The different types of interactive brokerage are mainly centered on online trading. Some of the investment firms deal with stocks, mutual funds, bonds, futures and options. Interactive brokerage may be entirely self-directed by the investor or may include assistance from the investment firm's online tools and service representatives. Individuals as well as corporations may participate in interactive brokerage.
Many investors find that it is beneficial and cost effective to trade stocks online through an interactive brokerage firm. Depending upon the investor's knowledge of the stock market, investment strategy and trading protocol, he may reduce his costs by initiating trades without the assistance of a live broker. The fees and commissions do vary from one interactive brokerage firm to another, but they are typically lower than a full brokerage service.
Investors who participate in online trading usually have to be knowledgeable about the stocks they wish to trade. Some of these firms provide links to information about available mutual funds, stocks and bonds through their electronic trading platforms. Investors are responsible for reading the financial disclosure information concerning their trades, including financial performance history. If they know how to accurately analyze and read financial statistics and information, online trading can be rewarding.
Some interactive brokerage firms realize that not every investor will have the financial savvy to execute trades on his own. Brokerage firms may provide educational materials that allow investors to research different investment strategies and how to diversify a portfolio to achieve those strategies. For example, a young investor may put in his age, expected retirement year and initial investment amount into an online tool. Then, the tool analyzes this information and directs the investor to a fund strategy that emphasizes stocks.
In addition to educating the investor about the fund strategy, the tool may also suggest certain products. These products may include specific mutual funds that invest in a mix of low, mid and high risk stocks, along with some small investments in stable funds. The investor then has the choice of selecting the mutual fund or creating his own portfolio from the other available funds the investment firm offers.
There are a few interactive brokerage firms that give investors the option of speaking to a live representative to initiate a strategy or trade. This usually results in higher fees, which the investors are informed of when they choose the personal assistance option. The actual trading still occurs through the brokerage firm's electronic trading platform, but the investor is guided through the process and given specific trading recommendations.