With increasing frequency, investors are turning to Web-based platforms in order to buy stocks online. However, it's rarely a simple matter to pinpoint the best choice of brokerage firm.

In fact, the top candidate will depend in large part on the particular use of the brokerage account. As an example, a long-term investor who trades rarely should be more concerned about the dependability of the broker than the fees charged for each transaction.

Even in the case of a particular type of trader, the best choice will depend on a number of factors. For instance, one popular broker charges a fixed fee regardless of the number of shares traded. In that case, an account with this firm would be useful for a trader with a smallish portfolio who buys and sells a lot of low-priced stocks.

Multiple Accounts to Buy Stocks Online

For peace of mind, however, it would be advisable to distribute your assets over two or more brokerage firms. From time to time, you may have reason to worry about your account at a particular firm. For instance, there have been cases when brokerage firms have been victimized by crackers who have broken into customer records and stolen private information such as passwords.

Depending on your country of residence, you may have to keep your retirement funds in a separate account from your ordinary portfolio. In that case, you would have to maintain at least two different accounts even if they are held at a single institution.

In line with the previous issue about peace of mind, it would make sense for you to keep your ordinary account at one brokerage firm, and your retirement account at a different one.

Related Classes of Products

As the level of financial sophistication increases in the population, a growing number of individuals are using techniques that were once the preserve of professional traders. A simple example in this vein is the sale of options on a stock which is held in the same portfolio. The goal here is to earn the premium on the options as well as any dividends on the underlying stock, without the risk of huge loss that would occur if the options were sold without the underlying equity.

In the years to come, a growing number of investors will use other sophisticated methods such as the tracking of a stock index by buying a futures contract along with full backing by the ownership of government bonds. This method allows the investor to earn the dividends on the bonds while tracking the stock market. Moreover, there is none of the enormous risk that is usually associated with the position in a futures contract.

In these ways, a growing segment of the population is turning to brokerage firms that allow for multiple types of financial instruments in a single account. The array of instruments may span the gamut from stocks and options to bonds and futures.

In this light, brokerage firms offer assorted combinations of financial instruments. For this reason, the choice of a broker will also depend in part on the trading strategies you plan to use.

Benefits of Size

Another factor to consider is the array of benefits offered by a brokerage firm according to the size of the portfolio. The standard practice is to determine the benefits corresponding to the combined level of assets in all accounts held under a single name.

As an example, the broker may offer a reduced rate on transaction fees if the total value of your accounts adds up to $50,000 or more. The schedule of costs and benefits will also affect your choice of brokerage firm.

The advantage of size is of course a good reason to aggregate your accounts at a single institution. In other words, you should not keep a lot of small accounts at a host of brokerage firms.

Roundup and Further Action

To sum up, the top choice of brokerage firm – as well as the best type of account – depends on your particular circumstances. Examples in this vein include the frequency of trading and the average size of individual trades. Other factors range from the size of the portfolio to the schedule of benefits at various brokerage houses.

Regardless of your needs, though, a great starting point for further research is an annual survey conducted by a publication named Barron's. The publication is directed mainly at serious investors. However, the survey of brokers is relevant to newbies as well as old-timers in the investment arena.

The survey of brokers evaluates the major players in the forum and classifies the firms into different groups. An example of the latter is the best set of brokers for long-term investors, or the top group of candidates for international trading.

The survey does a pretty good job of rating the brokerage firms. As an example, Fidelity Investments often ranks high in the annual reports. Fidelity in fact happens to be a commendable choice for newcomers to online investing.

A key advantage of this report is that it covers the notable players in online investing. Although the brokers are based in the U.S., the firms tend to welcome investors regardless of their country of citizenship or residency.

In particular, the firm named Interactive Brokers maintains subsidiaries abroad in countries ranging from Britain and India to Hong Kong and Australia. For this reason, you could open an account at a local branch or a nearby country and trade not only stocks but other instruments in far-flung regions of the globe.

On the other hand, the primary audience for Interactive Brokers is the professional investor. As a result, the rookie will find the user interface to be a bit on the abstruse side. If you're a beginner, you may want to get at least half a decade of experience under your belt before you deal with this firm. Due to the low cost and multiplex functionality, however, the brokerage is a top choice for experienced traders.

The results of a recent survey by Barron's are presented in an article at the address given below. However, the relative rankings of the brokerage firms do not vary much from one year to the next.