Choosing a Discount Stock Broker
Is it weird that I’m excited to switch into my new portfolio? I just have to settle on a brokerage. Now, you are not going to find an exhaustive broker comparison here. I’m just one guy and I just want to find the best broker for me. I’m just selfish like that 
First, let’s start with all the discount brokers I can think of: TradeKing, ChoiceTrade, CyberTrader, Etrade, Interactive Brokers, MB Trading, OptionsExpress, Scottrade, ThinkOrSwim, Schwab, Fidelity, TD Ameritrade, Ameritrade I-Zone, Harrisdirect, Muriel Siebert, Firstrade, WallStreetE, Vanguard Brokerage, Bank of America.
Let’s start the pruning.
1) My account will have $10,000 in it to start.
2) I want no inactivity fees.
3) I want a maximum commission of $10 for trading 1000 shares, even if I only make 1 trade a quarter.
4) I also want to be able to speak with a broker if needed.
5) I only want to trade stocks with cash. I don’t care about options, margin rates, mutual funds, etc.
That leaves us with:
TradeKing, ChoiceTrade, MB Trading, Scottrade, ThinkOrSwim, Firstrade.
So, I’ll have to decide between these brokers. I already have accounts with Tradeking and MB Trading. Tradeking seems alright (I opened the account mainly for the bonus), although the reports that their website is slow are true. I didn’t like my first impressions of MB Trading, and have taken my money out, but my account is still open since they have no minimum balance. But I may just be tempted back by their low stock trade commissions with trades starting at $1. Now to read up on the rest of these guys. Here are some reviews I dug up so far:
EliteTrader.com reviews (Pro-trader perspective)
SmartMoney 2005 Broker Reviews
April 5th, 2006 at 3:49 am
I’m searching for a broker too. I would go with Scottrade, but they don’t have an option to reinvest dividends automatically. I know ShareBuilder does, but what about the others?
April 5th, 2006 at 4:04 am
I just opened an account with Firstrade.com. Things are great so far. No minimum balance, free ACH in and out, $6,95 trades and the customer service has been excellent. I have used thinkorswim and have had issues whren depositing and withdrawling money, but that was right when they opened their doors.
April 5th, 2006 at 6:40 am
I use scottrader and have been happy with their service. Their 2minute turnaround time for email questions is very very nice, and a bit creepy
April 5th, 2006 at 7:01 am
I have not had any problems with Scottrade and have had an account with them for about 2+yrs. They have an office within 30min that I go to each year to deposit my Roth and to make sure a live human is there just in case. I have not found any hidden fees, in activity gotchas, or other BS that my bank keeps pulling…other than some annoying commercials, I have no problems recommending them…
April 5th, 2006 at 7:46 am
You should take into consideration DRIP programs of each broker being you’re investing for the long term and will probably want the dividends reinvested. Be careful though because some will offer DRIP but not for IRA accounts.
April 5th, 2006 at 8:23 am
ive been through a few brokers myself, from sharebuilder, ameritrade and now with scott trade. by far i like scottrade the best, it has a very nice layout, my trades are almost instant, and 7 dollar commission fees. A little higher then some of the 5 dollar ones out there, but they have a lot of local branches incase i ever need any help or want to run a quick check to them so it can be deposited into my account. thats the only drawback, no online money transfers into the scottrade account like i could do with sharebuilder and ameritrade. sharebuilder is the way to go if you want to setup some kind of automatic plan, where money is taken out every month at the same time, 4 bucks for that setup, but its limited to tuesdays only and they execute the trade anytime that they please. i say go with scottrade from my personal experiences, nice layout, and great customer service.
April 5th, 2006 at 8:40 am
You may want to also look at FolioFN. It essentially allows you to manage your own mutual fund and rebalance upto 50 stocks at a time. The rebalance feature I really like, although I don’t use it on my long term stock accounts (which are with Muriel Siebert FWIW).
April 5th, 2006 at 8:54 am
Just curious as to why IZone got left out …. They satisfy most of the criteria that you have set. Well, criteria #4 maybe the only one that IZone does not satisfy but it more than compensates with its low $5 per trade. No?
April 5th, 2006 at 9:48 am
I opened up a TradeKing account after its mention on this site as well. The site being slow isn’t even the biggest problem. It’s taken nearly 25 days to get my funds into my TradeKing account, 5 days just for them to get cleared before my first trade. Although, after all this I’m pretty sure I’m just going to stick with them.
April 5th, 2006 at 10:20 am
I use Scottrade, but I can’t really compare it to other brokerages since I’ve never made any stock transactions through another broker.
