The platform supports trading on a remarkable number of international stock exchanges, as well as fractional share investing. You can also set up a direct dividend reinvestment plan, which ensures that dividends generated are reinvested immediately without the need for regular account monitoring.
Interactive Brokers is one of the most advanced internet brokers in the United States. However, the platform’s interface and technological features may be intimidating to a novice investor.
What Qualities Should an Online Broker Have?
Technology has transformed investing, with online brokerages gaining popularity in the United States and around the world. In addition to much lower transaction fees and annual maintenance fees, online brokers enable rapid transaction processing, allowing traders to capitalize on quick intraday price surges and stock drops. Let’s have a look at some of the main factors that will influence your decision.
The cheapest is not always the best option.
The majority of investors choose the broker with the lowest brokerage charge. That fee is now often nil in many cases: commission-free trading is the standard. That is beneficial, but don’t forget other important features such as broker support, access to information on various investments, and investment restrictions based on geography, citizenship, and so on.
It’s also vital to realize that even zero-commission brokers have to make a profit. They frequently do it through “paying for order flow,” which distributes transactions to the market maker who pays the most commission to the broker rather than the one that offers you the best price.
If you are a frequent trader, having zero-commission trades is vital, but it should not be your only consideration, especially if you are a buy-and-hold investor.
Beware of Excessive Gamification
Several online brokers frequently “gamify” their platforms in order to attract new customers and encourage frequent trading. While gamification features may appear tempting, they can lead less experienced investors to be misled by the herd mentality, resulting in huge losses as the hype dies down.
“Gamification tactics in trading apps and personal recommendations on social media may cause regular investors to engage in trading behavior without comprehending the dangers involved,” the European Securities and Markets Authority explains. The Securities and Exchange Commission (SEC) of the United States is presently investigating the latest gamification developments.
Examine the Platform Restrictions
Online brokers frequently offer add-on services such as international market investing, paper trading tools, and curated research newsletters. Depending on your investing style, you should investigate the additional bonuses given to get the most out of your broker.
