Many people ask me “which online broker is best?” I always respond with, “well that depends on what you are looking for.” Readers do not like this answer, so I am going to try and break it down in a multi-part series here at Fanelli Finance.
Why do I say that it depends on what you are looking for? Each online broker is the same – they execute trades of various investment vehicles for individual investors. Each online broker is DIFFERENT. Each broker provides varying amounts of research, investment options, customer service availability, minimum account balances, interest on cash balances, no transaction fee mutual funds, commissions, and other various fees.
There are many online broker ratings out there on the web that break down various discount brokers, and I would recommend “googling online investment brokers” for further research.
Let’s start with some questions that you need to ask yourself before researching online brokers. 1) How much are you planning to invest, 2) How important is low commission fees, 3) How important is no load mutual funds with no or low transaction fees, 4) How important is stock research, 5) How important is an easy-to-use website, 6) How important is it to contact a customer service representative via phone, 7) How important is high interest rate on cash balances? This list of questions was utilized at Kiplinger’s Personal Finance web site.
Some individuals only care about low commission fees. For those of you out there check out
Trade King ($4.95),
Firstrade ($6.96), along with
Scottrade ($7). Most other brokers have fees between $9 and $25 per trade, but will lower their fees if you make a certain amount of trades per year, or if you have above a certain amount ($) in your investment portfolio with them.
Commissions are one item, but most companies blatantly advertise these fees, and there are usually no hidden items behind them. However, there are some pesky fees that may arise for various items such as inactive accounts, annual IRA fees, and fees to close an account.
Schwab’s online broker firm is one of the best for customer service and investment research, but charges $95 to close your account, $2.50 to send you an old statement, and $50 to obtain a stock certificate directly from Schwab. According to Kiplinger,
Vanguard,
OptionsXpress and Siebert are the best at minimizing these “nickel-and-dime fees.”
Here is Kiplinger’s Personal Finance Online Broker Ratings for a $50,000 account:
1)
optionsXpress, 2)
Muriel Siebert, 3)
Wells Fargo, 4)
Firstrade, 5)
Fidelity, 6)
Vanguard, 7)
TradeKing, 8)
Schwab, 9)
E*Trade, 10)
Scottrade, 11)
TD Ameritrade.
Please look for future posts at Fanelli Finance for further breakdown of online brokers, and a more detailed description of each.
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