Best Online Discount Brokers For Cheap Stock Trades
Published 9/14/09 (Modified 3/8/11)
Reviews Of Cheap Stock Trade Offers At Discount Brokerage Firms
Anyone who has ever invested in the stock market before knows that one of the biggest potential drains on one's rate of return is the amount of money spent on expensive commissions and trading fees, paid out to brokerage firms. Regardless of whether one only performs equity, option, or bond trades a few times a year - or engages in heavy duty non stop day trading - broker fees have a nasty and rather surreptitious way of chipping into one's investment profits over time.
Back in the day when I opened my Roth IRA account and started investing for the very first time, brokerage commissions for equity trades were in the $20-30 range. That was how much I paid in the way of transaction fees for a single stock transaction back then - for an account that barely broke $500 at the time. These days, with the emergence of deep discount online brokerages like TradeKing and Zecco - for the same amount of money, one can now buy, sell, and transact securities two to three times over.
Of course, while many of these emerging top online brokers are able to offer their customers extremely low fees and discounted charges for investment transactions, bear in mind that they can do so because they offer their account holders substantially less in the way of investment tools, premium research material, and customer service support. While���� not always the case, you generally get what you pay for. Premium high end brokerage firms such as Fidelity Investments, Charles Schwab, Bank of America, and even Wells Trade charge more for the brokerage services they provide, but in exchange they offer their customers more attention, provide them more expert investment advice, and back up their services with reputations that have been honed for a greater period of time. But even with that said, if you are a beginner to investing and are primarily interested in the major index funds, or if you are an experienced investor who doesn't need the extra hand holding that more expensive full service brokerages provide - then going with the cheapest discount stock brokerage may still be the best option for you.
Personally, I own and retain accounts with most of the major big name brokerages (a few opened just for experimentation purposes). For my fund investments, I invest primarily in established mutual funds run by top fund brokerages like Fidelity, Vanguard, T.Rowe Price, and Charles Schwab. However, at the same time, I also balance my fund-heavy portfolio out with a number of individual stocks, and exchange traded funds (ETF's) that trade like ordinary stocks. Savvy investors who want to maximize their investment returns may want to do the same - utilize popular mutual fund brokerages like Fidelity and Vanguard for no load, no transaction fee (NTF) mutual fund investments - but take advantage of discount online brokerages that offer cheap stock trading rates for individual stock and ETF purchases.
List Of The Top Value Discount Brokers With The Lowest Commission Costs
While going with a cheap stock broker that offers basement prices for equity trades may seem like the natural way to go for the cost conscious investor, I would advise readers to not overlook the importance of value. Sometimes, paying a tiny bit more might be worth it if what you're getting in return in the way of a better trading experience outweighs the cost. After pouring through a large number of excellent online brokers and researching their commission structures and fee tables, here are the results of my findings. For comparison purposes, I've also included the cost per stock trade numbers in parentheses below.
1) Zecco ($0.00 per trade): Zecco customers enjoy a special recurring offer of 10 free stock trades every month so long as they maintain a $25,000 minimum balance or make at least 25 trades each month. However, even if an account���� is unable to satisfy the requirements to get the free trades, the regular Zecco commission rate is only $4.50 per trade - still an extremely good deal for even the most price sensitive of investors. For no load mutual funds, Zecco charges $10.00 per trade. With its tandem promotion of free online stock trades and regular low cost commissions, Zecco will likely appeal to active traders the most. While the gimmicky brokerage firm does not offer the best all around package in the way of investment research features or advanced trading tools for its account holders, those who are willing to perform the bulk of their stock and mutual fund research elsewhere should be able to easily overlook this nominal downside - in favor of Zecco's super cheap rates.
2) OptionsHouse ($2.95 per trade): Charging only a mere flat rate of $2.95 per stock trade, and a flat rate of $9.95 for option contracts, OptionsHouse is one of the most affordable discount online brokerages in the market today. With OptionsHouse, there are no monthly minimum balance requirements and no maintenance fees to contend with. Ranked #1 with an award of 4.7 stars by Barron's in its 2009 Online Broker Survey as the best choice for options traders, the brokerage firm's offerings are not limited to just options. Despite its name, with OptionsHouse, you can trade stocks, ETF's, no-load networked mutual funds, options, spreads, and invest in most of the usual host of financial products you'd expect from any other major discount brokerage firm - but without the high commission cost. Currently, OptionsHouse is running a host of exclusive online promotions, such as offering a free $100 bonus rebate when you switch to OptionsHouse from your current broker, as well as extra $50 OptionsHouse referral bonuses for when you Refer-A-Friend to the firm.
