Image source: Getty Images
Whether you’re investing for the first time or consider yourself an expert, you may wonder if there are any benefits associated with using a discount broker. After all, you don’t want broker fees to eat into your potential profits. Here, we cover what a discount broker does and several ways using a discount broker may benefit you.
What is a discount broker?
Like a traditional broker, a discount broker makes it possible for you to buy and sell securities. The difference is that a discount broker won’t hold your hand through the process, and you’ll pay lower fees. As long as you’re comfortable making trading decisions on your own and are OK with (potentially) only having access to a brokerage online, a discount broker may be just the ticket. If that sounds like a fit for you, consider the following benefits of working with a discount broker.
1. You can get upfront savings
A discount broker can help you build a diverse portfolio at a fraction of the price. Many offer their services for much less than a traditional broker, and some even offer certain services for no fee. This can be especially helpful for beginner investors looking to get their feet wet without incurring too many extra costs.
2. The variety is there
You have access to tax-advantaged and taxable investments with a discount broker -- and a wide variety of investment types from which to choose. A discount broker can hook you up if you’re interested in ETFs, stocks, or cryptocurrency. Want to dive into a mutual fund instead? A discount broker can do that for you. You may even be able to pick up IPO stock.
3. The rules still apply
Discount brokers may have a little more flexibility than the garden-variety traditional broker, but they’re still subject to the same government regulations as all brokers. For example, the brokerage must be registered with the Securities and Exchange Commission, belong to the Financial Industry Regulatory Authority, and also be part of the Securities Investor Protection Corporation.
4. They provide unbiased assistance
One advantage of working with a broker who doesn’t offer advice is that the broker has no interest in selling you any specific investment. There’s no commission it in for them and no reason to push you toward anything you’re not interested in buying.
5. You can access them anywhere, anytime
There are few things more convenient than being able to log on from anywhere and execute trades. Let’s say you’re on a small island, sipping cocktails with friends, and someone tells you about an incredible up-and-coming company. It’s publicly traded, so you can jump online and buy as much stock as you desire. There are no offices to visit and no traffic to fight. You don’t even have to change out of your flip-flops.
6. Many offer a wealth of educational materials
Brokerages that have been around for a while often offer an extensive array of educational materials via their websites. You’ll likely find what you need online if there’s any investing area that you’d like to brush up on or learn more about.
While there are definitely advantages associated with making trades through a discount broker, it’s essential to look out for hidden fees. No matter how much a broker advertises low commissions, the proof is in the pudding. Before working with a discount broker, find out precisely how they make their money and make sure little (or none) of it is coming out of your pocket. To learn more about how the two types of brokers stack up, take a look at our guide to traditional and discount brokers.
The Ascent’s best credit cards
We’ve vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class picks pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with The Ascent’s best credit cards.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
