Summary: First time investors, who flocked the markets during the 2020 crash, are seeing their first meaningful correction. In order to make sure that the wealth is created for the long-term, selecting the right online brokerage is the first step to success. An online broker is optimised for different types of clients -- from long-term buy-and-hold investors to short-term day traders. Step 1 is to understand what your investment goal is. That is, whether you plan to execute day and swing trades or find few solid investments to hold for the long haul. Based on this, investors need to choose a broker that has a diverse source of fundamental and technical data to generate higher returns. Step 2 is to figure out what type of broker fits your investment profile. Investors can choose three types of brokers – full-service brokers who provide stock recommendations tailored to a brokerage plan; discount brokers who carry out only buy or sell orders for the client without any additional services; and robo-advisors which are automated digital platforms providing online financial services. That apart, investors must also make sure that the brokerage firm is backed by regulatory authority and offers protection against any fraudulent activities. Step 3 is to understand the broker account fees. A smaller premium may justify if you want to lose as little as possible of your investment returns to accounting fees or trading commissions. For experienced investors, margin rates are applicable as they borrow funds on behalf of the broker to take bigger positions in the market. If you plan to trade more than equities, make sure you know the fees to trade options, bonds, futures or other securities. Step 4 is to check the brokers’ platform and whether it educates you profusely about the market or stock that you wish to invest in. Investors must explore the technical and fundamental tools. Check if the technical charts allow you to plot basic indicators like volumes, simple moving averages, RSI and MACD. If any of these indicators are missing, it is better to move on. Lastly, step 5 is the ease with which an investor can deposit or withdraw funds once invested. It is prudent to review the deposit, withdrawal, and fund settlement terms of the brokerage that you consider. Most brokerage do not charge deposit fees – make sure this is a must in your checklist. That apart, check how long does it take for deposited funds to settle and how swiftly can you withdraw the funds once deposited. Do note that most brokerage houses charge a fee for withdrawal dependent on the type of investment.
