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Let’s pretend you have read piles upon piles of books, read the extremely informative articles on this website and you have spent the last seven-hundred hours researching stocks and you have even gathered up some money that you want to invest into them. There’s only one thing left to do: choose an online brokerage.
Many people will give you the option of regular brokers or whatever else exists, but let’s face it, we are in the age of the internet where everything is cheap, fast and convenient – so I’m not going to recommend you take up telephone trading among other things, unless you are ninety-seven and have chronic hemorrhoids.
That’s why I recommend an online brokerage where you can buy and sell stock at the click of a button (literally). To set up a brokerage account all you need is (typically) your name, contact information, Social Insurance Number (SIN) and bank account details – and then you can start rolling in the dough!
I also recommend an online brokerage since their commissions tend to be significantly lower than other means of trading stock (if you don’t know what commissions are, keep reading).
The way most online brokerages work is the more trades you make per quarter (for example, buying stock is one trade, selling it is another trade), the less money you have to pay for each transaction. For instance, TD Ameritrade (an online brokerage) currently charges $10 per trade, flat.
On the other hand, E-Trade charges $13 per trade, but if you make over 150 trades a quarter you are charged only $7.99. Then again…I don’t know how much speed you have to mix with your cocaine in order to make that many trades in three months.
For those of you who aren’t familiar with how buying stock works or if you had a large chunk of your brain blown out in Vietnam; whenever you make a transaction in order to buy or sell equity, such as a stock or bond, you are charged a commission fee.
So, say you open up an account with E-Trade, and buy a stock: you will be charged $13 for purchasing shares and then when you feel that you are ready to sell, you have to pay another $13 for the transaction to sell. That’s twenty-six bucks ripped out of your deadly kung-fu grip and there’s nothing you can do about it.
Let’s say you invested $1,000 for the above process. That means your $1,000 investment has to grow by 2.6%% just to break even and make that $26 back. On the other hand, if you invest $10,000 you will only have to grow your investment by 0.26% in order to break even.
That 2.6% of $1000 may not seem like much, but you have to remember that many professionals can barely make 2.6% returns in one year. Also, the higher your return, the more your money compounds and the richer you get.
For those who are weary about managing your own investment account, especially making buy/sell orders online, I’ll say this as plainly and simply as possible: If you are mentally fit to handle a pomegranate, then you can handle an online brokerage account.
Your brokerage’s website should have some dandy, easy-to-follow guides to help you through the process of opening your account, making trades and closing your account after you lose all your money because you haven’t been paying close-enough attention to my sacred advice.
Here are some links to lists and comparisons that compare the online brokers that are available to you:
For the Americans: http://www.thedigeratilife.com/blog/index.php/2009/01/09/best-online-stock-brokers-cheap-stock-trades-online-discount-brokers/
For the Canadians: http://www.milliondollarjourney.com/review-canadian-discount-brokerages.htm
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Thanks Mr. Moneybags that was great help for me…… I’ll definitely be a regular visitor
I0J5s0 I want to say – thank you for this!
Hello from Russia!
Can I quote a post in your blog with the link to you?
You’re all welcome…except you Polprav, how dare you ask me that? You want to take all of my sweat, blood, tears and not to mention hard work and use it to your advantage? You make me sick. Who do you think you are?
Nah, I’m just kidding. Sure, take it. In fact, pass on the information in fact I encourage everyone to pass this site along to everyone they know – hopefully we will be able to cure the world from stupidity…maybe even raise the GDP a tad.
What about the Europeans? (The Netherlands to be precise)
optionsXpress all the way! http://www.optionsxpress.eu/
Thanks a lot for your quick response!
Why would you say optionXpress all the way?
Potential buyer of a rope.
Although their rates are a tad high (15 per trade), absolutley everyone I know that uses these guys LOVES them as opposed to the death threats that all the other brokers get, plus they were rated the number one online broker by Barron’s for four years in a row which is pretty damn respectable. Of course, I am of the master of all things America so I wouldn’t be able to give you information about specific brokers in your area (hence…I sell rope).
I would recommend you head over to one of your local bank’s branches and they should give you all the information you need, most of them will even be happy to tell you about competitors (although expect a sprinkle of bias in what they say).
Dear Mister Moneybags.
Thank you again for your quick response! That does sound good and i will most definite try that one out. All tough i have one question regarding the commission.
Alltho i already know the answer, im just qualifying myself for a cheap rope.
It says:9+ Trades/Quarter2 $14.95 (1000 shares) $0.015 / share (1001+ shares).
That means that for every share above 1000 you pay 0.015 extra? (Again i already know this answer)
But, when will you ever be over 1000? And will it be by a large amount
Will im writing this im looking at the ceiling lol
Regards Scrooge McDuck
Bram/Scrooge, you are exactly right (so no rope necessary…yet). 1000 shares will cost you $14.95, 1001 will cost you $15.10, 1002 will cost you $15.25, etc…
Most of the time you will run into a case of buying over 1000 shares when you are buying penny stocks or just cheap stocks. For instance, say you want to buy shares of Sirius XM Radio (SIRI) at $0.63 and you want $1,000 worth (not including commission). That is 1587 shares and commission will cost you the intial $14.95 plus a saddening $88.05 to make $103 – so, just to break even you have to make a 10.3% return on investment.
Other times you will see this happen is when rich bastards (i.e. Mr. Moneybags) have many big fat moneybags to spend. So, if I want to buy $1,000,000 worth of Apple shares ($204.19/share), I will have to buy 4,897 shares.
Mister Moneybags, thanks for the superior educative responses!
I guess we will just have to accept that fact i guess?
Really enjoyed reading your book btw. Made me laugh lots of times.
Im reading all your articles as well.
Keep up the good job, which you will.. since your a pile of big fat moneybags.
Hi there,
I’ve read so many of your articles, and have taken down alot of great advice. I know you often say one of the differences between the average joe on the stock market and an investor is that investors look at the long term and aren’t fazed by fluctuations. However that is easy enough to say, but how do you tell if it isn’t just fluctuation? is it just that you really have to pick the right stocks and go from there?
Also, how long do you have stocks generally in companies before they return, say, 30%? do you sometimes leave them there for years and then one year they start to go up alot, or does it happen straight away (eg. first year?) just because you have picked the right company?
I apologise if these seem to be stupid questions, i’m really new and i want to be completely educated in every form possible before i start.