How to Choose Your Stock Broker?

Here is the greatest irony of investing - You need to have a broker to be whole.  
Okay, it’s corny, I know.

But kidding aside, you need the service of a broker for you to invest in our stock market.
Sad to say, you can’t make your million alone. You’ll need their presence.
These brokers place orders in the stock exchange in your behalf. In exchange, they receive some commission for every buy or sell transaction they match for you.

Two Types of Brokers

Before, there were only people brokers.

This is the chaotic scene you’ve seen in the Wall Street movie.
If you have parents or grandparents who have invested in stocks, most probably they have done it through live brokers.
They would contact their broker buddy thru a phone call, and instruct them audibly their desired transactions.
And these people depend on newspapers business page to know the market results the previous day.

Photo credit
Thanks to internet!
The advent of technology makes almost, if not, all aspect of investing painlessly smooth.
Deviating from the traditional breathing warm-blooded brokers, we now have available brokers with an online platform, and are called ... hmm, online brokers (gosh, I’m so brilliant!)
Online brokers make investing easier for everyone. Aside from that, they charge you tiny commissions compared to live brokers.

You only need your computer (or even a capable cellphone) and a fine internet connection, and boom!

You see the business world unfolding in your computer screen, real-time and live!
You see how the market moves. You see the most recent transactions. You see all the prices. You see foreign money movements.
Practically all the information you need is in your fingertips.
No need to utter a word; just your clean and bright fingers held up on high! (wait.. I think that’s supposed to be hands)

My Experience

When I started investing, I had Philstocks by Accord Capital Equities as my first broker.
No special reason though. It’s just that when I researched about online brokers in the Philippines, it was the first one I read that allows potential stock market participants to begin investing with just 5000 pesos. (Read related story My First Time.)

(You see, you don’t need a big chunk of money to actually start investing.)
But as you’ll soon know, other brokers have the same if not better offer.

Citiseconline (COL) for one will also allow you to open a trading account with the same minimum amount.

They offer it to student starters and to what they call “EIP investors”. The latter may sound exceptional, but I think they just made up that term to attract small-time investors – a.k.a YOU and ME, versus those who can start with 25,000 big cash. After all, both of them use exactly the same features of their online platform.
What’s better, you can actually open your trading account with even less than 5000.
BPI Trade and FirstMetroSec, for example, offer the same online brokerage service with the only requirement of opening an account with their counterpart bank companies – BPI and Metrobank respectively. This bank account will then be linked to your stock trading account, allowing easy and convenient transfer of funds between the two accounts thru online banking.

So what broker do I have now?

I actually have all four of them: COL, BPI Trade, Philstocks and FirstMetroSec. HAHA
 But mind you, I won’t recommend doing the same. I opened all of them just so I would know who’s the best of ‘em all, basing from first-hand experience with them.
Looking back, having one broker is enough.
Two is tolerable; say for example, you want to have separate accounts for your long-term investments and short-termers (aka tsupitero mode) because you just can’t control your itch to play too much.
Having three or more brokers is a meaningless exhibition. :P
(Unless you really have your special reasons, or just want your money scattered everywhere.)


Having that experience of using multiple online brokers, I propose the following considerations in choosing your own online broker:
1.Fees. The four I mentioned above charge your with almost have the same commission and transaction fees. For small-value transactions, the difference ranges from few centavos to few pesos. With an increase in value of your purchases, this difference will also rise in value. In this aspect, I recommend COL as they have the minimum associated fees possible.

2. Fund Transfer. This equates to convenience of moving your money to and from your stock trading account. Online brokers with the bank counterparts, namely BPI Trade and FirstMetroSec, win in this aspect. As previously mentioned, these brokers allow easy transfer of funds between your trading account and bank account. As a result, you won’t need to do any manual intervention or effort except for the click-here-type-there role when moving funds in and out of the market.

COL for example, while allowing funding thru online banking (thru online payment to a third party), still requires filling-up a form, and sending it via email (or fax) when requesting for withdrawals. The opposite is the case for Philstocks – unless you do it by BDO online payment, you need to send your scanned deposit slip for funding. They won’t need though any form to fill-up for your cash-outs, but that would entail cross-banking charges (unless you request your check to be deposited to your BDO account). This of course is not a good option if other brokers let you do it all electronically without the unnecessary fees.

3.Online Features.   This is an important consideration if you’re doing swift trades – or trades that happen within a day or few days. Having speculative stocks for example (or stocks with no fundamentals) crucially require players not to be left behind from fast rallying or falling stocks. In this kind of rapid market behavior, you would need a trading console that can show you all the relevant action - price movement, recent transactions, foreign entries and exits, etc; and allow easy entering of orders. Take note however that this is much less of a concern if you have a much longer time horizon for your investments; in other words, if you’re holding fundamentally great companies where price action is a lot less volatile.

In this aspect, I’ll give the crown to COL and Philstocks. I specifically love the effects in Philstocks!
I must also say that BPI Trade has just the most boring trading page. FirstMetro has also a platform quite similar to COL. It can be a good choice if you have an existing Metrobank account.

Other online features and services that cater to more advanced market players can also be a factor. COL and FirstMetro for example have extensive tools like charting, comprehensive market researches, market calendars and similar useful content to help you guide in your trade decisions.

4.Customer Service. This is of low priority though, given that by the very nature of online brokers, we seldom make inquiries with their representatives. But you may also want to maximize the commissions you give them by attending free seminars they organize.
COL for example holds regular seminars discussing fundamental and technical analysis of stocks - for free if you’re their clients. Just last August 1, I attended COL’s Mid-Year Market Briefing held in that stunning Meralco Theater.
FirstMetro also organizes market briefings from time to time.

What now?

Some of my previous blogs tackled the value of investing. And then I shared myfirst-hand experiences. And then I covered Saving as a prerequisite step for investing.

Opening a trading account is like going to a gym for a planned work-out. You’re done recognizing the need to exercise, and have actually already decided to go after it. But for some petty reason, each time you attempt and try, you just feel like it’s the hardest thing to do, and you’re back to point on the verge of going on or turning back. But once you’ve managed yourself, and enter that room with all other people working-out for their dream body, you’re suddenly back to your senses, and recharge what you’ve originally wanted and desired.

In chemistry terms, we call it the rate-determining step - that crucial step that paves the way for the rest of the smooth steps.
So I ask you back the question - What now?

Have fun investing!

PS: My next blog will contain a summary table for the four mentioned online brokers. Watch out for that!

PPS: More important than choosing your broker is choosing what stock to buy. For those aiming for long-term investments, leveraging on “SAM - Strategic Averaging Method”, join the Truly Rich Club!
Receive regular stock updates and wealth strategies; know what and when to buy and sell, plus mountain load of other blessings to manage your finances.
Check if it's for you here - Truly Rich Club!

PPPS: I am not paid to endorse any of the mentioned online brokers. Those are all coming from my personal experience with them. Find time to check their sites and see what best suits you.



You might also like

Related Posts Plugin for WordPress, Blogger...