Stockbrokers are enjoying a resurgence of sorts these days. With Americans' 401(k) plans getting hammered, and investors scrambling for answers, a calm, seasoned hand at the wheel increasingly seems like a good idea.
Okay, fine. But where do you start if you don’t have a broker?
First, do you even need a stockbroker? Before you hire a portfolio professional, you need to do some thinking about how—and how much—you would like to invest. If all you plan to do is invest in some CDs or mutual funds, then paying a broker to help you doesn't make much sense. (For this you can generally educate yourself, by researching the terms and interest rates of various CD accounts, or the ratings and reputation of different mutual funds. Try our partner sites, TheStreet.com and BankingMyWay.com).
But if you're looking to invest in the more volatile, high stakes world of the stock market, you may be well served by engaging a professional broker. Whether you're best served by a no frills, low fee online account, or a full-service broker depends on your own goals and personal preferences.Consider an online broker. Why not go online? Cyber-brokers charge much lower commissions and fees than the full-service firms. They also take a largely hands-off approach, which is great if you prefer to do the legwork yourself. That means you’ll be picking the stocks and funds yourself, and relying on the web site to process the purchases. The sites should also provide background information on the products you’re looking at.
Before you make any kind of commitment, be sure to ask about trading commissions, maintenance fees and other costs. Also find out which additional services they offer, such as phone trades, local offices and ATM and check-writing capabilities. Of course, the downside of cyber-broking is the absence of handholding and experienced counsel should the market turn south. And without a dedicated human advisor, you run a greater risk of technical difficulties: Think clogged servers, missing checks and long waits on customer service lines.
Check out discount brokers. If a purely online brokerage account isn't for you, there are a number of discount brokers, such as Charles Schwab (Stock Quote: SCHW). These brokers have established an online presence, while also maintaining advisory and account management services. As a result, the cost of their services fall somewhere in between the no frills web sites and the full-service brokers. Even if you think you know a lot about the markets, most people simply lack the time and focus to adequately monitor and allocate their investments, year after year. This can be a great solution for an investor with strong opinions about where and how to invest, but would still appreciate a sounding board, and a personal touch, from time to time.