What I don’t like about Scottrade is that I can only deposit money by wire transfer (expensive) or mailing a check (takes a while). Scottrade doesn’t offer ACH transfers into or out of their accounts (I believe there was an identity theft incident with the previous vendor).
When I see a quick pullback in a certain stock and want to take advantage of it, I’ll probably end up using my Sharebuilder account.
April 5th, 2006 at 10:48 am
Hey Jonathan -
I?ve been reading your blog for a few months and really enjoy your insights. I opened an HSBC Online Savings account in December and have been very pleased with the return.
A few weeks ago I researched discount stock brokers and I?m recommending Scottrade because of all of the awards it has received over the past few years ? although I still have yet to actually open an account!
I figure with all of the awards, they must be doing something right. I?ll be interested to see which one you pick!
April 5th, 2006 at 11:14 am
Doh! I forgot, I also have an I-Zone account already. I’m pretty happy with them, but you can’t talk to a human… ever. It hasn’t been a problem so far, but sometimes you don’t want to wait 24 hours for an e-mail reply. I am fine with it for my current $5,000 balance where I trade stocks casually, but I plan on growing my holding at this new brokerage for a long, long time.
Later on, if I have $100,000 at a broker, I would definitely want the ability to speak to a human! If other places can offer $1-$5 trades and phone access, I-Zone stops looking so good.
April 5th, 2006 at 11:41 am
Why did MB Trading charge you the $10 fee? Was it for level 2 feed?
April 5th, 2006 at 12:10 pm
Firsttrade is pretty good. Its my only broker. The initation process involved faxing some documents which took a few days, the only other online investment company I’ve signed up for is Vanguard and that account was much easier to setup, all online if I rm correctly.
Firsttrade seemed quick to make my trades, no minimums, free dividend reinvestment, no inactivity fees. I can’t compare them to another broker because I have no other experience, but they seem fine to me.
-Kriton
April 5th, 2006 at 12:45 pm
I also use Scottrade and have been happy with their service. Like having a local office close by in case I need help. Have had them for several years and no problems. Another I will throw in not mentioned is Fidelity (yes the mutual fund co). Have had them for a couple of months (stocks from company plan transferred to them) and they are good as well. They too have local offices. They do not reinvest dividends either. On a side note, for those who are looking for or complaining about lack of reinvestment of dividends which Fidelity and Scottrade do not offer why not transfer them to the DRIP through the stock company? And they do offer optional cash purchase and it is someimes low or no cost. I have several DRIPs setup. Just a thought.
April 5th, 2006 at 1:32 pm
lack of ACH feature is a real drawback, IMO, for Scottrade. But then you didn’t list it on your options, so maybe you dont mind the wait.
dogs of the dow also have some user brief review on scottrade, although they’re pretty old.
http://www.epinion.com also has some user review, but again, they’re old.
the list of reviews at elite trader is pretty handy.. I’mma read through it. danke!
April 5th, 2006 at 1:38 pm
Re: Scottrade
Yeah I noticed their ACH system went down and they never brought it back. But I thought I read that they let you request check-writing ability (might be onlyif you have more than $5,000 in your account).
If you can write checks, then you can just use that information to link the account to ING/ED/HSBC, right?
April 5th, 2006 at 2:38 pm
I’ll be disappointed if it turns out Scottrade does not allow online transfers
April 5th, 2006 at 2:42 pm
I’m looking for a broker too, and right now it is between Firstrade and Scottrade. The fees are almost same. Fristrade allows ACH withdrawl and deposit and do not charge for a large number of Mutual Funds. Scotrade seems to be somewhat better in customer service and you have an additional advantage of local branches.
April 5th, 2006 at 2:48 pm
Yes, at least I know that you can link it to HSBC. I have written a post about it. The fund is not available immediately as the previous e-checking service did though. link
April 5th, 2006 at 4:01 pm
I’ve used almost every online broker (Scottrade, Tradeking, Schwab, Ameritrade, etc.) and so far firstrade has been my favorite. With one exception — no quicken download yet. They say its coming soon though.
Their trade executions are fast and limits work very well. The dividend reinvestment is great, so are the electronic statements.
Customer service has been helpful, except when I wanted a stock certificate for CBH (which by the way are only $25). It took a few times, but the manager it got escalated to did keep me informed. Then a few days later the stock certificate just showed up at my house — at no charge, via overnight DHL. [By the way, I’ve done 3-4 other stock issuances with them, without a problem]
For the casual trader I think Firstrade is the best. No inactivity fees and something like 9000 mutual funds (no charge for MF investments).
