The Motley Fool: Here’s a guide to comparing brokers

If you’re ready to invest in stocks, a brokerage account will come in handy. Opening one is not much more complicated than opening a bank account. Consider the following as you compare brokerages.

“Costs. Find out how much each contender will charge you in commissions per trade. It can vary from $7 or less to more than $100. Also look at what other fees are charged, such as IRA custodian fees, wire transfer fees, account inactivity fees, annual fees, etc.

“Minimum initial deposit. Some brokerages require at least several thousand dollars, while others have no minimum.

“Usability and service. Check to see how easy its online trading interface is to navigate and use. Ask some questions and see how responsive its customer service people are.

“Banking services. Some brokerages now offer banking services, such as check-writing, money market accounts, credit cards, ATM cards, direct deposit and more. Look into these if you’re interested.

“Research. Many brokerages now offer free company research reports.

“Mutual fund offerings. Many brokerages offer a variety of mutual funds. If you’re interested in particular funds, check to see whether they’re offered. Know, though, that you can usually buy into mutual funds directly from their companies, bypassing brokerages. (Learn more about funds at www.fool.com/mutualfunds/mutual funds.htm and www.morningstar.com.)

“Non-stock offerings. If you’re interested in bonds, for example, see whether they’re offered.

“Convenience. Would you rather place trade orders through an actual person, touch-tone phone or online? See which brokerages offer what you want.

Some of these factors are more important than others. For example, if you trade only twice a year, commission costs might not matter too much. To guide your decision, make a list of all the services you need and how vital they are — then evaluate each contender on each measure. For more guidance, visit www.broker.fool.com and www.sec.gov/investor/brokers.htm.

Ask the Fool

Q: How can I research the risks facing some companies in which I might invest? — R.M., Woodbridge, Va.

A: Start at the horse’s mouth. Publicly traded American companies are required to file annual 10-K reports with the Securities and Exchange Commission (SEC). Accessible at various Web sites and from the companies themselves, these documents detail a company’s financial and operational progress and also address risks facing the business.

For example, McDonald’s recent 10-K cites many risk factors the company faces, such as “global and local market conditions, which can adversely affect our sales, (profit) margins and net income.” Severe weather conditions are also cited, along with terrorist activities, health epidemics and pandemics, and the mere possibility of these events (for example, “the potential spread of avian flu”).

Q: Where online can I find the quarterly and annual earnings reports companies file with the SEC? — P.D., Nevada, Mo.

A. Try http://quote.fool.com or www.sec.gov/edgar.shtml.

My dumbest investment

I’m a new investor. Not understanding the rules hurt when I found Delta Airlines stock trading at 18 cents a share. I thought, “Wow, an easy chance at some dough.” It was scheduled to come out of bankruptcy soon, and I figured that as soon as it came out, its stock would surge. So I bought 8,200 shares of the stock for around $1,500. Unfortunately, I learned about an hour after the markets closed that as soon as it came out of bankruptcy, its current stock would no longer be traded, and it would reissue new stock, mostly to creditors. All existing outstanding stock would be worth nothing. That was a hard lesson. It’s important to understand more about the game before you play. — Jason Hyer, Roy, Utah

The Fool Responds: At least you didn’t lose more money than that. This is a common mistake people make with companies in bankruptcy. If and when such firms emerge from bankruptcy protection, their creditors and others get paid first (often pennies on the dollar), with common stock holders frequently getting nothing.