« Fed Lowers Short-Term Interest .25% | Main | “Windfall Profits” Farce Part 1 »
Discount Brokers
By JD Bluefield | May 1, 2008
If you're new here, you may want to subscribe to the BluefieldMoney.com Feed so you'll never miss any posts on Engineering your Personal Finances and Investments. You'll also want to register and login to see what individual stocks I invest in by clicking on the Private Category. Thanks for visiting!
Some readers have emailed in and asked, “Who should I use to purchase stocks and who do you use?” Well, there are many brokerage houses to chose from, especially after the advent of the internet. If you want a full-service broker, you’ll definitely pay more, and there are many out there. If you just want a company you can just purchase (”trading” is a dirty word for me) stocks through or manage an IRA, than a discount broker may be the way to go. They are a much more economical route and will still offer more than enough resources for research.
Everyone’s needs are different, but to help you with your research, I compile a list of sites and put together this table (with companies and highlights) to help you with your decision.
| Discount Broker | Comissions | Min Balance | Promotion |
|---|---|---|---|
| E*Trade | $12.99 | $10,000; $40/qtr if not met | 100 free trades for 30 days |
| ShareBuilder | $9.95 | $0 | - |
| Scottade | $7 | $500 | Switch to Scottrade and get $100 |
| TD Ameritrade | $9.99 | $2,000 | Trade free for 30 days, fund your account with $25k and get $100 bonus. |
| Zecco | 10 free trades/mo, if min balance maintained/ $4.50 if not | $2,500 | - |
Commission is based on basic limit order trade, non-broker assisted, with less than 20 trades per quarter. If you can’t afford to put in more than $2,000 in a stock investment, you may not be ready to invest, and have bigger fish to fry. These are not trades on margin rates either, if you’re trading on margin, you’re playing with fire. Please be sure to do further research, prior to making any commitments.
So who do I use? I use TD Ameritrade. When I started my account in early 2000s, it was the lowest cost broker. As you can see, there are much cheaper alternatives now, (pretty much $0 per trade), but I have stuck with TD Ameritrade. I’m very happy with TD Ameritrade and haven’t had problems. Since, I make 2-3 trades per year, there is little incentive to switch to another broker. TD Ameritrade also gives me access to many different research reports produced by S&P, The Street, etc.
Quick Reviews:
I have a friend who uses Scottrade and is satisfied, but said money transfers between accounts are not as fast as he’d hoped.
ETrade is marginally more expensive, but is probably TD Ameritrades closest rival, in terms of size and longevity in the business, but is moving more towards a full-service brokerage model. They also feature many of the same type and style of research tools and access to company reports done by investment companies.
Sharebuilder and Zecco are the new kids on the block, with very low/$0 commissions. I know they offer stock screener tools, but unsure about any other features, (keep in mind that these are bargain prices). If you do research on your own with Google Finance, and just need a place to push buy, these may be right for you. I may try to use one of them down the road on my next stock buy.
How do Sharebuilder and Zecco make money? In addition to advertising, both use the margin on your deposits to gain interest and loan to others. ING owns Sharebuilder, so they’ll naturally lead you to their savings and loan side of the house. I have not tried Sharebuilder or Zecco , but I am intrigued by their low prices. If anyone tries them out, please be sure to let me know how it goes. Thanks!
Topics: Investing |
Comments
You must be logged in to post a comment.