3) TradeKing ($4.95 per trade): Bottom line, Tradeking is one of the best discount brokerage firms out there, and one of my personal favorites. Whether online or broker assisted, trades via the popular brokerage firm are incredibly affordable at a mere $4.95 per equity trade for both market and limit transactions. With TradeKing, there are no minimum balance requirements and no account maintenance fees. The very highly ranked company has won numerous accolades and high praises from major publications like Barron's, SmartMoney, and Kiplinger's for its award winning account features - something that should offer great appeal to both beginners and experienced investors alike. But perhaps TradeKing's most commendable feature is its highly touted and highly regarded customer service reputation. Whether you desire extensive customer service support via a live representative or need technical support via phone or email, TradeKing is there to deliver the support you seek. Currently, the firm is offering a bonus deal of $150 for new account transfers and $50 for each new account referral. For a more detailed overview of my personal experience with the firm, please see my TradeKing review.
4) Scottrade ($7.00 per trade): Scottrade is probably a pretty well established and recognizable brand name to most American consumers, as the firm advertises heavily on mainstream media networks like CNBC, CNN, and elsewhere online. In terms of fees, Scottrade really shines - charging only $7.00 per online trade with no account maintenance or inactivity fees, and low balance requirements. While phone and broker assisted trades do cost more, they can be easily avoided by simply sticking with online trades exclusively (as everyone ought to anyway in this day and age of Internet based brokerages). For mutual fund investors, Scottrade offers a broad selection of���� NTF funds that are completely devoid of fees, as well as a broad selection of out of network funds at a price. But for the majority of retail investors, Scottrade's greatest appeal will likely be the large number of physical branch offices that the company maintains and operates. While most online broker investors will undoubtedly conduct the majority of their investment transactions via the Internet, Scottrade's incredibly large network of branch offices nationwide is there when you need to tap into it. Check out my Scottrade review for my personal analysis of the popular discount broker's pros and cons.
5) TradeMonster ($7.50 per trade): As a subsidiary of options trading brokerage firm, OptionMonster - TradeMonster is a relative newcomer to the discount brokerage scene. Despite its relative newish stature, the company's reputation has already been rapidly lauded and reviewed by financial publications such as Barron's, recently awarding the brokerage firm 4 stars for review categories such as trade experience, usability, research amenities, and portfolio analysis reports. Offering a pretty impressive online trading interface for its account customers, TradeMonster's pricing structure is also quite competitive - at just $7.50 per trade up to 5,000 shares, and a mere $0.50 per options contract. For mutual funds, the company charges $15.00 per purchase and nothing for sales. Trade Monster also offers all of the usual investment products and possibilities, including stocks, options, ETF's, mutual funds, bonds, traditional IRA's, and Roth IRA's. Although new, this low cost brokerage is worth a hard look.
6) E*Trade Financial ($9.99 per trade): E-Trade has been around since the advent of discount online brokerages. In the early days, the company was one of the first to offer an integrated all in one power trading and Etrade banking service for online investors, and one of the first to offer continuously streaming quotes and regularly updated news reports for its customers. Since then, the popular online broker's services and features for account holders have only continued to expand. While ETrade is by no means the cheapest brokerage option in the market, the firm brings forth a tremendous amount of value. The company has won an impressive number of accolades over the years, including the very coveted number #1 ranking for the best overall online discount brokerage firm according to the 2009 SmartMoney best broker survey. In the editorial review, E-Trade received extremely high marks for almost all facets of the firm's offerings, snagging extra praise for its top notch customer service, excellent banking features, and highly regarded research tools. If you want the very best in the way of financial research material and investment calculation tools, you really can't go wrong with E-trade. In terms of fees and charges, Etrade's offerings are decently competitive - charging just $9.99 per equity trade for those who make at least 30 trades a month or maintain $50,000 in account assets, and charging the standard rate of $12.99 per trade otherwise. Currently, ETrade is also offering a limited time bonus offer of 100 commission-free stock and option trades for new accounts.