will need to know your account number and routing information, which can be found on any personal checks linked to that account.
These steps are simple, painless, and SECURE. I know many people get weary about sharing their personal information, but you have to remember these companies are expected to keep the same privacy level as banks.
© 2008 The Wild Investor 10
Research Resources and Tools
Hopefully by now TWI has helped you land the brokerage of your choice, but do you know what to do next?
We are pretty sure that if you were active enough to read this book, then you probably really want to get started buying and selling stocks.
Make sure to frequently check The Wild Investor (http://thewildinvestor.com) for stock recommendations, learning materials, and other eBooks to make your trading successful.
Here are some other resources that can help you out.
Google Finance http://finance.google.com
SmartStops http://smartstops.net
Bloomberg http://bloomberg.com
INO http://ino.com
INO TV http://tv.ino.com
INO Trend Analysis http://quotes.ino.com
Reuters http://reuters.com
© 2008 The Wild Investor 11
Final Thoughts
Just because you have created an account with a stock brokerage doesn’t mean you will begin making money. Think of it like a gym membership. Just because you signed up, that doesn’t mean you will get fit. You have to work at it and show dedication.
There are many different ways to make money through the markets, and it’s up to you to find the one that best works for you.
The person down the street made some money off the markets, so who says you can’t either?
Make sure to keep a look out for other instructional eBooks by The Wild Investor, and make sure to visit us at http://thewildinvestor.com for recommendations, resources, and anything else financially related.
Also we really want to hear your thoughts about this book, The Wild Investor, and/or anything you would like to see from us. Feel free to contact us directly at [email protected] or by using the contact form on our website.
Best wishes and happy trading!
The Wild Investorhttp://thewildinvestor.com
© 2008 The Wild Investor 12
© 2008 The Wild Investor 13
