I’ve actually been thinking of expanding beyond my high yield savings account. Since I’m a novice about investing, I figured that I needed to take a hard look at online brokers before I go about signing up with one.
According to SmartMoney’s Broker Surveys, when shopping around for a broker, I should be concerned about commissions, research, investment products, and customer service (or the lack of it as the case may be). Since I’m investing with a budget in mind, I’m also going to have to watch out for transaction fees, the minimum amount I must use to open the account, and the penalties, if any, for closing my account. It also bears repeating that there are risks associated with investing.
Online Stock Brokers With Cheap Brokerage Fees
So here’s a look at some of the online brokerages I’ve had the chance to evaluate (note that they are in no particular order):
Pricing. The first stop on my tour was TradeKing. Right away, I noticed their low commission costs! Working with TradeKing will cost you $4.95 a trade plus 64 cents per option contract, while broker-assisted trades won’t cost any more than that. I like the fact that there aren’t any account minimums, and that they don’t surprise you with any hidden fees.
Customer Service and Tools. Thanks to their customer service, TradeKing has earned awards from sources like Kiplinger’s, Barron’s and Smart Money. Clients also have access to tools like research reports, a tax manager, a profit and loss calculator, and more. What more, a TradeKing account is protected up to $25 million (not from investment risk, but from fraud or company failure).
Resources and Education. If you have questions, you can refer to TradeKing’s investor community or the live chat on their website, or you can call to speak to a TradeKing stock broker. There’s also an education section with information on trading strategies, an area for novices, and even webinars to download!
I believe that overall, TradeKing is one of the best online brokers available today because of their user friendly site, streamlined tools, top notch customer service, and most of all, their simple, flat commission pricing. Do take note that if you want to open a margin-enabled account, Federal regulations require $2,000 for it.
Pricing. Another popular online stock broker is Zecco. It would be great to get free trades, and this site offers a chance at 10 free stock trades a month if you maintain a balance of $25,000 or if you execute at least 25 trades each month. Otherwise, stock trades are $4.50 each. Option trades are $4.50 per trade, plus 50 cents per options contract. Note that the free trades only apply to the first account of each type opened.
For equity trades, a broker-assisted trade will cost $19.99 and there’s a variety of other fees ranging from transfer fees to wire fees that you need to be aware of. There aren’t any account minimums or inactivity fees here, either.
Investment Tools. If you want to use premium tools, you can access performance and tax planning tools for a two-month trial period, then pay $24.99 a month for a six-month subscription. For $20 a month, you can sign up for streaming quotes, too. Note that you can also access a variety of free tools that are available through the site: they range from calculators and screeners to analytics tools.
Educational Section. Before you sign up, you may want to check out Zecco’s Trading Demo to give yourself an overview of the site’s layout and services. There’s also an education section that offers videos and coverage of investing and trading topics, such as techniques for stock and options analysis, the basics of IPOs, and more.
Pricing. Another familiar online stock broker is E*Trade. Pricing is a bit more complicated here. To drop your trades from the standard $12.99 to $9.99 per trade, you need to maintain $50,000 in assets or have 30 to 149 trades per quarter, while option contracts are 75 cents each. A broker-assisted trade adds on $45. What’s good to know is that the more you trade per quarter, the lower your cost per trade is — so they have a tiered pricing structure at this brokerage house. You can actually lower the cost of your trades to $7.99 per trade if you manage to make 150 to 1,499 transactions quarterly, although I find that to be quite tough to do unless you are a stock trading maniac. Who wishes that they should just adopt a simple flat price per trade?
Investment Tools. If you have an iPhone or BlackBerry, you can take your trading on the road with E*Trade Mobile Pro. Clients can also find beneficial tools like quotes and charts, a strategy scanner, and more. E*Trade is actually known for its solid set of tools, which you’ll be able to use once you are a qualified client.
Security. To cover security issues and address security concerns, E*Trade offers fraud, payment and privacy protection. You can even receive smart alerts via email, PDA, or mobile phone for each transaction on your account.
Which Online Broker Should You Choose?
Although E*Trade’s gotten my attention because of its ad campaign in the past, the broker-assisted trade fee of $45 seems high, relative to its competitors. Looking into Zecco and TradeKing, we see some lower fees overall. I like the chance to receive 10 free trades a month from Zecco, but if I’m interested in broker-assisted trades, TradeKing seems to have an edge.
In my mind, you can decide which broker to sign up with based on your priorities and goals: for simple pricing, TradeKing is my pick; for active traders, Zecco may be most cost efficient due to the free stock trades, while ETrade excels with their suite of investment tools.
Before you sign up with an online broker, study the offerings, fee structure, and research tools — you might save yourself some money by doing so!