There are so many different online stock investment brokers that it only makes sense to compare online trading options before you make an investment.  While in many respects they are similar, there are key differences that could make the difference between getting large returns on your investments and paying most of your profit to the broker.  While there is no one best broker for everyone, the things you should look at when comparing brokers remain the same.

Points of Comparison

When they compare online trading options, most people find it helpful to do a weighted comparison.  The following aspects are considered and ranked in order of importance:

  • Fees and commissions
  • Investment options
  • Tools or stock trading software provided to customers
  • How easy their system is to use
  • The level of customer service and support available

Once these aspects are ranked, they are assigned weighting factors according to their rank.  Each broker is rated for all aspects, then that rating is multiplied by the weighting factor and all of the aspects are combined to determine which is best.  For example, if I am a new trader with little computer savvy, the ease of use and customer support will probably be the most important aspects for me of choosing a broker.  I’ll set up my ranking grids (using a 1 to 5 ranking scale) for two companies as follows:

Company 1

Aspect Rating Weighting Factor Score Weighted Score
Fees 4 2 4 8
Diversity 5 1 5 5
Tools 3 3 3 9
Ease 1 5 4 20
Customer Service 2 4 1 4
Total 46

Company 2

Aspect Rating Weighting Factor Score Weighted Score
Fees 4 2 2 4
Diversity 5 1 2 2
Tools 3 3 3 9
Ease 1 5 5 25
Customer Service 2 4 4 16
Total 56

Even though company 1 has higher ranks than company 2 does, company 2 excels in what I consider most important, and will therefore be my company of choice.  Conversely, if I valued low commissions and a large diversity of investment offerings, company 1 would have scored higher and would be the company of choice.

Comparing Made Easy

There are two basic research methods to employ when you compare online trading.  You can do all of the research yourself from the broker websites and try to determine what is best, or you can save time and money by visiting a website that has customer rankings and reviews of many different online brokers.

Filed under: Stock Market Trading Software

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