Choosing the Right Investment Firm

So, you’ve decided to invest; good for you.  It’s (almost) always a good idea to start putting away money for the future, whether for retirement or some other goal.  Chances are that the first place you should start investing is in your 401(k) (or equivalent) plan at work.  Not only will you get a nice tax break, but your company might even match a portion of your contributions; if that’s the case, you’re giving up free money by not contributing.

Once you’ve maximized your contributions to your 401(k) (or at least, invested enough to get the maximum match from your employer), though, you might find yourself with more money that you’d like to invest.  If that’s the case (and again, good for you if it is), you’ll need to open an account with an investment company in order to keep investing.  Which brings up the obvious question, which investment firm?

How To Choose The Right Firm

After all, there are quite a few choices out there, each offering different investment styles and services, to say nothing of different investments.  How can you be sure that you make a wise decision about where to invest?  Well, luckily, there are steps that you can take to help ensure you choose the right investment firm for your needs and your goals.  The first step to doing so is, of course…

1. Knowing your investment goals and needs: There’s any number of reasons you might want to invest, from saving for retirement to wanting to test your ability to ‘pick’ the most profitable stocks.  Likewise, your needs as an investor can run a wide range; you could be a seasoned pro who just wants to be left to your own devices, or you could be an investing novice who wants a lot of hand holding.  There are brokerage firms who cater to each end of this spectrum, as well as plenty that hit various points in between.

And of course, your broker should be able to avoid this kind of situation.

A major decision at this step is whether you want a discount or full service broker; that is, one who will provide you with little, if any, personal consultation (a discount broker) or one that can provide you with much more assistance (a full service broker).  Which one you choose will determine not only how much assistance you get, but everything from the level of fees you pay (discount brokers, as you might guess, tend to be cheaper) to how much research you have access.

2. Knowing what do you want to invest in: Different firms specialize in different types of investments; the ideal firm for a mutual fund investor will frequently be a poor choice for a stock investor, and a firm that’s great for an active trader might not be well suited at all for a buy and hold investor.  Knowing what the firms you are considering specialize in is important in narrowing down your options, and eventually choosing the best firm for your needs.  You can use on and offline resources, such as SmartMoney’s annual broker survey, to get a better idea of what the firms you’re considering do well, or not so well.  On that note…

3. Knowing the history and reputation of the firms: Once you’ve narrowed down your options to a few of the most promising candidates, it’s time for the real research to begin.  Using online reviews, magazine articles, and perhaps even friends and relatives, find out what you can about the firms you are considering, and whether they are right for you.  Even try calling or otherwise contacting their service department for more information; not only will you learn more about the company, but you can get an idea of how they respond to requests from customer in the process.

If you follow all these steps, you should have a pretty good idea of what firm will be the best for you.  When you do, you’ll be all set to start your investment journey.  Good luck, and here’s hoping you have a profitable time!

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