How to Put Wall Street on Your Side

It's hard to think of a time when Wall Street institutions have been more hated. With too-big-to-fail bank bailouts, the MF Global scandal, and multiple billion-dollar Ponzi schemes in recent years, many ordinary Americans figure that the only way to win the investing game is not to play.

But you can stand up to the big institutional investors that get all the negative press lately. With the right broker on your side, you can get the help you need to execute your own investing strategies to eventual success.

Later in this article, I'll share some ideas on picking the best brokerage firm for your own particular style. But first, let's look at how many investors never really pay attention to this key decision.

Why a good broker is essential
With many things, it doesn't matter much where you buy them. Most grocery stores, for example, sell the same food and carry the same brands. Where you go typically doesn't make much difference.

The temptation is to treat brokers the same way. After all, all brokers give you access to stocks and other investments. But the range of customer service, investing research, and other tools vary so much that picking the first broker you see could be a really big mistake.

Should you trust the rankings?
When you're evaluating brokers, you'll find all sorts of surveys and ratings that pit different brokers against each other. For instance, Barron's released its annual broker survey over the weekend. Here were some of the review's findings:

  • Four companies finished with 4 1/2 star ratings, the best given this year: Interactive Brokers (NAS: IBKR) , TradeStation, TradeMonster, and MB Trading.

  • For category honors, TradeStation earned the top spot for frequent traders, while international trading honors went to Interactive Brokers and options trading favored TradeMonster. Scottrade had the best in-person service. Long-term investors do best at Fidelity, while TD AMERITRADE (NAS: AMTD) was deemed best for novices.

What's right for you?
The key to understanding rankings, though, is that one size definitely doesn't fit all when it comes to brokers. For instance, with monthly minimum fees of $10 and charges for certain data, Interactive Brokers can earn profits from investors even as it offers low commissions. If you don't trade frequently, then you might end up paying more in commissions with those fees than you would at another broker. You have to figure out what category you belong in before you depend too much on rankings.

Even once you find the right niche, however, you should keep an open mind rather than giving rankings too much credit. Consider that for both long-term investors and novice investors, Fidelity and TD Ameritrade were in the top two spots in the Barron's survey, with E*TRADE Financial (NAS: ETFC) and Charles Schwab (NYS: SCHW) appearing in the top four. Yet you might prefer one broker's investing tools over another broker's, even if the rankings would suggest otherwise. E*TRADE recently joined Schwab and TD AMERITRADE in offering commission-free ETFs to customers, trying to entice new investors to open accounts.

Finally, you have to understand that the brokerage industry is in constant flux. For instance, with Capital One (NYS: COF) having recently taken over the ING Direct platform, you may see some changes and improvements to the service. With surveys representing a snapshot that reflects a past experience that may no longer apply, you shouldn't hesitate to take a second look at a broker even if it posted less than perfect scores in a particular survey.

Get the best broker
With so many brokers competing for your business -- and doling out great incentives to open accounts -- there's absolutely no reason why you should settle for anything less than the perfect broker for your investing style. If you're not happy with your current broker, don't hesitate. Start shopping for a broker that will be a better match for you. Finding the right broker can make a huge difference to your investing results over the long haul.

Once you've found the right broker, the next step is to find the best investments. Be sure to check out The Motley Fool's latest special report, which highlights three promising stock picks that you can use to invest for the long haul. Don't wait; get your free report today while it's still available.

At the time thisarticle was published Fool contributor Dan Caplinger absolutely loves having control of his own money. You can follow him on Twitter here. He doesn't own shares of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Schwab, Interactive Brokers, and TD Ameritrade. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is far, far away from Wall Street.

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