Which Broker Is Best For Long Term Investing?Jan 28, 2024
Hello Stoic Investors,
Today we’re going to talk about how to choose the best broker for you.
Finding the best broker is the first step you need to take when you start as an investor, based on
where you are, your needs, and just find something that is quite reliable.
What is a brokerage account?
A broker is simply how you access the stock market; it's your way to be able to buy and sell stocks, bonds,
ETFs, funds, whatever is available in the market.
It's a very important choice because it's basically the tool that you're going to use to be an investor, which is
the most important thing when it comes to growing your money, and it's the place in which you hold your
Many people don't understand that at the end of the day, a broker is simply a bank that decides to offer this
service. Probably also your local bank can give you the brokerage service.
The problem with those is that most of the times when you have a bank that does a lot of things like
mortgage, credit card, saving, brokerage account, investments, they do everything decently and nothing
The general suggestion is to use a bank that just focuses on services as a broker.
These are usually the apps that you may hear more often, like Fidelity in the US, Free Trade in the UK,
Degiro in Europe.
All of these are banks that just decided to focus mostly on these types of services, and that's what we want
to look for.
What to look for in a broker
Let's understand first of all what to look for in a broker.
Of course, it's difficult to summarize everything, but these are the most important questions you should ask
yourself when you're considering a broker:
1. Easiness of usage:
It’s important because you're going to use the broker to invest a lot of money hopefully over the years, and
therefore you cannot use something that is clunky, that is not easy to understand, that doesn't show you
everything as you want.
You need to find something that you are comfortable to use.
The easiest way to solve this, you can do as I did, which many years ago, I literally opened 14 brokers, and I
tried all of them to just see which one I like the most, and then I closed 12 of them and kept two, which are
the two that I use, which are FCO and Interactive Brokers.
But you can avoid the stupid bureaucracy mess that I did and simply watch YouTube videos about the
interface and see if you like it or not.
By the way, another easy way to understand a bit more about a broker is just to go into the website
brokerchooser.com, which will help you find the right broker.
This selection is good, but you need to at least understand what you're looking for to appreciate the
selection that the Broker Chooser can give you.
The first thing you want to understand is “Does this broker have a banking license?” Because I told you
before that most brokers are simply banks, but this doesn't mean that to be a broker, you need to be a bank.
What is the consequence of not having a banking license? That you are much less regulated, there's much
less control on what you do, and therefore you are more likely to do bad stuff or scamming or frauds.
Again, it's not that it happens every day, but if you're playing around with a few thousand dollars, sure,
choose whatever app works well for you. But if your plan is to reach 1 million in net worth and more, maybe
it's best that you already choose something that you can be comfortable to keep a lot of money in.
And so you want a broker that has a banking license. You can find this for any broker very easily if they have
it or not, you just type it on Google.
And second, you want to check whether they had any scandals in the past.
Here I'm giving you two examples: Trading 212, which is a very common platform in Europe, not one of my
favorites, but had a problem in which when there were some crypto movements, they basically blocked
people to buy or sell certain investments, which tells you how this broker will operate; they can block you in
doing certain things.
Again, it's something in the past, we're talking about 2017, so maybe things change, but it's just one thing to
Robinhood is another platform that had a few scandals, for example, the GameStop scandal or the problem
with payment for order flow, which is a shady practice.
I'm not saying this, but Charlie Munger said this, one of the biggest investors, that this is a very shady
practice to basically take money from you without you even noticing.
So overall, you want to see that they have a good reputation.
“Is the fee structure simple to understand?” It’s important to ask this and not “Are they cheap?” because the
problem with many brokers is that you truly don't understand what you're going to pay because maybe you
pay a percentage of the order that you buy and sell, and then also something in the assets, and then we
have a fixed fee.
There's a lot of things that can make things complicated, and at the end, you don't understand what you're
going to pay.
So if you're searching for the fees of a broker and you don't understand, drop it and go to the next one
because they are trying to trick you with complicated stuff.
And then a related question is “Do they charge fixed fees vs transaction fees?" Which means "Are this
broker something like a subscription-based, it costs a fixed amount per month, and then everything you do
inside is free, or do they make you pay something every time you buy or sell?”
The best one for you, generally, it depends on how active you're going to be, how many investments you're
going to do on a monthly basis.
The more investments you plan to do, probably it's best to have a fixed fee because at least you know that
you can operate as whatever you want.
If you know instead that you're going to do something very simple, probably the transaction fees based
brokers may work better for you because you just are going to maybe buy once per month the same
investments, and so you probably don't even pay anything.
Also, you need to understand if they apply order flow. What is this? It's the shady practice that we mentioned
before with Robinhood, you want to know is they don't do order flow, that is the simple idea.
Some of my students' questions
Now, I’ll share with you some questions that my students in my coaching program ask very often.
The first question that I always receive is “What if my broker goes bankrupt, do I lose all my money?”
Well, there's a difference between how your cash and your investments inside the broker are treated. Cash
in a broker is protected up to government limits (e.g., $100,000 in the US, €100,000 in the EU, £85,000 in
the UK). If a broker fails, cash beyond these limits might not be safe. However, investments are fully
protected and can be moved to another broker, as they can't be used by the broker. It's advised not to keep
too much cash in a brokerage account.
Second thing “What if I want to change broker?”
You can migrate your asset across brokers; it's the same exact thing. You simply need to open a new broker
account, ask to migrate the assets from the previous broker, the two brokers will talk with each other, and
they will handle this procedure. It takes a few business days, of course.
And finally, the other question that I always receive, especially from international students, is “What happens
if I move somewhere else?”
The first thing you need to do is to close all the accounts and pay your due taxes as realized gains before
opening a new account in a new country. You can simplify things by using a broker account that is available
in multiple countries.
For example, I use Interactive Brokers, because is available literally everywhere.
My favorite list of brokers by country
Let’s finally have a look at my favorite list of brokers by country.
This is not based on my favorite choice or because I'm paid to say this; I don't get paid to say this, but it's
simply what my students that are from 25 different countries told me in terms of feedback.
Canada: Well Simple for simple strategies or Interactive Brokers if you want to do complex stuff.
UK: Free Trade or Trading 212. In both cases, you have the ISA brokerage, which is an important broker to
use in the UK.
Germany: Trade Republic is the favorite one.
Italy: It’s my country, so in my opinion FCO, because you can avoid a lot of tax complications if you use a
The rest of Europe: Degiro is my favorite safer option, or Trading 212 is a cheaper option.
Singapore, Hong Kong: a lot of people there use Moomoo, and I enjoy it.
The rest of the world: Interactive Brokers is always a safe choice.
In conclusion, I hope this newsletter can help you to understand how to get started as an investor.
You know, the broker is your companion; it's what you're going to use for the rest of your life, so it needs to
be something you enjoy doing and also that doesn't cost you too much money and it's safe.
So, Note Down These Points and Start Investing Today:
1. It’s important to select a broker that suits you, because it is your access point to the stock market.
2. Consider the easiness of usage, safety and fee structure clarity to choose you broker.
3. If your broker faces bankruptcy, cash holdings may be at risk above certain limits, but your
investments remain secure and transferable to another broker.