U.S. Brokerage Firms

Intelligently buy and sell investments through brokerage firms
By Greg Brown If you want to invest actively, you'll need a brokerage firm. A brokerage firm is a group of stock brokers who buy and sell your shares on the open market (hint: buy low, sell high). The services of a stock broker, a trained, licensed professional at a brokerage firm, are necessary to buy or sell in your name.
 

What, you say? Sounds like a monopoly? Not really. Lots of brokerage firms compete for your business, and orderly trading among regulated, professional brokerage firms, including online brokerage firms, helps keep utter chaos and fraud at bay, if not completely out of the picture. Hiring a brokerage firm is not hard, but it helps to decide exactly what kind of investor you intend to be.

In this guide to brokerage firms, you'll learn:

1. Deciding among traditional brokerage firms.
2. Using a mutual fund company as your brokerage firm.
3. Selecting your bank as a stock broker.
4. Bypassing a stock broker for discount online brokerage firms.

Go the traditional route for selecting a brokerage firm

Like your banks big and gray? Or just getting started in investing? It can be reassuring to work with a brokerage firm with a well-known name with a reputation and institutional experience backing it up.
Try: Some of the largest and oldest of the traditional brokerage firms are Merrill Lynch, Morgan Stanley, Smith Barney, and JP Morgan.

Mutual fund providers may offer the services of a brokerage firm

If your expectation of a stock broker is to execute trades and perhaps fork over some research from time to time. Say no more. Log on to your mutual fund provider's website and click on "brokerage," or call them up and ask for information on trading. They'll be thrilled to help, and cheaper in general than a personal stock broker.
Try: Among the bigger mutual funds companies that manage stock trades like brokerage firms, consider Fidelity, Vanguard, and Schwab.

Find a stock broker at your own bank

This wasn't true only a decade ago, but now most "neighborhood" banks are really extensions of enormous financial juggernauts. It can be easier in some ways to hire your bank as a brokerage firm, but make sure the stock broker you get is qualified before getting in big.
Try: Consumer banks now offering stock brokerage firm services include Citi, Bank of America, Regions, Wachovia and Washington Mutual.

Consider online brokerage firms and discount brokerage firms to save fees

If you execute trades daily or simply feel like a stock broker is going to push advice you don't want or need, well, the web is listening. A boom in online broker services means that trading fees have dropped to single digits, one more commodity linked to an up-sell, like wealth management down the line.
Try: Compare and contrast services at big online broker firms, including E-Trade, Scotttrade, TD Ameritrade and Sharebuilder.

• Avoid websites that offer stock trades but little information on who owns the brokerage firm or on licensing and regulation. Scams are legion.
• Cheap does not equal good. If you need research and advice, the fees of a financial advisor stock broker can be regained many times over in gains.
• "Day trading," or buying and selling stocks with hours or days, is possible with an online broker, but not recommended. Get into day trading slowly with online brokerage firms, and use only money you can lose.