I hope you were able to identify a suitable market for you to invest in. And, now you are at the stage of choosing the ideal brokerage platform for buying and selling. There are some points to note while choosing one platform over the other. Below are some checks I have performed while deciding on my broker.
With Necessary License
A key priority is to check whether the broker of your choice is having the necessary license to the market. Only companies with the proper license can provide services to the customers. If the broker were around for long enough, most likely they should have it already. Yet, it is still a good practice to perform your due diligence. You may head over to the broker’s website and check for this information.
Brokers will usually list down the different licenses they hold and provide the license numbers on the website. You can verify this information by heading down to the government agency website as well.
You are checking on these extra steps to make sure that you trust the broker with your money and stocks. With the introduction of new brokers every now and then, it could be difficult to know who has the right license for the market you are trading at.
Easy To Set Up
Another key consideration for me is the ease of setting up the account. When you go to the sign-up pages, you will know how easy it is to set up an account. Governments have adopted digitalization too. Providing access to address, national id, and other key data via APIs to service providers. Using these services will help to populate this info without the need of filling it in. Of course, you need to consent to this activity.
As of now, setting up a brokerage can be fast as within a day itself. If the KYC verification is a manual process, the broker may take a few days to comb through the documents you submitted. Based on the checks they perform and the results, they can approve/reject your account.
Easy To Access Account
In the past, brokers were only accessed with phone calls and email. With the digital adoption, most of the brokers are adopting a mobile-first approach. Most of the general population is accessing the internet from mobile devices. Thus, brokerages now have mobile apps and desktop apps to access the platform.
If your broker has a platform in mobile, desktop and web, it is a good indicator. Ensure that all services are accessible through all the platforms. Having mobile apps will help to have access to your information in real-time and on the go.
Ease Of Depositing
Once you set up and get approved, you need to deposit money to start buying the stocks you want. Do check out the steps involved in depositing money into the account. You should be able to deposit money in the currency you want. The key consideration here is the steps involved in transferring money and how long it takes. Most brokerages now have direct debit arrangements with the local banking partners. This will help to transfer amounts real fast.
If the broker does not have a local banking partner or so, it will ask you to transfer the money to their bank account. They often provide you with a reference number to put in the transaction. These transactions may take a few minutes to days to complete. Especially if intermediary banks are required.
You may always have the worry until your money reaches the broker’s account. So, the faster the better. Always have the habit of checking the account details many times before you hit the send button.
Ease Of Withdrawing
You would want the withdrawal to be as fast as the depositing too.
Once you sold the stocks and the transaction is complete, you need to bring the money back to your bank. This is the process of withdrawing money from your brokerage account. Depending on the broker and the bank involved, this can take hours to days to complete.
Read through the documents, understand the process before choosing the broker. Once you deposit money, you will have to go through the withdrawal process to get the money back.
Currency Conversion
Most brokers allow currency conversion in their platforms too. Sometimes, they may provide a better rate than you can get outside. Do check out the FX rate they provide and any fees involved. Even though these rates and fees will change in the future, most brokers try to be competitive.
Compare the rates and fees across before choosing to create an account/deposit. Also look out for any limitation on when you can avail of this conversion, whether it’s 24*7.
Company Analytics
Most brokerage platforms now have the capability to perform fundamental analysis. Meaning, they provide tools to visualize the different numbers and ratios. These platforms even allow you to compare other stocks with your selected stocks.
This will help you with access to all different datasets required for analyzing a stock. This starts from the basic profile of the company, revenue/income comparisons, reports etc…
If the platform provides all this data in their app, you may not need to check outside to research.
Commission-Free Trades
Commission-free trades can be a marketing gimmick to get you on board with the platform. Still, if there is a way to save some money on the commissions, it’s good to have them. Remember to check out the usual commission rates before setting up your account.
If the broker serves different markets, commissions for the different markets can vary. Different types of trades have different commissions too…E.g normal stock vs options.
Transferring Shares In/Out
Check out if it’s possible to transfer stocks from another brokerage. This way, you may not need to sell the stocks you held with other brokerage and buy from the new brokerage platform. Check the policies related to transferring shares out too. This information may be in the fine prints. Yet, check them out before you set up accounts and deposit.
This applies to platforms that keep custody of your shares. For CDP accounts/Demat accounts, you can provide your broker access to these accounts to buy/sell.
Real-Time Market Data
Check if you are able to view the real-time market data and the quotes are not delayed. Some platforms show quotes delayed like 15 minutes or so. It is always good to have real-time feeds so that you can plan your limit prices well.
Some brokerages provide level 2 market data for free too. If you are unsure about what is levels 1 and 2, Level 1 quotes provide basic price data for securities. Including the best bid and ask price + size on each side. … Level 2 shows market depth up to the 5-10 best bid and offer prices.
Once you learn how to make use of them, you will appreciate their availability of them free of cost.
Easy To Use Interface
An easy to use interface is a must for the brokerage platform. When you find an opportunity to trade, speed to execution matters for traders. If you are using a desktop application, some brokerage platform allows you to have many charts open at the same time. This can help short term traders to manage their entry and exit with ease. Some platforms even allow you to customize some hotkeys to your choice.
If the broker allows a trial account, look out for the different indicators and tools.
Community
It is a newer feature that most brokers have, where users can interact with each other. This is a social media feature where users post their opinions and others comment and like them.
When your favourite stocks are falling, some of the comments by others can help you with a diamond hand. Remember to exercise caution and read all kinds of comments. Sometimes these forums can help to pump and dump schemes, don’t be a victim.
News
Availability of market news is a very basic function of a brokerage platform. if your broker of choice provides faster access to news, you may not need to rely on other platforms for the same. Most brokerages will also prioritize news based on the stocks you hold.
These will help you filter out the important news with priority. This may not be so relevant to long term investors as they don’t trade based on short term news. Yet, these can help to buy the dips in share prices.
News is a must-have for the short term traders to spot opportunities and trading setup.
Conclusion
It is always better to spend some time comparing the different offerings by the brokers. Choose one that meets most of your needs. Even if moving out of shares is easy, you may not want to do it that often. Also, there are only so many providers you can move to. Do your research before picking one broker for your usage.
Your friends/online influencers may want you to use their favourite brokerage platform. Exercise caution and do your own due diligence. A platform liked by your friend may not be the best choice for you.