ETF investing is a passive form of investing that has the attention of many long-term investors because of its slow and steady approach to building wealth. ETFs can give you a balanced exposure to different market sectors while limiting overexposure to any single stock in order to spread out the risk and maximize the odds of success.
However, the success of your ETF investing is dependent on factors such as the quality of stocks in the fund, the quality of information at your disposal, and the quality of service from your brokerage firm. Your ETF could deliver decent performance and you’ll still end up with marginal/negligible gains if you a bad brokerage firm. Here are 6 tips that could help you chose the right brokerage firm to increase the odds of your trading success.
1. Check out their product selection
There’s more to choosing a brokerage than being able to invest in ETFs and watch your portfolio grow. Hence, you need to find a brokerage that has a decent selection of investment alternatives. A truly diversified investment portfolio will have a mix of stock, ETFs, CDs, municipal bonds, options, and precious metals. However, if your brokerage only offers stock investing, you’ll still need to open account with other brokerage firms in order to gain exposure to other parts of the market. However, you’ll find it much easier to keep an eye on your portfolio if you hold all your investments with a single brokerage than if you hold your assets with multiple firms.
2. Read the fine print on the pricing
People would want to tell you that pricing is not everything; yet, the fact remains that pricing is a big part of your trading and experience. You need to know how much it will cost you to place and execute trades, and you need to know that the price makes financial sense in the grand scheme. You should read the fine print to know what the brokerage charges as commission costs. You should also read independent third-party reviews to know how much you’ll pay for limit orders. For instance, this Questrade reviews shows that the firm doesn’t charge annual account fees, it doesn’t charge a fee on ETF purchases, and it only charges a low $4.95% in per-trade costs.
3. Know how well they fare during peak trading
Investments are inherently risky and the risks contribute to the volatile nature of the markets. Hence, most investors tend to move the markets at about the same time by buying when the price of equities are low and selling when the prices are high. Unfortunately, the increase in market volume at peak times could slow down execution on brokerage firms that have not invested in robust trading infrastructure. Hence, before you sign up, you should try accessing the company’s website at different times during the day to see how fast the site loads up during peak trading hours.
4. You can’t afford to ignore accessibility
Many brokerage firms now offer different avenues through which you can access their service and you can’t afford to ignore ease of access. As expected, you should be able to access and manage your portfolio online, it also helps if they have a mobile app so that you can still keep an eye on your portfolio from your smartphone. You should also be sure that they have other alternatives such as broker-deals over the phone, touch-tone telephone trades, and email orders.