Best Stock Broker - What Should I Be Looking For?

The right investment advice is necessary for profiting in the world of finance but its just as important for you to find a partner in a broker who can help you follow through with the plan. There are a variety of criteria that financial sites quote when it comes to brokers. There are as many features as there are brokers sometimes! But once you have some experience under your belt, you will realize that there a few key factors to consider while picking the best stock broker.

Here is our list. You might find it useful if you are just starting out or if you are already an experienced investor or trader:

1) Cost or Commissions

This is the most important factor to consider since it is directly related to our investing bottom line. You should always try to reduce your costs while making sure the remaining criteria are still met. Unless you have an extremely large portfolio (upwards of 7 figures) or have some other reasons you would do well to steer clear of the full-service brokers that charge well over $100 in most trades. Discount brokers have come a long way and you should definitely consider them for all the different options they provide without emptying your wallet.

2) Tools for Trading

A lot of new investors get attracted to the bells and whistles that various accounts have. But the traders who consistently make money know that the tools that help you backtest your investment strategies are key. TradeStation and Fidelity have some great tools in this regard.

Do keep in mind that just because historically a strategy has worked it will continue to work indefinitely. But, more times than not a backtested strategy would be more useful than an untested one.

3) Options Trading

With all the volatility in today's markets options are gaining more popularity amongst investors. We think options are a very useful addition to any investor's portfolio whether it is to manage risk or to enhance returns. Nearly every investor can in some way benefit from learning about and then trading options. Its important for the broker you pick to allow options trading. Usually the broker will send you a questionnaire to gauge your investing experience and then accordingly you will be approved for an options trading account.

Some brokers are better than others when it comes to options trading. You should consider ThinkOrSwim if you are serious about options.

4) Foreign Stocks

Even in todays turbulent investment climate we believe that U.S. markets are still the best place to invest. But in order to diversify your portfolio it is definitely worth considering foreign stocks. Investing oversees will limit the exposure of your portfolio to one economy. Some brokers let you buy directly from foreign exchanges while others simply let you buy foreign companies that are listed as ADRs. Interactive Brokers offer some direct buying opportunities.

5) Reinvestment of Dividends

Buying dividend-paying stocks and then reinvesting the dividends is a tried and tested profitable strategy. The tricky part usually is that sometimes when you get a dividend payout you aren't able to buy up a round number of shares of the company. So, you want a broker that not only gives you the option of reinvesting dividends but also provides the option of buying fractional shares.

6) Research

When it comes to top-notch investment research Schwab does an amazing job. You get their equity ratings in addition to mutual fund recommendations and better yet portfolios of mutual funds for the busy investor. You also have unbiased research provided from other firms. Don't underestimate the power of research when it comes to investing.

There you have it. Our list of important features to look at it when choosing your stock broker. We wish you the best of luck in your investing endeavors.