Not every family man can devote 18 hours a day beside a telephone, anxious for his brokerage firm to call back and let him know whether or not his hard-earned money had just fallen down the drain, nor spend every one of his son’s soccer games on that same phone screaming “buy” or “sell.” Contrary to the numberless clichés propagated by stereotypical box office hits, investors DO have lives. Online brokerage firms, pioneered by physicist William Porter in 1982, have begun to multiply like rabbits in the past decade or so.
These kinds of firms, employing online brokers also known as “discount brokers,” have become the inevitable standard for individual investors (regardless whether or not they are experts in the stock market) looking to gain considerable profit with such a relatively small capital. Online brokerage firms such as Zecco.com, Tradeking.com, or their granddaddy: Etrade.com.
Online investors can look forward to remarkably smaller (or in some cases, even free) trade commissions as these firms hardly charge anything compared to their predecessors, traditional brokerage firms. However, like everything in business, while they do indeed grant the individual investor more control over his money. It is not without payoff: online brokerage firms hardly give any live stock advice; it is not uncommon for investors to complain about the unsatisfactory nature of their customer services. The reason why some (if not most) of these firms can afford to live with zero to minimum commission is that the brokers themselves are usually paid regular salaries, rather than based on how much money they make for their investors.
Also, under the all-too-easy anonymity inherent in the separate world of the internet, online brokerage firms have more of the potential to run from its investors; a significant amount of research can do you good before placing anywhere between 100 – 25000 USD in one of these firms. The offers are attractive, yes, but they’re a tad more risky than most traditional, physically-accessible and longer-established brokerage firms.
So, this writer emphasizes, as with all things in business, sufficient research should be undergone before diving into any kind of investment—doubly so with online brokerage firms, who have the increased capability to run off with your money. It would do you well to make sure that any brokerage firm you wish to enter business with is heavily transparent in its practices. Actually seeing the physical offices of these firms to ascertain their financial statuses (or even just their very existences) can give you that extra peace of mind when it comes to your money, which, as this writer need not remind you, is bread for yourself and your family. It wouldn’t hurt you either to select an online brokerage firm with a favorable reputation with business publications, including awards or just good reviews.
In the end, one falls back into the basics of the human experience: informed decision-making. While romantic gestures of taking the unrealistic risk of defeating a dragon with little more than a toothpick may be a recurring theme in the stories made by dreamers, it almost never works out in the waking world.
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