For a long time, the assumption was that if you wanted to invest in stocks, bonds or anything more complicated than a savings account, you would need to find yourself a trustworthy broker in the area. But with the emergence of online brokers, the market has changed, opening the possibility for you to make your own investments.
The investment world has always had a mystique around it, with the perception that trading stocks or navigating the workings of the financial system requires a unique set of skills. And that idea tended to create separation between investors and the money they were putting into the market. Traditional brokerages would offer financial planning and advice, as well as conducting all the trades or other business that you needed addressed.
By giving investors the tools to manage their finances themselves, online brokers allow for the creation of a more personalized investment strategy, but also remove the experience and resources provided by the traders themselves. While this jump can be intimidating, there are some very real advantages to be gained from choosing a brokerage site over a traditional brick-and-mortar advisor.
Traditional brokerages often advertised themselves as being highly personalized, with individual attention from a broker for each client. But at the end of the day, these businesses all had their own biases, as did the individual advisors. Left to their own devices, they would rely on a fairly standard package of investments and, what's more, they would often push hard to promote certain partnered mutual funds.
Online brokerages, on the other hand, impose no particular strategy for investments. This means that as an investor you are solely, personally responsible for the success or failure of your own investments. But it also means that you can take whatever approach you deem appropriate without any pressure from a broker.
Convenience and Control
An important part of being able to take personal responsibility for your investments is to be able to carefully control how and when trades are made. Traditionally, you would need to call or visit your broker, sometimes needing to set up a meeting, simply to be able to arrange a trade. By giving you complete access to your investment portfolio through a web portal, online brokers provide you the opportunity to make trades, check prices or make other changes from anywhere around the world.
Admittedly you should be wary about accessing this information on unsecured networks, but many online brokers have started to roll out secure mobile applications that allow you to do all the necessary research and make trades even on the go.
More Information, Faster
One of the advantages of having a traditional broker was, ostensibly, to have someone who could parse the information on your investments to put it into a comprehensible form. The problem with this is that it assumes the broker, firstly, will be effective at condensing and conveying complex information and, secondly, will know what information you want. If you understand what kind of investment strategy you want to take, there may be key details that get left off or that the broker simply does not want to share.
With an online broker, these problems disappear entirely because, once again, you are relying entirely upon your own abilities to find the information you need. The difference, however, is that these brokerage sites provide a wide range of research tools that can help you collect information and present it in a digestible format. The depth and ease of use of these tools are key considerations for comparing online brokers.
Of course, with direct control of your portfolio, there are also a range of unrelated websites and investing services that you can also make use of more reliably. But having research tools embedded in your broker's site with which you are comfortable can make the process that much more convenient and encourages you to check any moves before you make them.
In addition, some more expensive online brokers even provide access to more exclusive reports from analysts or credit ratings agencies.
Cost Above All
The single simplest and best argument in favor of using online brokers, however, is a simple matter of cost. Sometimes it can prove difficult to compare online brokers on fees and other expenses, because these can depend heavily on the fine print. But on the whole, it is usually safe to assume that an online broker will offer significantly lower costs than a traditional broker, simply because they are offering less extensive personal services.
There are a number of other positives as well, ranging from ready access to personal records to rapid trade execution. Ultimately, however, all of these advantages depend entirely upon how comfortable you feel as an investor operating largely on your own.