5 Things to Consider when Choosing a Stockbroker

What makes a good stockbroker? Is it low commissions? A stable trading website? Good customer support?

The role of stockbrokers has become more prominent now than ever. With stock trading in the Philippines skyrocketing in recent years, getting a good stock broker is as essential as making the right trades.

According to the Philippine Stock Exchange (PSE), around 1% of the Philippine population invests in stocks, as seen in this report on the Profile of Filipino Stock Traders. As more and more Filipinos discover stocks as an important investment asset, separating good stockbrokers from the bad ones also becomes a challenge.

Why choose a good stockbroker?

Well, for one, no retail investor can trade stocks without the use of a broker. Regardless if you use an online platform or deal with a live person handling your trades, an account must still be opened first with a stock brokerage firm before you can start investing in stocks.

Stock brokerage companies play a very important role in the stock trading process: they handle your cash.

Imagine if the stockbroker files for bankruptcy, disappearing together with your money. That would surely be a big hassle. Although you won’t instantly lose your money, especially if your cash is already invested in stocks, it would be time-consuming to ensure that you will get your money back.

What to consider when choosing a stockbroker?

So what must you evaluate before opening an account with a stockbroker? For us, we believe that you must consider these five (5) things when choosing a stock brokerage firm.

1. Broker’s Commission

Whenever you buy or sell stocks, you pay a certain fee to stock brokers. Of course, the lower the fees, the less you pay which means you get to retain more cash. The broker’s commission is something you have to pay regardless if you make a profit or loss in stock trading.

In the Philippines, based on our research, almost all online stock brokers currently charge 0.25% broker’s commission. They are pretty much comparable in this regard. Other brokers, however, also offer live assistance and sometimes assign you a personal account handler, and in turn, they charge you a higher broker’s fee.

For an idea of how trading fees and broker’s commissions affect your stock trading transactions, refer to our article on Fees and Charges when Buying or Selling Stocks.

2. Stability and Speed of Trading Website

stable online trading website is critical because a website’s downtime could spell huge losses, especially during times of trading volatility. Imagine wanting to sell a stock to lock in a profit only to face a “Page Not Displayed” error when visiting your broker’s website.

The good thing is, most brokers offer an alternative in case there are access problems with the website. They give you a telephone number which allows you to talk to a live broker who can execute your trades. But that would take time and could eat precious minutes that you could have used to execute an important trade by yourself.

Aside from website stability, also check the speed of a website in loading and in executing your trades. Prices may change in a split second and if it takes time before the page loads or your trade is processed, the price might have already changed and your trade might not go through.

3. Ease of Funding and Withdrawing your Account

Another critical factor to consider is the ability to fund your account and to withdraw your money easily.

Look for brokers that have partnerships with local banks, enabling you to make easy fund transfers, sometimes even through online banking. Some brokers, however, accept only cash or check payments, requiring you to make a personal visit to their office every time.

Do note that withdrawals typically take between 1 and 3 days before the cash is transferred to your account or a check is made payable to you.

4. Stock Researches and Trading Tools

A few brokers offer free stock researches and reports. These resources give tips and recommendations helping you make informed decisions when trading stocks. They are useful in providing guidance with your trades.

A caveat, though: not all reports are reliable and are sometimes made just to “promote” or “hype” a stock. Make sure you distinguish between objective reports and hype reports before believing everything you read in the reports. View them primarily as guide, not an infallible recommendation with 100% accuracy. Still, having access to stock research is more helpful than not having access to researches at all.

If you’re into short-term trading and you’re knowledgable in doing technical analysis, you’d also like to have access to useful charting tools. These allow you to make your own technical analysis, so check out what charting tools and services, if any, that the broker’s website provides.

5. Customer Support

Finally, consider the customer support offered by the broker. If you have issues regarding your trades or questions about your account, a reliable and accessible customer support is, of course, desired.

Customer support can be email-based or phone-based. Assess if they reply to you quickly or if it takes days before you receive a response from them. If it takes forever, perhaps it’s time to change brokers.

Time now to tell us your preferred broker! Vote in our poll below and write your opinions about your brokers in the Comments section!

Happy trading!

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