Getting Started with a Broker πŸ–₯

You only need to get this right once and then it’s sorted for life. This lesson goes far beyond a quick brokerage recommendation. We’re going to uncover the hidden costs of investing so that you know how to limit them and control them fully. This is a subject often ignored by other investors, so paying close attention now will carve you a little advantage.


The Broker for US Citizens πŸ‡ΊπŸ‡Έ

Broker cost control

 Firstrade is the best budget broker out there for Americans. Click the image to get started! It’s simple to use, zero cost both to setup and in the long term, and has a deep selection of stocks and ETFs available. Using this link means I get a small commission. It’s still free for you, but you’ll be supporting this course.


The Broker for Non-US Citizens 🌍

Try Fidelity (in UK, try it only if you’re investing over Β£7,500 because otherwise it’s too expensive). Vanguard is also very good for long-term fund holding, and Charles Schwab is good for bigger sums. If none of these are available to you in your country, look to DeGiro. If you’re still struggling, drop a comment. It’s better to go for a mainstream broker than a small outfit when you’re a beginner. Make sure that at the end of the day, you’re not being excessively charged the following fees. 


The Costs of a Broker πŸ’°

These fees are what you want to minimise as a first priority. Start with the biggest.

Platform Fees
These are 1-3% fees just for being on the platform. You pay these yearly. Needless to say, avoid them as best you can.
Per Trade Fees
 Every time you trade, a broker might charge you between €/Β£/$1-10. This isn’t the worst type of fee first, because a good investor makes very few trades, and second, because it’s not slapped on as a percentage.
Fund Manager Fees
This won’t apply to 90% of students. If you decide to buy into a basket of investments put together by a special fund manager (a hedge fund), be careful what he or she is charging. I’m firmly against paying 3% yearly fees to superstar fund managers who, on average according to history, are no better at beating the market than the rest of us.
Advice Fees
I’m not a financial advisor. However, I recommend all my students see someone CFA certified for a one-off meeting if they feel uneasy about investing, and especially if they have big funds to manage. But let me warn you. The advisor will try to sign you on for ongoing professional advice and convince you to let them manage of your money. They charge 1-2% commonly, have no special talents, and might even try to up-sell you to their funds where they apply those fund manager fees. Make sure you fully understand the costs involved in handing off everything to an advisor.
Spread
Brokers geared towards short-term day trading rather than long term investing will usually make their money from having you pay $10.05 when the stock costs $10. That nets them $0.05 as a spread fee. If you’re looking at spread fees, you’re looking at the wrong broker.

2 Bites of Broker Wisdom βœ…

Controlling your costs is as important as making your gains.

It’s true. Learn to nip those costs in the bud because investors often end up paying more in percentage fees every year than they actually make as gains with their stocks.

The more you know, the less you pay.

Also true. If you progress right the way through this course then it’s unlikely you’ll need the financial advice. That’s 1-2% fees shaved off from being willing to learn. By learning to stock pick as well on this course, you won’t need to hire a superstar fund manger to do it for you.


 

Chris Morrissey

Chris started in financial advisory, assembling client portfolios with pension companies and investment banks. Following that, he worked at an agricultural commodities trader in London and now various "fintech" start-ups. He's also studying business full-time at Lancaster University. Feel bewildered by the stock market? Chris will help you get things under control.

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