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Review of best online stock brokers for trading stocks

Published 12/27/07 (Modified 3/1/12)
By MoneyBlueBook

Updated list of 10 best discount brokers

So, you are finally sold on the idea of signing up for an investment brokerage account so you can start making money by investing in the stock market. Or, perhaps you are already an experienced trader but at times still wonder what other brokerage options are out there? These days there are a lot of options out there but it can be sort of confusing trying to find the right online broker. There are many choices available, from full service premium brokerages to deep discount online brokers. Relying on authoritative financial and investment sites for guidance and opinion reviews isn't always definitive either since they occasionally have differing opinions. The best way to choose the best and right broker to handle your investments is to do a combination - by sticking with the popular ones that have been around for some time and have been sufficiently subjected to adequate scrutiny by the investing community, as well as go with the brokerages that have consistently appeared at the top of reputable rankings and researched reviews.

Know Thyself To Better Determine Brokerage Fit

Factors to consider when choosing the right online broker include the type of investment vehicle you intend to trade (stocks, bonds, mutual funds, indexes, options), the amount of your investment, the type and amount of research material you want, customer service, website design and layout, and trading reliability. It's important to know what type of investor you intend to be. Do you plan on being an active trader with numerous trades per week, or do you plan on being an index, mutual fund type investor who prefers to leave and then forget it. These things matter because many brokerages charge fees and commissions that differ depending on how much you invest and how frequently you trade.

Choosing Discount Brokers Over Full Service Brokerages

I am a hands on investor so I prefer to do things myself. This is not to say I want to handle every single minute detail, but I personally don't need the services of an expensive account adviser for investment decisions. That's why I prefer to go with more affordable online discount brokers over their more expensive full service cousins.

Full service brokers offer a much broader variety of financial products and provide a much wider array of investment advice and research than do discount brokers, but then they charge much higher fees for their services. They justify the much higher commission rates by offering a lot of investment advice and by providing active recommendations. However, keep in mind the advice they provide are usually just educated guesses. Frequently, much of the investment advice and research material can be found elsewhere for free and the educated guesses they provide doesn't always lead to the best investment decisions since no one can truly predict or time the market. It's primarily sales commission-based so they frequently have an incentive to solicit business and encourage active trading, which can occasionally cause suspect and even conflict of interest investment choices. Because of the excess premium you must pay for full service firms, I recommend sticking with discount brokers.

Due to continual competition, many discount brokers now also offer a decent wealth of financial research and investment material at your online fingertips. There are less frills than premium brokers like Merrill Lynch, Morgan Stanley, or Wells Fargo, but I think for most reasonably educated investors, the discount path is the way to go. The considerably lower fees will enable you to lose less money from unnecessary commissions and help you maximize your money.

There are many brokerage firms out there from expensive fancy pants full service brokerage firms to more affordable premium discount and deep discount brokers. Since I advocate sticking with much cheaper do-it-yourself online discount companies, I'm listing the best ones in my opinion. However, all of these discount broker choices would certainly benefit more experienced, seasoned investors as well. I'm also recommending a few popular more-premium brokers such as Fidelity and Vanguard that many like for the exceptional low cost funds they offer as part of their own transaction free network of mutual funds.

The Top 10 Best Online Discount Broker (Listed In No Particular Order)

1. Zecco - Zecco is a popular online broker choice among investors who want to enjoy free trades and not have to pay a fee for each equity transaction. Currently the commission cost is free for the first 10 trades per month if you maintain a minimum of at least $25,000 in total account equity (total balance of all cash and stock value). If you are unable to maintain the balance requirement, then each trade will require a $4.50 trading fee. Even with the fee, Zecco offers one of the lowest trading fees among all popular discount brokers. Also, there are no hidden inactivity fees, which is great for those who don't intend to trade too often. For more information, check out my review of Zecco, and my account trading experience with them.

2. TradeKing - TradeKing offers exceptionally low $4.95 equity trades, with no inactivity or maintenance fee, which is very good. The trading interface is pretty average but decent, and the online customer service chat feature is useful, although many brokers are starting to provide this function as well. For a more detailed breakdown of all that TradeKing has to offer in terms of combining low trading costs with premium online brokerage features, please read my TradeKing broker review.

3. E-trade - Bonus Offer: E-trade is currently offering free trades for 60 days. This special Etrade bonus offer is also available for new new IRA and Roth IRA accounts as well. If you haven't yet opened a retirement Roth IRA, this may be your best opportunity. Etrade has been around for some time and is quite popular due to the wealth of tools and research information the company provides to account holders. Etrade is one of the few full service discount brokers out there that also offers an integrated online bank as well - complete with Etrade bank savings and Etrade checking privileges. Its stock commission rate is tiered at a standard rate of $12.99 but drops the more frequently you trade and the higher the value of your accounts. Customer service has occasionally been spotty, but it's rapidly improving. If you're looking for an all-in-one broker/bank, Etrade's your best bet.

