List of the Best Online Discount Brokers

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I‘m looking at online discount brokers to determine where to open an IRA account later this year. And in the process I’ve learned three important things about online 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., Zecco, 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, maybe not 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.

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. Zecco made a big splash several years ago advertising free trades (Zecco’s commission structure has changed since then). 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.

As I mentioned above, cost is not a critical factor for me. Why? For starters, I’ll only be buying individual stocks, not options or other more expensive equities. Second, I won’t be trading a lot–once or twice a month at the most. So the difference between a $3 trade and a $7 trade is just not that significant for me.

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.

Summary Of The Best Online Discount Brokers

Scottrade1) Scottrade: 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 $27, 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.

You can get more information about Scottrade or open an account by visiting www.scottrade.com.


OptionsHouse Logo2) OptionsHouse: 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 $3.95, 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 PEAK6 Investments, one of the largest options trading firms in the world. It is from this platform that OptionsHouse offers an array of professional trading tools:

optionshouse-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:

optionshouse-trading-platform

For more information or to open an account online, visit www.optionshouse.com.

OptionsXpress3) OptionsXpress: OptionsXpress is another broker with a name suggesting it only handles options. But with OptionsXpress, you can trade just about anything including stocks and futures contracts. Stock trades cost $9.95, which is a bit more than some other discount online brokers. With OptionsXpress, however, there is no additional cost for broker-assisted transactions, which makes it a good option for those that want some help with their trades. Perhaps the one thing that OptionsXpress is best recognized for is its trading tools. Smart Money’s 2009 Broker Survey awarded 5 stars to OptionsXpress for its tools. The tools fall into three categories, designed to help traders find investing opportunities, analyze those opportunities, and finally to execute trades. And these tools include an extensive collection of videos. Here is a short video describing the trading tools offered at OptionsXpress:

Check out our detailed OptionsXpress review, or to get more information and to open an account online, visit www.optionsxpress.com.

eTrade Banner4) E*Trade: E*Trade was ranked first among discount stock brokers by Smart Money’s 2009 Broker Survey. E*TRade scored high marks across the board in categories ranging from customer service to research to banking services. While it ranked as one of the best in just two categories (banking services and Research), it scored consistently high in all categories. E*Trade’s research resources including portfolio management and analysis, stock and fund screeners, independent research, and risk analyzer. Stock trades cost a flat $9.99. In addition, E*Trade is offering free trades for 60 days and up to $600 for new accounts, the details of which you can find on E*Trade’s website.

And yes, E*Trade boasts the funniest commercials among the discount online brokers. Here’s one of my favorites:

To get more information about E*Trade or to open an account online, visit www.etrade.com.

tradeking6) Trade King: Trade King 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).

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 or to open an account, visit www.tradeking.com.

Published or Updated: July 24, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Bill says:

    Would you please provide a recommendation of a discount broker that facilitates stock trades on foreign exchanges, specifically Toronto, Australia, and Hong Kong?

    Thanks,

    Bill

    • DR says:

      Bill, there are several alternatives for discount brokers that enable you to buy stocks on foreign exchanges. In researching the alternatives, it is important to understand that for many of these brokers, you can’t buy foreign stocks online, you must use a broker assisted transaction. Still, the cost of the discount brokers is relatively low, depending on your trading volume.

      That said, here are some alternatives:

      Scottrade: Scottrade has foreign exchange trades and offer separate commission schedules for Canadian Orders versus other foreign stocks.

      E*Trade: Etrade offers a global trading platform that covers exchanges in Canada, France, Germany, Hong Kong, Japan and the UK.

  2. T says:

    Check out Interactive brokers, excellent tools, extremely low priced. Wonder why they arent on this list of brokers.

  3. WILLIAM PEERY says:

    WHAT ABOUT INTERACTIVE BROKERS. OTHER THAN THE FACT THAT THEY DON’T SELL MUTUAL FUNDS. THEY GIVE GREAT FILLS AND ONLY CHARGE 1 PER TRADE.

  4. Wendi Thiessen says:

    I’ve been using Interactive Brokers for the past two years. They have a powerful system, incredibly quick fills and charge $1 per 100 shares round trip ($2 /100 shares for Canadian trades). You can trade in most international markets. They have great options and futures capability but seem to exist out of the spot light.

  5. Toeser says:

    There are two things I look for that are hard to find in a discount (or any) broker. 1) Good and safe options for cash. When I don’t like the market, I sometimes go six or seven figures into cash. It’s important that that amount of money is earning something and is safe as it is well above FDIC and other guarantee limits. Scottrade is good in this respect. They break up your cash among several banks, if necessary, to keep full FDIC coverage. 2) Good bond trading capabilities on a commission and not a principal basis. Brokerage houses that trade bonds on a principal basis are generally ripping you off. E*Trade is not great, but good. Others have been very disappointing.

    Any suggestions?

  6. In the Money says:

    Thanks for the great reviews. When I did my research, I also chose Scottrade as my top choice for both an IRA and trading account.

