Dividend Broker Tips

Tip: Online Stock Brokers and Dividend Stock Investing

When it comes to trading stock online, in most instances you must use a broker who is authorized to buy and sell stock. Investors should spend the time to research different online brokers. To find the right online broker, you must first ask yourself several questions.  

  • Do you need a full-service or discount broker? (like Fidelity vs. Scottrade)
  • How much will you have to pay an online brokerage?
  • What questions should you ask a broker before you engage their services?
  • How do you get started once you've chosen an online broker?
  • Where can you go for more information?

Most online brokers will provide you with a trading plattform that will allow investors to execute their investing strategy. Some of the popular online brokers include: Etrade, Scottrade, Ameritrade and BrownCo. Commissions vary from broker to broker, depending on the services included with the online account.

Tip: Low Cost Brokers

A low cost brokerage can be considered to be a special case of a discount brokerage which functions in a similar way to a dividend reinvestment program. ShareBuilder, BUYandHOLD, and FolioFN are the better known examples of such low cost brokers.

Low cost brokers are generally less expensive for an investor who invests in small amounts (say, fixed dollar amounts) and who is not particular that the stock trade must happen in real time. Low cost brokers execute orders only a few times a day by aggregating orders from a large number of small investors into one or more block trades which are made at certain specific times during the day.

Such block trades are also sometimes referred to as window trades. Window trades help lower costs in two ways: By matching buy and sell orders within the firms order book the overall quantity of stock to be traded can be reduced thus reducing commissions. The broker can split the bid-ask spread with the investor when matching buy and sell orders - a win-win situation in most cases Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash using which fractional shares of specific stocks can be purchased. This is usually not possible with a regular stock broker. Low cost brokers also provide real-time trades but these are usually (but not necessarily) charged a higher commission.