A discount stock broker charges lower fees than traditional brokerages but does not provide financial advice.
Trading online through discount stock brokerages, rather than with a full-service brokerage, is now the preferred option for many investors—but it has risks.
The main advantage of using discount stock brokers is lower commissions. And commission rates can be even cheaper if you trade stocks with your discount broker online, as opposed to placing orders over the telephone.
Although lower commissions are a plus, there are several reasons to be cautious. Low commission rates sometimes lead investors to trade a great deal. They may assume they can’t lose because they can sell at the first sign of trouble.
Online trading with discount stock brokerage firms may look like a fairly quick and convenient way to build wealth, but there are many hidden dangers that may not be evident at first.
The main risk comes from the fact that it all may seem deceptively easy. The lower costs and higher speeds of online trading can lead otherwise conservative investors to trade too frequently. That can lead you to sell your best picks when they are just getting started.
Frequent trading can also lead you to buy lower-quality stocks.
Manage your stock trading risk by following TSI Network and using our three-part Successful Investor strategy:
Invest mainly in well-established companies;
Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
Downplay or avoid stocks in the broker/media limelight.
In 2021, trading online through a discount broker, rather than with a full-service broker, is increasingly the preferred option for many investors. But risks remain.
The main advantage of switching to a discount broker is lower commissions. And commission rates can be even cheaper if you… Read More
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When you decide you want to invest on your own in the stock market, you face a decision every investor has encountered. You have to choose whether to use a discount broker, a full-service stock broker, or a portfolio manager. This decision is no formality;… Read More
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific investment advice on the fundamentals of successful investing. Each Investor Toolkit update gives you a new piece of… Read More
In a recent TSI Network poll, we asked site visitors whether if trust the advice they get from their stock broker. Aside from a yes or no option, we gave visitors a third choice: “I trade online through a discount broker.” Seventy-five percent of the… Read More
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