April 5th, 2006 at 4:07 pm
Hi Jonathan,
First time replier long time reader. I have a tradeking account also, but I’m not really bothered by the slowness. Since we are both long term investors (buy and hold), does it matter if you delay your purchase .5 hours. I’ve exagerated a bit because Tradeking is not that slow.
On a different note, could you point me out the article that describes how to simulate direct deposits to another bank from HSBC? Also I would be interested in simulating automatic deductions (bill pay) into my HSBC account.
Thank You, and keep it up.
April 5th, 2006 at 4:47 pm
Why, oh why, have I felt any loyalty to Schwab. I’m really going to have to shop around and open another account. I’m really sick of paying $19.95 a trade!!!
Hazzard
April 5th, 2006 at 4:54 pm
I asked scottrade about transferring online and they said they should have the capability by late summer. Great service though, a local guy to talk to, and a smooth site. They also have some trader tools if that is your thing.
April 5th, 2006 at 4:59 pm
Can I ask where you see the TradeKing $100 promotion and in particular the $1000 funding requirement?
Kind of confused as to the ground rules on how long I need to keep money in there, how much etc.. to get the $100 bonus.
April 6th, 2006 at 5:01 am
This Schwab customer since 1993 has no complaints. I don’t know why Hazzard is paying $19.95/trade. That’s crazy. Schwab is only charging me $9.95/trade and that’s on limit orders. Option orders are also $9.95.
Don’t waste brain cycles shopping for a broker. It’s getting in the way of you making money. Consider Schwab - they have offices everywhere, they’re a MARKET MAKER (which means you’ll get much better prices on your trades, and they have free transfers, level 2 quotes, you-name-it. Being able to visit an office when you need something fixed is very helpful. An excellent outfit.
April 6th, 2006 at 8:40 am
Just FYI. Stopped by local Scottrade office this morning and asked about ACH. They are expecting it up and running somewhere in the summer.
April 6th, 2006 at 11:54 am
Schwab commission structure is tiered, which is why Hazzard was was paying 19.95/trade (the highest possible) and why cliccli is paying 9.95/trade. I pay 12.95 myself, I’m certainly not switching to save a few dollars, since all added perks more then make up for it.
April 6th, 2006 at 2:55 pm
I have had accounts at E-Trade, Smith Barney, Schwab and Fidelity. Schwab is the one I use day-to-day. It has execellent research material and resources to help pick stocks and evaluate your portfolio.
WRT the tiering structure, it depends on the # of trades you make. You need to consider the perks versus the cost per trade and pick the one best suited for your needs.
April 7th, 2006 at 1:35 pm
Hi Jonathan,
I enjoy reading your blog. Nice commentary on IB Trading and MBT. I checked the IBT site. They say it will take 4 days to credit the account for an ACH deposit. As you know, the settlement period for Stocks is 3 days and for options, it is 1 day (next day). So this might create a problem if we are purchasing stocks or options and we might be charged margin interest.
Did everyone see Jonathan’s picture in Businessweek in an article about blogs?
April 7th, 2006 at 7:55 pm
Hi,
Can anyone comment on which broker gives better interest rate on the cash balance? I have my brokerage account with TD waterhouse and there is 23000 sitting idle in my account earning 0.5 %. I don’t like.
April 7th, 2006 at 7:56 pm
I would also like to add that I have an Izone account and my ACH withdrawl is credited to my Bank account the next day and my ACH deposit is credited to my IZone account the next day also. That’s a good thing.
On the otherhand, I spoke to IBT folks and one advantage with IBT is they don’t have Option Assignment or Excercise fees. IZone charges $30. So, if someone does lot of Option trading, IBT is a clear winner, Margin Interest not withstanding.
April 8th, 2006 at 2:04 pm
Does Firstrade do a hard or soft credit pull?
April 25th, 2006 at 1:31 pm
Does anyone have anything negative to say about Firstrade?
September 28th, 2006 at 10:35 pm
fyi, there there have been various reports of problems at tradeking with both customer service and order execution
thinkorswim however has gotten many ratings (on elitetrade) of “near perfection”
May 6th, 2008 at 6:11 pm
If you’re a buy and hold trader then by all means scottrade is ok but if you’re planning to do more than one trade a day you’ll be sorry, the have a slick ad campagin and good customer service but their execution time and bugs in their trading program will end up costing you thousands (like me). try Tradeking, Izone, interactive broker or E-trade you’ll do much better off in the end.