I‘ve been investing nearly 25 years, long before online brokers came on the scene. During that time I’ve used several of the best online discount brokers, including Scottrade, OptionsHouse, and even Vanguard’s brokerage services. Based on that experience and a lot of research, I’ve complied this list of the top options. Note that I have accounts at each of these firms and have personally tested their trading platforms, research, and other tools. Here’s a quick look at the top brokers.
Best Online Discount Brokers of 2017
Over the years I’ve learned three important things about brokerage firms.
First, there are a lot of them. You’ve probably heard of many discount sites that allow you to trade stocks online (e.g., Scottrade), but I’m guessing there are a lot of online brokers you’ve never heard of (Sogotrade may be one example).
Second, while on the surface they can all seem similar, when you dig deep into what these brokers offer, you’ll find big differences. For example, not all of them offer the same account types. With some you can’t buy mutual funds, while others offer more mutual funds than most. And the stock trading tools available to you vary from one discount broker to the next.
And the third thing I’ve learned is that the cost of these discount firms can be tricky to understand, and in the end, may not be the most important factor. Because I watch every dime we spend, it may seem odd that cost isn’t the most important factor to me (after all, we are talking about “discount” sites, not full service brokerage firms). I’ll come back to that in a moment, but first, it’s important to understand a few things about the fees discount online brokers charge.
Summary Of The Best Online Discount Brokers
Scottrade – Best Broker with Physical Offices
Scottrade is high on my list of potential discount brokers for my IRA account. There are several reasons why I’m leaning toward Scottrade. First, the cost is reasonable, with stock trades costing $7. Broker-assisted trades are $32, but I’ll rarely if ever use a broker. Scottrade ranks well in broker surveys, including Smart Money’s 2009 survey. Its one downside according to Smart Money is its banking services, but I’m not going to be using its banking services. It offers a number of account types, including IRAs and other retirement accounts. And with a Scottrade IRA account, there are no opening, closing, annual or custodian fees. I also like the look-and-feel of the site. It’s well organized and easy to navigate. The account minimum is just $500, and there are no inactivity or maintenance fees.
Scottrade has one other feature that I like; physical locations. Among discount online brokers, Scottrade has the largest network of branch offices. While I expect the vast majority of my transactions will be online, it’s good to know that I can talk to a person face to face if I need to.
- Trade Stocks: $7 flat fee
- Trade Options: $7 + $1.25/contract
- Margin Rates: 5.25% to 7.75%
- Broker Assist Fee: $32
- Mutual Funds: $0 to $17 per trade
- Minimum Deposit: $2,500 (There is no minimum deposit requirement to open a retirement account, custodial account or Coverdell Education Savings Account.)
OptionsHouse – Best Low-Fee Online Broker
At first, the word “options” in the name led me to believe that OptionsHouse only allowed you to trade options. Not true. With OptionsHouse, you can trade stocks, options or spreads. The cost to trade stocks is a flat $4.95, making it one of the lowest cost stock trading alternatives. There are no maintenance fees or monthly minimums, either. According to OptionsHouse, it offers a professional-grade trading platform backed by TradeMonster.com. It is from this platform that OptionsHouse offers an array of professional trading tools.
To give you an idea of the look-and-feel of the OptionsHouse trading platform, here is a screen shot of its online design:
Now you might be a bit confused by the screenshot above because the URL shown is www.TradeMonster.com. When you take into consideration the logo shows “OptionsHouse by E*Trade”, you might wonder “How many brokers am I using at the same time?!” Well the correct answer is three, OptionsHouse and TradeMonster were purchased by E*Trade so if you attempt to visit TradeMonster.com, you’ll be redirected to OptionsHouse, which is now owned by E*Trade.
- Trade Stocks: $4.95 flat fee
- Trade Options: $0.50 per contract + $4.95 base
- Margin Rates: Ranges from Fed Funds Rate + 1.75% to Fed Funds Rate + 6.25%
- Broker Assist Fee: $25
- Mutual Funds: $20 per trade
TradeKing – Best All-Around Online Broker
TradeKing is one of the lowest cost discount brokers, with both market or limit stock trades costing $4.95. And there is no additional cost for broker-assisted trades. It has been ranked #1 in customer service by SmartMoney Magazine and Kiplinger’s. Here’s what Kiplinger’s had to say about Trade King’s customer service:
In this category, TradeKing reigns. We were speaking with a friendly representative within 20 seconds when we called on a busy Monday morning for the stock market. Our e-mail asking a question about our account balance was returned in 7 minutes. You can also contact TradeKing representatives via instant messaging (only Schwab, E*Trade, Siebert and Scottrade lack the IM function on their Web sites).
- Trade Stocks: $4.95 flat fee
- Trade Options: $0.65 per contract + $4.95 base
- Margin Rates: 4.50% to 9.25%
- Broker Assist Fee: $20 + Regular Commission
- Mutual Funds (Load): $0
- Mutual Funds (No Load): $9.95
- Minimum Deposit: None
The final thing I’ll mention about TradeKing is what it calls the Trader Network. Through the Trader Network, you can connect with other traders, share strategies and trading tips, and see the hottest trades of the day. To get more information check out our TradeKing review, or to open an account, visit TradeKing.
TD Ameritrade – Best Online Trading Platform
The most expensive discount broker on our list, TD Ameritrade counters it’s cost with some of the best online trading tools. It’s platform “Trade Architect” is my favorite portal to use, specifically designed for casual investors like myself. If you’re looking for a more hardcore approach, they also have a thinkorswim platform that offers more date, more 3rd party research and more functionality.
Again, TD Ameritrade decided to cater to both casual and advanced investors by creating two separate mobile apps.
- TD Ameritrade Mobile (for the casual investor)
- TD Ameritrade Mobile Trader (for the advanced investor)
TD Ameritrade Summary:
- Trade Stocks: $9.99 flat fee
- Trade Options: $0.75 per contract + $9.99 base
- Margin Rates: 6.50% to 9.25%
- Broker Assist Fee: $44.99
- Mutual Funds (Load): $0
- Mutual Funds (No Load): $49.95
- Minimum Deposit: None
- Sign up Bonus: 60 days commission free trade + up to $600
How Much Will You Pay To Buy And Sell Equities Online
All of the firms make a point to advertise how much you pay to buy or sell stocks, mutual funds, options, or other equities. Today most trades at discount sites run from about $2.50 to $12 per trade. The key to remember, however, is that many of these firms charge additional fees, depending on how you use your account. These additional fees may include fees for large buy or sell orders, fees to buy or sell stocks trading at less than $1, account maintenance fees, account inactivity fees, and of course interest if you buy on margin.
Because these fees vary among discount brokers, the starting point is to understand how you will use your stock trading account. Will you trade frequently or just once or twice a month (or quarter)? Do you want to set up an automatic investment plan? Will you be buying stocks and mutual funds, or do you also plan to trade options? The answers to these questions will help you narrow the selection and ultimately pick the best broker for you investing needs.
Factors To Consider Other Than Cost
But just like most anything we buy, the cost is just one of many factors to consider. And the same is true when selecting a discount broker. So what are the factors besides cost that we should consider when selecting a discount stock broker? There are several, and they include ease of use, customer service, types of accounts offered, investing tools, type of investments you intend to buy, and account minimums. I’ve highlighted these and other factors below in the summary of the best online discount brokers. But just like cost, it’s important to know your investing goals when you evaluate your options. For example, account minimums may be a non-issue for you if you plan to invest a significant amount of money. Likewise, if you are looking for a specific account time (like an IRA), you can quickly eliminate those discount stock brokers that do not offer that account type.Topics: Investing