What factors to consider when looking for your penny stock brokerage
There are a ton of brokerages out there nowadays. Turn on the television and see an ad for any number of them. Go to a website and see three advertisements for three different brokerages... At the same time. Often, this information can be overwhelming, leaving the investor thinking: which brokerage should I choose? Fear not, this post will help you determine what you value in your penny stock brokerage.
- The biggest requisite for a penny stock brokerage is of course the ability to trade penny stocks. Quite a few of the large brokerage firms don't allow the trading of certain issues based on share price or market capitalization. Or, there may be additional fees associated with trading lower-priced stocks. Before you sign on with a brokerage, make sure that they'll trade the companies you want to trade.
- Fees are another big factor. No investor wants to dish out a considerable portion of his or her profits in fees. Be sure that you determine which fees are associated with which brokerages. Some to consider: per trade fees, additional fees for trading penny stocks, processing/maintenance fees, fees to open an account, fees to close an account. The list is endless so be sure to ask questions and seek answers.
- Be sure you know what it takes to open an account. Are you charged a fee to open your account? What is the minimum deposit, if any? Do you have to maintain a certain balance? Are there fees for or limits to adding additional funds?
- Something else to consider is how the brokerage operates. There are a seemingly endless number of online brokerages, but you may want to deal with someone in person or over the phone. You may like the idea of an online brokerage, but want to speak with someone just on occasion. Or, you may be okay with just handling everything online.
The list above is very general, but inclusive. There are any number of factors that go into choosing the right penny stock brokerage, all of which come down to personal preference. Some people may not know what they want. So, we'll provide an example of what we consider to be a great all-around brokerage:
Scottrade*
We think that is a great option for those looking to trade penny stocks.
- First and foremost, they allow the trading of penny stocks, even those listed on the OTC Markets. The only stipulation here is that you add 1/2% of the principal value of the trade to the transaction's base fee for companies trading for $1 or less per share.
- Scottrade is very upfront about its fees. The online trading fee is just $7 per trade for stocks. They boast "no hidden fees," offering the full list of the fees they charge on their website.
- It only takes a minimum deposit of $500 to open an individual investment account. There are no set-up, inactivity or maintenance fees associated with Scottrade.
- What really takes Scottrade to the next level for us is they operate as an online brokerage, but also have over 500 local offices. You can talk to an agent over-the-phone or in-person at these offices, which simplifies communication.
Choosing a brokerage can be overwhelming and tiresome. However, knowing what you want and seeking out answers will ensure that you are satisfied with what you choose.
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As a new investor this past year, I was worried about signing on with a brokerage that would take advantage of my inexperience with add on fees or, on the other end, try to feed me with so much information that I would choke on it. I love Scottrade. They’ve made it sooooo easy. I know they’re there, but they gave me plenty of room to set my own pace. There have been no unpleasant surprises. Glad to be on board with both The Bowser Report and Scottrade… Best New Years Resolutions I’ve made in years!