It’s not your father’s stock market anymore. Gone are the three martini lunches with your stockbroker, or sitting in the brokerage lobby with a copy of the Wall Street Journal and a cup of Joe.
The Journal is still there, and so is the joe – it has the name “Starbucks” on the side of the cup – but other than that, the whole investing enchilada has pretty much moved on.
Online, that is.
Online brokerage accounts have done to traditional stockbrokering what DVDs have done to VHS tapes. In both cases the latter still exists, but at a minute fraction of how they once dominated their respective niches.
Skeptics – and there are many, and not all of them are over 70 years of age – need to understand that, with one exception, an online brokerage account delivers virtually anything and everything you once got from your shirt-and-tie stockbroker. Two exceptions if you count the martinis.
And you get it at a much lower cost.
Online brokerage accounts allow users to open an investment account – including margin if you choose – and self-manage and execute your own trades. That means just what it says – you can buy and sell stock (and bonds) on your own at the touch of a button, including market orders, stop and limit orders, short sales, options trades and cash management.
Execution is immediate, you see what you’ve bought, and at what price, within seconds. And, your account balances are immediately and accurately updated right before your eyes.
And the best part is that it happens at a cost that is from one-tenth to less than one-one-hundredth of the cost of a traditional broker trade commission. Trades are done at a fixed cost, usually about five bucks or so, no matter how large the size of the trade.
Yes, you read that right. In the past when you bought, say, 1000 shares of a $35 stock through your broker, the commission would be about $350, give or take a hundred bucks.
Using an online broker, the commission is only about five bucks. Maybe less.
But that’s not the only advantage.
You also get unprecedented access to current market information, including bid and ask volume and sequence data, trending charts, and current news. In other words, all the things (and more) that you used to wait to hear while hanging out in that lobby.
You even get an expanded real time ticker showing all activity on any listed stock you select.
What isn’t available online, though, is the opinion of a broker who knows you.
That was always the inherent value of the commission you were paying a broker, and explains why the cost of an online trade is so much less. If you need mentoring and advice, or even someone with whom to share that three martini lunch, then you might rationalize the old school way of trading stocks as a good investment, perhaps even a good time.
Online brokerage accounts, thought, do offer research into specific stocks, and plenty of it. So does the internet at large – you can find out anything you want to know about a company that’s already public knowledge. And frankly, pretty much anything your broker might tell you about a company and its stock is already on the internet, anyway. Maybe even more, since brokerage firms are timid about purveying information that hasn’t been verified – your commission also pays for the lawyers responsible for that position – while the internet knows no fear.
Meaning, you have to judge for yourself.
Which, in retrospect, has always been the case. Even over those martinis while face to face with a stockbroker. The upside and downside are yours alone.
If time, data and cost are important to you, and if you are confident in your ability to find and understand the research, then an online brokerage account just might be the way to go.
And, you can make all the martinis you want while you’re at it.
