6 factors to consider when choosing the best brokerage for Investing

BY: Francis Osabutey
6 factors for choosing the best brokerage for Investing

Investing has become essential in today’s world. Rising costs due to inflation and the need to prepare for the future (retirement, housing, etc.) have made investing the only option. Investing does not only help you to protect your wealth but grows it as well.

There are several ways in which you can invest your money. Some of the most popular ways are real estate, gold, stocks, fixed income, and more. Investing in stocks provides the chance of high returns, however, it comes with greater risk.

If you want to invest in stocks or any other instrument, then you need to pick the right brokerage. Picking a brokerage that suits your needs may set you up for a successful investing journey. But you must beware of scams.

Experts at Forex Brokers SA warn that you must carefully choose a brokerage firm. There has been an increase in fake brokerages & general investing scams which target the general public in guise of quick returns in the market, especially since the start of the pandemic.

You must ask these questions, whether the brokerage is a licensed dealing member in your country or not? What is the fees structure? How easy are the withdrawals?

Here are five steps that you should take before picking a broker for investing in stocks, bonds and trading other alternative instruments.
Compare Fees and Costs
Every broker charges a different rate. They charge annual fees, brokerage fees, transaction fees, commission, etc. Some brokers might not charge a commission, or some brokers might not charge annual fees. However, they all charge a mix of fees for the services that they provide.

On top of all these fees, you will need to also pay taxes as applicable.

All of the fees charged by a brokerage house add up to a lot of money over time. Even though upfront the fees might not seem like much, but you should be very careful and check all the fees (including hidden fees) that a broker charges.

The best way to compare all the fees is to check the fees on their website. If you’re not clear about a certain aspect, then you should reach out to customer support and ask them to clarify.

It can take a little time to effectively compare the fees charged by different brokers, but it can save you a lot of money in the long run.

Regulatory License

Only sign up with a reputable brokerage firm who is licensed in Ghana for offering trading. Do not deposit your money with a broker that doesn’t have a good track record or are not licensed.

There are 19 Licensed Dealing for trading stocks listed on GSE. And there are 15 licensed dealing members for investing in bonds through Ghana Fixed Income Market (GFIM).

In terms of alternate instruments, currently there are no retail FX brokers licensed in Ghana. But in 2020, SEC of Ghana was reported to have invited experienced forex traders for working on creating framework for forex trading & regulating brokers locally. For now traders in West Africa trade through foreign regulated forex brokers.

Choose Between Discount Brokers and Full-Service Brokers
Not all brokers provide the same services. Discount brokers are brokers that only provide brokerage services. This means that they will only execute trades and transactions on your behalf. Since they do not provide any other value-added services, they also charge slightly less than full-service brokers.

Discount brokers are good if you can trade and invest on your own. They do not offer any guidance or consultation services along with their brokerage services. Hence, you will need to use other sources to gather your information and make informed investing and trading choices.

However, if you’re a new investor, then you may consider signing on with a full-service broker or investing in a mutual fund. A full service broker provides consultation services, research, and advisory on top of their brokerage services.

They basically act like one-stop shops for all your trading and investing needs. However, since they offer more services, they also charge a higher rate for their services. On an average, you can expect to pay double the fees as compared to a discount broker.

Full-service brokers are advisable if you’re a new trader or an investor. The consultation services provided by these brokerages are quite helpful and they may help you reach your financial goals faster when compared to doing it all on your own.

Check Customer Support

Before settling with a stockbroker, you should be very careful of the quality of customer support that they provide. The history of investing is littered with stories of how investors lost out on money because of poor customer support provided by their brokers.

Customer support helps to ensure that you’re never in a position in which you’re facing a problem with your broker’s services but there is no redressal. A lot of brokers will promise big things while signing you on as a customer, but then fail to deliver proper customer support later.

The strength of the customer support is a true testament to how good a broker is. Since each brokerage caters to a high volume of customers, many brokerages try to automate a large section of their customer support. This may be good and more cost-effective for the brokerages, however, it may not spell well for a customer since getting help from a human at the other end is always more helpful.

Hence, you should be sure that a brokerage provides good customer support before signing on with them. Talk to your friends and family and see which brokers they would recommend in this regard.

Educational Material And Research Reports

As mentioned earlier, not every broker provides the same services. Some brokers try to differentiate themselves from the competition by providing value-added services such as research reports and educational material.

Such information is especially useful if you’re a new trader or you don’t have the hang of investing yet. This information can be invaluable in terms of helping you grow as an investor and trader.

If you’re new, this information will help you find which indicators to look out for when making any trading or investing decision. When to rely on technical indicators, when to rely on fundamentals, which metrics to use, and so on and so forth.

However, if you’re an experienced trader or investor, then you might have your own sources for research and making your decisions, rather than relying on a broker.

Hence, the decision to sign on with either type of broker depends on where you are at with your investing or trading career.

Effective Platform

The trading experience is dictated by the trading platform. Different brokers offer different trading platforms to their clients. Some use popular platforms developed by third parties while others use their own proprietary trading platforms.

While looking for a good trading platform, you should check how fast the execution speeds are, how intuitive and user-friendly the platform is, what kind of technical indicators and charts are available, what kind of advanced features are available, and so on.

A good trading platform should be available on the devices that you use. For example, if you’re using an Android smartphone and a Windows laptop, then the trading platform should support both devices. It is crucial that the trading platform be available on mobile as well since you may need to execute trades while on the go.