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Your life is too busy to hassle with investments all day long -- you either stick mostly to mutual funds or have a portfolio of stocks that doesn't change much day to day.
You make only a handful of trades each year to rebalance your portfolio, kick out a few losers and invest new contributions. You may want occasional access to advice, but you're not interested in paying full-service broker fees.
Here's what should guide your selection:
- Account fees are more important than commissions. What good is it to save $10 on each of your five yearly trades if at the same time you're forking over $25 every three months in account fees? Make sure you know what your brokerage choices charge in account, maintenance, custodial, transfer and inactivity fees, and how much of a balance you need to avoid them. Also, ask about "short-term trading" fees. These relatively recent fees typically penalize customers who sell mutual fund shares within weeks or months of buying them. Find out how the brokerage defines short-term trading.
- Opt for the right choices. So what if the brokerage offers 5,000 different mutual funds, if your favorite fund (or fund family) isn't included? You'll also want to take a look at the brokerage's "no transaction fee" choices, if any, to see if there are enough viable options that allow you to buy and sell mutual fund shares without paying a commission. Schwab's pioneer One Source has the most commission-free funds, but Fidelity and E*Trade have a host, as well.
- Check out their customer service. This is measured in a number of different ways; you'll have to decide for yourself what's most important. At a minimum, you'll want to check out the brokerage's Web site for ease of use. Find out if the brokerage has 24/7 phone service, how long you have to wait for help and whether it has physical locations near you.
- Ask about the extras. Can you transfer cash from your bank to your brokerage account electronically, how much will that cost and how long will the transfer take? Will you have ATM access to your cash, and what are the fees? How about check-writing privileges? If you want an expert to review your portfolio, is that service available and how much does it cost?
- Good tracking is key. You'll want some way to track how well, or poorly, your portfolio is performing. Find out if performance-tracking is a service offered with your statements or online, or if you can easily download your account into personal-finance software such as Microsoft Money or Quicken.
What's not so important? Research and fund-screening tools. If your chosen brokerage offers these, great; if not, you can use MSN Money or Morningstar.
Editor's note: Follow the links in the blue box to the left to read about other investing types and to return to the main article.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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