New To Investments? Here’s 5 Things To Look Out For When Creating An Investment Account.

Tips when creating an investment account

Written by Sherwin Chan, edited by Jackie Tan.

As promised from the previous article, where I shared my personal experience in getting started in stocks, this is the follow-up article where I go into a lot more detail on the things to look out for when creating a brokerage account. After all, when you first decide to dabble in investments, you must first create your platform to stand, and there are many options available for you. So, keeping a lookout for the things written below will make sure you create a sturdy platform that can make your investment life simpler!

#1 Commission Fees

This is a no-brainer thing to look out for. Would you have spent money on a trade knowing that there are cheaper commission fees options out there? Of course not! So how do you go about selecting a brokerage firm from this option? Well, one important aspect is knowing your own investment goals and financial capability.

If you know your investment goal or specific products you want to buy, be sure to choose a brokerage firm with the lowest commission fees for that product you want to buy! Most of the time, there won’t be a specific minimum to have when making your trades, but brokerage accounts do have a basic fee when you make a trade. Keep a lookout for this amount especially if you don’t have enough to hit the lowest band of trade amount.

Lastly, don’t just consider the minimum commission and the percentages charged on the lower end of the trading amount, but look at the fees the firm charges at the higher end of the scale as well. After all, as you progress on, you will earn more income from your job etc., and you will be trading more substantial amounts, and commission fees on the higher end of the scale become essential.

#2 Ease of use of the online platform

This is especially important since 99% of the time you’ll place your trades online (commission fees are usually cheaper this way). Some firms provide very old-school user interfaces to make the website faster by reducing the fanciful user interfaces (useful for those intending to do high-speed trades), whereas I prefer a more user-friendly interface (since I invest in the long term) and only log in occasionally. Every individual has their own needs and preference and needs so make sure you choose based on what you require. The last thing you want for a long-term investor is a platform that’s hard to access the information about the fundamentals of the companies! You can find tons of online reviews of the different platforms in Google regarding this.

#3 Scope and Depth of Research Reports

Investment firms pour tons of money into this area of their operation because if you make the right trades, they earn more commission fees. However, not all research reports are created equally; quality of analysis is essential. Additionally, the coverage of the research reports regarding several markets (E.g., Hong Kong, Japan etc.) and the coverage for medium cap firms and penny stocks. These are usually the neglected ones, but they tend to have higher returns than blue chips (big established firms). The frequency of update is also critical. Do they update quarterly? Semi-annually? And lastly, is the accuracy of the reports. When they recommend buy and give you a price target, how are their hit rate and standard deviation? All these are difficult to answer especially when a newcomer does not have access to the resources but have faith in Google and your researching skills.

I implore you to spend more time on doing this especially if you’re a newbie because research reports by brokerage firms are usually exclusive information and can provide you with more in-depth insight on the inner machinery of how the market works. This information is priceless (not really since you pay via commission fees).

#4 Customer Service

Don’t underestimate the importance of customer service. If you ever encounter any problems in your trades, especially if a sizable amount of your money is tied down, the last thing you want to hear over the phone are stupid jingles that last for eternity, while the customer service officer enjoys his cup of coffee on the other end, taking his time to finish his biscuit before attending to you. Customer service is especially crucial for those who intend to do most of their trades over the phone and for beginners who will most likely face problems over the system when doing their trades.

#5 Freebies

One freebie that is prevalent in most brokerage firms are the attractive sign-up bonuses you can receive. These can come in the form of commission-free trades or a one-time sign-up bonus. After reading all the above, if you still need help in deciding what brokerage firm to use, the freebies that come with the brokerage firm might help make or break the decision you make so make sure you choose wisely. Additionally, some brokerage firms have young investors scheme where they provide lessons beginners on certain basics.

After reading all the above, I hope you have a clearer idea of what to look out for when choosing a brokerage account. Remember, the above is just a short list and explanation of what to look out for. Don’t neglect your research into the company and make sure you tailor your investment needs to the best brokerage firm out there. Having an excellent online platform can make your experience investing an enjoyable and more importantly, profitable one 🙂

Been doing lots of research, but not sure who to engage to take the final step? Look no further! fundMyLife connects you to credible and incredible financial advisers privately and anonymously, based on the financial planning questions that you ask. We aim to empower Singaporeans to make financial decisions confidently.

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