4. Scottrade - Scottrade offers actual brick and mortar branches throughout the country that some investors find useful. I personally don't find it necessary but many appreciate the convenience of having actual branches nearby that they can visit, a benefit not offered by many other online brokers. Its biggest downsides include providing much less research material for account holders and offering a much lower interest rate for its cash accounts than its competitors. However, there are many pluses as the company offers very good customer service and provides a wide selection of No Transaction Fee (NTF) funds. Its commission fees for equity and limit trades are exceptionally low at only $7 with no share limit, and there are no inactivity fees.

5. ShareBuilder / ING Direct - (Note: ShareBuilder is offering a free $50 bonus when you open a new account). ShareBuilder was recently acquired by ING Direct. This broker provides good tutorials for beginners and is a great choice for those new to investing. I suggest sticking with the Standard subscription account as it provides more features, but those who don't plan on trading too often may prefer the Basic account, which doesn't charge a fee at all. Sharebuilder also offers the very useful option of automatic investments as well as dollar based investing, which allows you to invest in a particular dollar amount you choose rather than by a particular number of shares. The dollar based investing feature is very handy for trading stocks with high individual share prices like Berkshire Hathaway A Shares (BRK-A), which was last trading at $138,500 per share!

6. Fidelity - I personally use Fidelity Investment as my primary individual stock and mutual fund account. Not only is the company's customer service top notch, I think its online trading website is clean and easy to use. I invest in many of Fidelity's high performing mutual funds and by having a brokerage account through Fidelity directly, I don't have to worry about transaction fees when I trade Fidelity funds. Standard stock trades are $19.95, but due to its tiered system, the fees are much lower depending on the total value of your assets. I highly recommend this brokerage firm.

7. Vanguard - Vanguard is more expensive in terms of fees as each online trade costs $25 or $0.025 per share (whichever is greater). However, because Vanguard's exceptionally low expense ratio mutual funds have performed so well, this company is great for people like me who want to invest in high performing diversified Vanguard funds without having to pay hefty fees through another broker.

8. Charles Schwab - Charles Schwab used to be a more expensive premium broker, but it seems to be matching itself up with its competition better these days by lowering and simplifying its commission tiers. The company offers an impressive wealth of research related information and fees are currently $8.95 per trade, with extra charges past 1000 shares. Schwab offers other financial features such as personal banking and credit cards, and its customer service has been decent and dependable.

9. TD Ameritrade - Ameritrade bought out Datek and merged with TD Waterhouse to finally become TD Ameritrade over the years. Among the features offered, one stands out - a predicable and single priced commission fee - a straightforward $9.99 for each market and limit trade. TD Ameritrade is not the best for mutual fund investing, but it's very good for individual stock trading. The stock streamer program is a nice feature, but I've found it to be occasionally buggy and not always working properly.

For More Online Broker Rankings and Review, Please Check Out:

  1. Smart Money's 2009 List Of The Best Stock Brokers
  2. Barron's
  3. J.D. Power &, Associates
  4. Kiplinger
  5. USA Today

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55 Responses to “Brokerage Account|Online Brokers review|Best Online Broker” 

  1. Mrs. Micah says:

    Since I like Vanguard's funds so much, I'm planning to set up through them when possible. :)

  2. Raymond says:

    Hey Mrs. Micah, Yes I have Vanguard too, primarily to trade their funds as well. I wouldn't use them for anything else though other than that since their regular commissions are rather pricey.

  3. Evan says:

    Check out SogoInvest

  4. Royce abel says:

    Also check out www.zecco.com

    -Royce

  5. eddy says:

    I am looking for an online brokerage firm that allows so many stocks exchanges to be traded through its platform.

  6. jr1185 says:

    I am to my wits end with E*Trade. To sum it up, about 3 months ago, I opened up an account with etrade, and set up online transfer to transfer funds from my bank account. Made the transfer, and waited. After a week of no money in my account, and no word from E*Trade, I contacted customer service. They told me the funds should clear within 7 business days. 7 business days passed, and still no funds, so I called back, and they said the funds were returned and there was a "hold" on my account, and I needed to lift the hold by faxing them a form of government picture ID. I faxed them the ID, and tried to make a deposit again. Again, the funds were returned after 2 weeks, and I was charged a $25 fund return fee. I called customer service, and they said that because of the hold, I needed to sent a personal check, and they couldn't give me any reason as to why my direct deposit wasn't going through. I had the correct account number, and info for the account, but E*Trade wasn't accepting it. I've set up multiple direct transfers before with other companies, and E*Trade is the only one I have had a problem with. I even "verified" the account with E*Trade before attempting the transfer, and it was shown as "verified" under my etrade account. Frustrated, I sent E*Trade a check to start up a new account. After they received it, it took 2 WEEKS to clear. In short, it took me almost 2 months just to get funds in to my account. I should have withdrawn my money and closed my account, but I decided to give them another chance. I optimistically thought that once I got the funds in to my account, E*Trade would function properly. I was wrong. I made a few trades (never got the "100 free trades" etrade was offering with a new account because they said it was only valid for the first 30 days the account is active. They had a "hold" on my account for the first 2 months!) and things were going fine, until last week when I checked my E*Trade account, and my net assets have completely vanished! $0.00 . I called customer service immediately, and they said they were just having technical issues with their online account, and to give it "24-48 hrs". At this point I am fed up with the "24-48 hrs" line. I give it a WEEK and my net assets are still at $0.00, so I call them back today, and I'm informed that there is a "hold" on my account. I asked to speak with a supervisor, waited on hold for 20 minutes, and the same lady came back on and told me that the supervisor told her to send an email to one of their different accounts, and it would take "24-48 hours". She said they would either lift the hold, or they would need me to fax in a form of government picture ID. I asked her what I could do with my existing portfolio, and the answer was "NOTHING". I have thousands of dollars in a portfolio that I cant even see. I can't buy, sell, or even check my balance. I can't close the account, I can request a stock certificate and cut my losses, I can't do a thing. I'm at the mercy of the incompetent customer service of E*Trade. I once heard someone say that "stupid people learn from their own mistakes. Smart people learn from the mistakes of other". Be smart, and STAY AWAY FROM THIS COMPANY. You will save yourself TIME and FRUSTRATION.

  7. Matt says:

    Maybe you could do one day a list of discount online commodity and futures brokers.
    Many if the traders who trade options, also trade e-mini S&P.

  8. baroness says:

    Can you do a comparison of the top 10 brokerage services offered by banks. Like Bank of America, Chase,etc.

  9. Jerry Jepsen says:

    I am looking for an on-line broker who does not cancel trailing stop losses automatically after 30 days. Scottrade cancels mine without notice.

  10. Nadine Metz says:

    I like to broker with the first and foremost leading companies. This is so helpful!

  11. Zodd says:

    I use TD Ameritrade and let me tell you of my experience:

    I had bought 20,000 shares of xyz stock for under $4.00 p/s. According to the margin-account agreement, I was suppose to put-up 100% of the purchase price if the value dropped below $3.00 p/s. Within a few weeks and given our wonderful market volatility, the stock dropped to $1.25 cents p/s. WAY OVERSOLD! I didn't panic, but TD Ameritrade did issue a small margin call for $4,000, which I promptly deposited into my account. Within two days, the stock declined again to $.86 cents p/s, and WITHOUT NOTICE

  12. Zodd says:

    I use TD Ameritrade and let me tell you of my experience:

    I had bought 20,000 shares of xyz stock for under $4.00 p/s. According to the margin-account agreement, I was suppose to put-up 100% of the purchase price if the value dropped below $3.00 p/s. Within a few weeks and given our wonderful market volatility, the stock dropped to $1.25 cents p/s. WAY OVERSOLD! I didn't panic, but TD Ameritrade did issue a small margin call for $4,000, which I promptly deposited into my account. Within two days, the stock declined again to $.86 cents p/s, and WITHOUT NOTICE they sold out approximately 4,000 shares I had in the position to cover a $3,400 margin call which was due that day, but they decided to pull the trigger early at 9:30 a.m., without giving me any chance of depositing the funds in the account or even calling to advice me or anything for that matter. I was a knee-jerk reaction on their part and absolutely unecessarily done. About 12 noon, the stock was trading at over $1.00 p/s. These companies are suppose to sell you out before the close of business AFTER the issuance of a margin call provided you don't comply.

    But given this experience and my discussion with their risk analyst and manager, they really didn't give a s**t and the risk analyst sounded like some newbie fresh-out of college with no "REAL" world experience on the functioning of the markets. The risk analyst further stated that they had been selling-out other people for the last few weeks, like if that was suppose to restore confidence or something in their company. How foolish can they be! This company is operated by people who don't give a crap about clients because they have so many that loosing one will not have any impact on their business.

    WATCH-OUT, THEY WILL SELL YOU OUT WITHOUT WARNING! And for the record, I was NOT in federal violation of the account at the time of the sell-out. I have filed reports with the SEC, FINRA and to date have already received a reply from their cheif compliance officer stating on this letter that their will not reverse their decision because such facts are stated in the margin agreement in VERY FINE PRINT!

    I am currently shopping around for another brokerage firm, but I would highly recommend that you STAY-AWAY from this company. They are crooks!

  13. Nick says:

    I'm a new investor looking for a brokerage. Based on the above, I'm completely removing E-Trade and TD Ameritrade from my short list. Thanks for the comments everyone!

  14. Sasha says:

    Has anyone heard of Noble Trading.com? I am looking for an online brokerage account that I can trade on international exchanges with. Right now I have Trade King, and I love it, but I can't trade internationally. Any suggestions?

  15. eddy says:

    looking for an online broker that offers unlimited OTCBB and pinksheets stocks with a moderate commision.

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