Choosing a Discount Stock Broker, Part 2
After some more research, I jotted down some thoughts on each of the six brokers I narrowed it down to last time. Again, these are all from my own admittedly-biased perspective and personal needs.
TradeKing
I have an account with TradeKing, and they seem ok. Online chat help is alright. The site runs slow as if it is on a 56k modem, but my trade executed promptly. $4.95 trades with no inactivity fees is nice. The founders of TradeKing also founded SureTrade, which themselves merged and are now part of Bank of America. Thus, they seem to be a likely future merger target, which I am trying to avoid.
ChoiceTrade
Similar to TradeKing, ChoiceTrade also has $5 trades and no inactivity fees. But I can’t seem to find anything else about them! Barron’s apparently rated them 4 out of 5 stars in their broker survey, but that’s all I have. I think I’d choose TradeKing over ChoiceTrade anyhow since TradeKing has no transfer-out fees (ChoiceTrade charges $75).
MB Trading (MBT)
I also have an account with MB Trading already. With trades starting at $1 for 100 shares and no minimum commissions, they are the low-cost trade leader unless you trade huge amounts of shares. But you must use their proprietary software targeted at active traders, which only runs on Windows; There is no web-based trading available. The software a bit confusing to use, but if you dedicate some time to it I’m sure it’s doable. I’m just wary of such tools because you can literally trade stocks with 1 click. I feel if I drop something on my keyboard I might buy 1000 shares of GOOG by accident!
Another concern is if inactive traders like me start to use them, will they be able to keep their no-minimum commission feature? Having a customer who trades once a quarter pay you just $4 a year in fees isn’t exactly going to be profitable. That’s probably how much it costs just to mail out statements and prospectuses.
Scottrade
Out of all these brokers, Scottrade is the only one with an office nearby. Not only that, but they also have one where I plan to live in the future. In reading their reviews, it seems like the bad comments stem mostly from some temporary software glitches which understandably would drive an active trader nuts. But they’ve won a ton of customer satisfaction awards, and most of the comments I’ve heard from them are positive. $7 limit trades aren’t bad.
Another reason I like Scottrade is that they are around 80% privately owned, and have publicly said that they have no plans to merge with another company. They seem to be fiercely independent, and continue to open new branches each year. Finally, they have no transfer-out fees, so if I don’t like them it won’t cost me anything to leave. Note that they do reportedly pull a hard credit check for new accounts.
ThinkOrSwim
I’ve only come across these guys recently. They seem to target options traders. The reviews for ThinkOrSwim seem to be good, and they obviously have a sense of humor - “Every customer who funds their account will receive a monkey as a token of our appreciation. (Bananas not included)”.
Trades start at $5 for 100 shares, with no inactivity fees. They generously offer to pick up your transfer-out fees (up to $100) from your current broker if you move to them. I don’t know if these guys will stick around or not, they’ve only been around since 1999.
FirsTrade
Another relative newcomer is FirsTrade. But they do have a nice feature set. $6.95 trades, no inactivity fees, and free dividend reinvestment. They even offer free mutual fund trades for over 9,000 funds (if you keep them at least 180 days), including Vanguard funds. Finally, they also offer to rebate your transfer-out fees from your existing broker (up to $50).
They seem to have started in NYC Chinatown and continue to be a smaller but fast-growing brokerage firm. This makes me feel like they would be less likely to merge with another firm, but who knows.
Thoughts
Honestly, none of these brokers seem like a complete dud, which makes it very tough to choose between them. I think I’m going to end up choosing two new firms and test them each out.
April 10th, 2006 at 9:36 pm
Here’s my solution to the brokerage debate.
I use two!! Firstly I use Sharebuilders for a lot of the factors already brought up in other post, the obvious low price in buying and the automatic dividend reinvestment. I tend to make long term buy and hold purchases on this account. This being so I have found that sharebuilder does have its shortcommings. I particularly don’t like that you can only make the low price trades only on the 1st to 4th Tues. of every month. I also feel that you don’t have as much control over your money as one should have. i.e no stop loss orders. Also if you have to sell stock it will cost at least $11. Hence one must buy and hold.
To fix all these issues I then use Trade King as a second brokerage which is a more traditional brokerage with very little cost. I tend to do my active trading there. They offer evrything there even stuff i have never use like options and margin.
