What Is A Discount Online Broker?

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There are two types of brokers: full service and discount. In the past, full service brokers were the only ones out there. In the early years of the stock market, nobody traded stocks short term because it was too expensive to pay fees on each trade. If you traded stocks at the rates they charge at full service brokers, you’d go broke fast.

Discount online brokers are much more affordable and only came about recently in the 70s. In the past decade or so, discount brokers have moved to online-only platforms where everything is done online. You don’t get extra services, but you get to trade for a fraction of the cost. Having everything online helps reduce the costs.

Some people prefer full service brokers to help manage their portfolio. Usually these are wealthier people who have more money to begin with. They can afford to spend $100 or more on trades that they feel professionals will choose well. If you think you can choose your own investments effectively, there is no reason to throw a lot of money away on brokers who offer things you don’t need when you can pay much less for trading fees at a discount broker.

There are a ton of discount brokers online. I recommend choosing a broker that offers a fee structure based on your trading needs. For example, if you’re a day trading, you’ll be trading very frequently. Some brokers offer trades that go cheaper the more frequently you trade. If you’re a long-term trader, you can still benefit from discount brokers. You can pay about $10 a trade or less if there is a program tailored toward long term traders who aren’t trying to time the market.

No matter what type of investor you are, you can benefit from setting up an account with a discount broker. Every dollar you save with a discount broker will go toward more shares and more money.

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