  7. MSG says:

    I use Interactive Brokers (trading account) and E*Trade (IRAs). IB is good, but it’s definitely for the experienced trader. You need to know the exchanges, symbols, etc. Easy for stock trading, a lot less so for futures, options & Forex. You actually can’t trade Forex on IB until you take a little exam they have, and have prior experience. While good for position / short term trading, wouldn’t use them for day-trading – the user interface isn’t conducive to it. For quantities of options (10-50), E*Trade actually approaches or beats IB’s rates. E*Trade is good for IRAs / SEP-IRAs, as it’s easy to get your funds in when you need to.

  8. dutta says:

    Of all the brokerages i have checked .. i have found reliance money is the compnay which provides the lowest and cheapest brokerage amongst all the competitors..

  9. Rich says:

    Thanks for the tips. I use a comsec account to trade about once a month. I’d like to use E*trade or Scottrade as you recommend to save a few bucks (and encourage the CBA to be a bit more competitive). But how can I transfer the trades I’ve already made in comsec to a new online account? It doesn’t seem easy to switch between online brokers once you’ve invested some money.

  10. Jen says:

    If you choose to open an account with scottrade, you can get three free online trades (worth $21). Enter the code XEPG6413 in the box after selecting “referred by friend/received a promo code” on the application page.

  11. Jeremy says:

    I think SOGOTRADE is pretty good. It only cost $3 to make a trade (unlimited shares). They have good online and phone support, quick execution and a good inventory of shares that you can short! Oh and you only need $500 to open your account. You also get 100 free trades when you open your account. Can’t beat that.

  12. Sue says:

    For Toeser, I use Scottrade, and am looking for cheaper but with good support. Think or Swim is never mentioned in any of these articles, and they are $5/trade, and I forgot what they charge for options. They are real brokers, and give advice if nec., and do not charge extra for broker-assisted trades. So that’s good. BUT, I had to stop using them because their platform is so sophisticated and difficult, and it’s easy to make a mistake.
    As far as bonds go, I made the mistake of puchasing bonds through Scottrade, and then found a bond broker, Hennion & Walsh(no-I do not work for them). It was cheaper to buy from them. Scottrade had to buy through a bond-broker, and charged extra fees.

    • DR says:

      Sue, thanks for the comment. I’ve been meaning to review Think or Swim, and will do so soon. You hit on the main problem, however. The Think or Swim platform is really designed for very sophisticated traders. For those of us that trade less frequently and take a more passive approach to investing, there are better options for online discount brokers. Interesting insight on bonds. I’ve bought all of my bonds through mutual funds. I assume you are buying individual bonds.

  13. Stephen says:

    I’m looking for a brokerage firm which allow me to trade stocks listed in the Hong Kong Stock Exchange with my IRA account. Any recommendations?

    Thanks,
    Stephen

    • jake3_14 says:

      Interactive Brokers.

  14. Don Griswold says:

    You state “Zecco was one of the pioneers of online discount stock brokers.” , the firm is approx. 5 years old ( online discount brokers started out inthe early 1980′s). What criteria are you using to define them as pioneers?

  15. Size Trader says:

    What this analysis completely ignores is margin interest rates. Sogo is reasonable but the rest of them charge exorbitant rates.

    For low rates and reasonable commissions, look at investrade.com, interactivebrokers.com and tradingdirect.com. You may pay (literally) a few dollars more per trade but you will save many thousands on interest.

    GLTA!

  16. Gail Balcaen says:

    Just wanted to let you know, this Page(s) of information is the best I’ve ever come across to help me find solid, valid solutions to the problem of where to go to start investing my own money with Security, Expertise and Economy. Thank you, so-o MUCH !!! – - – CHIQUITA VIVA aka Gail Balcaen, Saskatoon, SK S7M OZ8 CANADA

  17. Chris M says:

    I believe Thinkorswim.com is a great options trading broker. They have a great desktop platform and the data feeds are free with your trading account. If you are trading options, seriously consider thinkorswim.com, which was curently purchased by TD Ameritrade.

  18. Ivan Basic says:

    Hi,
    I am kind a professional, but I stick to the equities. I am from Europe and interesting for Toronto and Germany. I like to day-trade, sell short, I want to skip additional cost like custodian fees. Any suggest?
    Btw. If you trade with futures, could you trade them intraday and could you do that each day?

    Tnx in advance!

  19. Lyn says:

    Hello,
    I’m very high on Scottrade. I have been with them for over 10 years with out any troubles at all. If you would like to try them out you can get 3 free trades just to see if you like them They have a good streamer.. They are all anybody would ever need.

    Happy trading !!!

    Lyn

    • Rob Berger says:

      Lyn, I’ve been with Scottrade now for about 3 years and have been very happy with them, too.

  20. Randall says:

    Bill,
    TDAmeritrade is one of the best on-line discount brokers. One feature that makes them high on the list is their no fee list of ETFs where you can purchase as little as one share for no cost. They also have the longest list of ETFs with this feature. You do have to hold your purchases for more than 30-days to avoid a $19 early trading fee. That is a small penalty for having access to a list of 100+ outstanding ETFs.

  21. Marilyn says:

    My husband and I are in T. Rowe Price funds. I am retired (60), and my husband will retire in august. He is 57. We were told to kick up domestic value stock (20%). Any recommendations?

    • Rob Berger says:

      Marilyn, increasing domestic value stock seems like an odd suggestion. Not that it is “wrong,” but rather that without more context, it’s difficult to evaluate. Do you have more details you can provide.

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