Just my 2cents
April 10th, 2006 at 11:09 pm
What is your take on the Online Discount Brokerage, “Interactive Brokers, LLC.”?
http://www.interactivebrokers.com
I personally haven’t tried them out yet, but have heard good things from a friend of mine.
Also, there’s always the idea not to use a Discount Broker, and use a more standard one like Morgan Stanley, Smith Barney, etc, or even a local small-cap group where you can get personal attention.
You can reduce your average cost per trade, simply by resisting the urge to trade that often, say limit it to less than 5 trades per year. This will help to motivate you to think long and hard about each trade.
April 11th, 2006 at 5:58 am
Does FirsTrade do a soft or hard credit pull?
April 11th, 2006 at 6:23 am
whats the down side for http://www.interactivebrokers.com ? Why are you not comparing it here ?
April 11th, 2006 at 9:44 am
IB seems like a good broker, but from my previous screening, my requirement was “3) I want a maximum commission of $10 for trading 1000 shares, even if I only make 1 trade a quarter.” They require $10 in commissions a month no matter what.
So if you don’t trade at all, you still pay $120 a year. Not a big deal if you make a least two trades a month, but I don’t plan to necessarily for this account. I just want to make a few trades a quarter into ETFS.
April 11th, 2006 at 10:58 am
I have been looking to open a brokerage account, which (including other requirements you mention here) provides low/no cost mutual funds purchases. Based on that criteria Firstrade looks good but as you mention you never know when any of them get bought/merged. Also they can always increase the commissions.
One thing I was wondering, why you don’t consider Fidelity ? This including for your mutual fund choices, in most cases their index fund cost is comparable to Vanguard.
April 11th, 2006 at 11:18 am
Do you know if MBTrading lets you trade online? sometimes you are at work and you want to quickly login and trade without downloading the software and going through the whole nine yard. do you know if any of the above lets you do that?
thanks for all your input
April 11th, 2006 at 11:54 am
I like Vanguard more than Fidelity, as I like their index mutual fund selection better, and their history of low expense ratios. Fidelity has some low expenses on their index funds, but it also takes $10,000 to get in the door even for IRAs. Both have good customer service.
As a stock brokerage, their commissions are bit high unless you have a good amount of funds with them.
MB Trading does not allow you to trade online in any way without their software. I think you can place a trade over the phone, though.
April 11th, 2006 at 3:40 pm
I don’t know if someone already mentioned but Scottrade also gives you free check writing and an ATM/debit card…You can also link this account to HSBC/ING etc…Of course fees, or lack of, was the biggest draw to Scottrade for me.
April 11th, 2006 at 7:12 pm
I just started using TradeKing and I can attest to both facts: site runs slow although not terribly slow, but at the same time trades are executed promptly. At 4.95 a trade it certainly sounds like a good deal, especially if your an active trader.
April 11th, 2006 at 8:57 pm
are there any fees for tradeking regarding ach transfers? i was looking at the commission+fees and not everything is spelled out.
April 11th, 2006 at 11:33 pm
No fees for ACH transfers, although the first one is slooooow to set up. 10 business days before you can do your first transfer, and then a 5 day hold on the first transfer. Way too long in my opinion, but the subsequent transfers are much faster.
April 12th, 2006 at 10:24 am
I mailed in a check to TradeKing and it went much faster.
Mailed the check on 3/31
TradeKing credited my account 4/3
Bank debited my account 4/4
I don’t think there was a hold on my trading account, but did not decide what I wanted to buy until 4/11, so I should get my $100 bonus for making a trade before 4/15. I also made some more money by selling a covered call on the stock I bought.
The only delay I found with Tradeking is the email trade confirmation arrived a day after my limit order executed.
April 12th, 2006 at 10:20 pm
there is a $100 bonus for signing up for tradeking?
May 29th, 2006 at 4:33 pm
Recently TD Ameritrade changed their fee structure. Now they have a lot of No Transaction Fee funds. So more money into investing!. Check their List of funds offered under(NTF) before you decide on opening account with them, not all funds are available as NTF.
November 29th, 2006 at 1:52 pm
[...] Mind you, there are many great things about TradeKing, and there are plenty of websites out there about how great it is, and I originally hoped to use it to buy the mutual fund VICEX and to get a $100 bonus. That was over two months ago now, and I still don’t have shares of VICEX nor a $100 bonus. Here are my gripes: [...]
July 10th, 2007 at 10:33 pm
I applied for a Scottrade account last year and I did not get a hard credit pull.