Discount vs. Full Service Brokerage Investing - Making Your Decision
February 20, 2010 by Aaron Smith | Category: Investing
It’s a classic question that comes up when discussing investments: should I invest myself using an online discount brokerage or get the help of a professional and use a full service brokerage? There is no single right or wrong answer to this question, but there are plenty of details to consider before making your final decision. Let’s take a look at some of the most important factors to keep in mind when making this important decision.
Benefits of Both Are Clear
You should realize that both a discount brokerage and a full-service, or traditional brokerage, have plenty of benefits. First of all, the discount brokerage allows you to have a low minimum and small trading fees, which are geared specifically toward the individual investor and reducing the costs associated with investing. At the same time, a traditional brokerage is able to provide you with much more research and even sit down with you and discuss your investments one on one. In this day and age, both the discount brokerage and the traditional full-service brokerage are available almost all of the time through their website.
Downfalls of Both Are Evident As Well
While it is certainly true that the benefits of both are clear, they both have clear negatives as well. A discount brokerage comes at a discount with a price to be paid. This price is often a lack of support for investors who need assistance or access to top notch research from the likes of Lipper and Standard and Poor’s. A traditional brokerage charges a large amount of money for their services, and they can also have some pretty tough fine print that can catch up with you over time.
Evaluate Your Personal Situation
The single most important thing you can do when choosing between a traditional brokerage and a discount broker is evaluate your personal situation and discern which one suits you the best. If you are the type of person who likes to speak with someone regarding your investment goals and try to set up an ideal portfolio for you, then the discount brokerage won’t serve you very well. On the other hand, if you like to do independent research and work on setting up your personal portfolio, while saving on commission fees, a discount brokerage is definitely the way to go.
Time Matters
While many investors fail to consider this when they are making their decision, time plays an important role in where you should be investing your money. Realize that when you put together a portfolio of investments, you’ll need to keep up with the current news so that you can be a well-informed investor. If you have little time to do this, you may be better suited allowing someone else to monitor your portfolio for you. If you believe that you can put the time in and keep your portfolio healthy, then a discount brokerage should work well.
Take Your Time and Make an Informed Decision
Finally, as is the case when making an investment, you should always take your time and not make a decision before considering all of the factors first. Be well-informed and do what is best for your financial future!
