Investing is a key component of your ability to comfortably retire, and a key component of this is investing in stocks and exchange-traded funds (ETFs). While you might not be aware of it, you have many different options when it comes to buying and selling these securities, with each of these options providing a different set of services, costs and limitations.
This article describes the three ways in which you can buy and sell stocks and ETFs, so that you can decide for yourself which one is best for you.
1. Full-Service Brokerages
Full-service stock brokerages are traditional stockbrokers that offer a full complement of services to their clients. Not that long ago, they were the only means most of us had to buy and sell securities.
With a full-service brokerage, a licensed broker (or a group of them working at a firm) actively manages your investment portfolio, buying and selling securities on your behalf. They also constantly seek out good investment opportunities and recommend these to clients, sometimes on an exclusive basis. Because of all this, the fees for these brokerages are the highest of the three options available.
But a good full-service stockbroker can be well worth the money, as they often can find you great stocks that you might not be able to find yourself. They also do all the work for you, freeing your time for other things. What’s more, you can usually visit them in person and talk to them on the phone.
2. Discount Brokerages
Discount brokers were created in reaction to the high-fees of full-service brokers. These brokerage firms charge far smaller commissions than their full-service counterparts. Some, in fact, do not charge commissions at all. At the same time, they also do not provide active portfolio management. The people who use their services have to do their own research when it comes to deciding what stocks and ETFs they want to buy or sell.
However, unlike full-service brokers, discount brokers typically provide their clients with great research tools that they would not have access to otherwise. If you know something about business and finance, or are willing to learn, you can use these tools to help you find stocks that have the potential to grow in value.
Another advantage that discount brokers commonly have over full-service brokers is that they offer online access. So, you can make your trades instantly over the Internet wherever you happen to be. What’s more, many also have brick-and-mortar locations if you prefer to do your trading offline.
3. Online Investment Platforms
Online investment platforms are websites and apps that let you buy and sell stocks and ETFs (as well as other types of investment instruments) exclusively online. So, you cannot trade with them offline. On the positive side, they generally have the smallest fees of the three options, with a number of them being free or close to it. But they also provide you with the least investment help of the three options.
While many online investment platforms do offer some type of research tools, they are usually not as comprehensive as the kinds that discount brokers provide. This means that these platforms are best for those who know exactly what securities they want to trade.
An exception to this is a type of investment platform called a robo-advisor. These use advanced AI and machine-learning techniques to match novice investors to investments that will best meet their needs. Focused mostly on ETFs, robo-advisors can also manage your portfolio, adapting it to maintain your goals. They can further automatically withdraw and deposit funds on your behalf.
There is not one best way to buy and sell stocks and ETFs. But, by using the information in this article, you can find the one that will best suit your needs.