There are so many discount brokers, but which one is best? This is a common question among investors. But there is no right answer because it really depends on your investing style and other considerations. On this blog, you can find a list of best discount stock brokers sorted by price. This is great if you’re looking for cheap stock trades, but trade commission is just one variable.
Here are a few factors you might want to consider when choosing a discount broker:
This should be the first question you ask when searching for a discount broker. Does the discount broker have the investment products you want to invest in? All discount brokers allow you to trade stocks, but they may not offer the exact mutual funds and/or other investment products that you want. If you have some particular investments in mind, make sure your broker offers the product at a reasonable price.
This is the area where big firms like Fidelity, Charles Schwab, and TD Ameritrade really shine. For example, Fidelity has an impressive mix of more than 16,000 mutual funds — many of which don’t carry transaction fees.
If you are planning to trade stock frequently, my list of cheap stock brokers is perfect. For example, nobody can beat Just2Trade who offers $2.50 for both equity and mutual fund trades, but the broker is only available for experienced investors. Otherwise, you may want to try TradeKing, which costs $4.95 per transaction, but it comes with more comprehensive services and tools.
However, if you are planning to invest mainly in mutual funds, you should look for a broker that offers a wide selection of mutual funds; especially no load, no transaction fee ones. Also, be careful with mutual funds that carry transaction fee — for example, TD Ameritrade charges $50 for the privilege of buying and selling these funds.
Watch out for those fees — e.g., maintenance fee, inactivity fee, check writing fee, etc. You don’t want all your gains to be wiped out by them. Figure out what you want to do with your brokerage account, and find the one that let you do them for the least amount of money.
Discount brokers usually list their fee schedule online, such as this fee schedule from E-Trade. If you can’t find it online, you should be able to get a copy from their customer service department.
Next make sure you can find the right information for your trading needs. If you’re a technical analyst, make sure you have access to technical analysis tools. If you’re a fundamental analyst make sure you have access to stock fundamental research tools. For example, I mainly invest in mutual funds and love the free access to Morningstar Premium for being a TD Ameritrade customer.
Other discount brokers with top-grade research tools include E*Trade and Charles Schwab. If you have an iPhone or an iPod, it’s also worth noting that Scottrade has investor education podcasts that have ranked in the 20 most popular investment related podcasts on iTunes.
This is another important factor to consider. You’ll interact mainly with the web interface so make sure you’re comfortable. Based on research done by SmartMoney, Scottrade boast the fastest trade execution time, followed by E-Trade. However, TD Ameritrade was most robust with 13 trading tools that include premarket and aftermarket trading, news alerts about your stocks, trading over your smartphone, etc.
This may or may not be important to you. If you already have a bank account that can accommodate all of your banking needs, this is a non-factor. If you’re looking for a broker that also doubles as a bank, then this is important.
For example, E-Trade offers complete banking services without added charges. This includes competitive savings rate, free ATM/VISA Debit card, the ability to pay bills online, make cash transfers, etc.
For me, this is very important. I like to have access to customer service 24/7 and occasional face to face discussions. If you want to be able to see someone face to face, the best bet is searching your neighborhood for an office. For example, I have TD Ameritrade and Charles Schwab near where I live.
Another good idea is to give discount brokers on your short list a call and shoot them an email. How fast are they responding? Are they knowledgeable? Are they courteous? This will help you narrow down the list before committing.
I am with Vanguard. Curious to why you did not include them in the list? They have great customer service and it was easy for me to set everything up online and even without much knowledge they have good lifecycle funds for me to start with till I learn more.
Craig, thank you for your comment. I was focusing on a selection of discount brokers and left out Vanguard. I’ll give them a look and see if I can add their info.
Very informative article. What about discount brokers who cater to infrequent traders? I am a buy and hold type of person and I do not want to be hit with inactivity fees or mandatory balances.
Thanks
I currently use Scottrade and love it! Simply and straight forward for me. Also fast execution time, which helped in my 4,000% stock gain this year so far.
@Joe – For infrequent trades, you can try TD Ameritrade or TradeKing. I don’t trade that often and haven’t seen any inactivity fee.
@Chiko777 – 4000% that’s amazing. Congratulation!
Thanks Pinyo and Chiko777.
What about UBS Financial Services? I received some information from them. Any insight? Please advise. Thanks!
@Ohio109: UBS is more of an investment house with advisors than a traditional online discount broker.
I am a 53 years old women with some savings in a sort of retirement plan during my OPS position at the University BENCOR Inc. with a FICA account type. I have not being employ by anybody so far, and I have to rollover this money to an IRA so I do not get penalized. I do not have a clue what to do, please help.
Hi Patty, I think this article will be helpful for you: http://www.moolanomy.com/1828/.....s-it-work/
Thank you your article suggestion is very good. I have this broker offering to transfer the money to ING, he said it doesn’t cost anything do you have any input?. Thank you.
Patty
Hi Patty, ING is affiliated with ShareBuilder and CapitalOne. I’ve only heard good things about ING as a bank; however, I have not personally used it for investing. Usually, there is no cost for you to rollover your 401k to an IRA. The costs comes in when you invest your IRA money into various investments. If you are unfamiliar with investing, you might want to look into Vanguard Target Retirement Funds (lowest expense in the industry). And if you’re going to use Vanguard fund, then your other option is to talk to Vanguard directly.
If you’re uncomfortable, Scottrade, Charles Schwab, and TD Ameritrade have branches around the country and their reps are very helpful. You may consider talking to one or more of these brokers so you can get a better idea of what you want to do.