Active stock trading has more in common with gambling than it does with investing. On top of that, it’s expensive gambling. When you step up to a quarter slot machine, you know each bet will cost a quarter. You don’t lose a nickel on each spin as a “transaction fee.” In order to play the stock market, with “play” being the operative word, you lose money right off the bat in the form of commissions.
So if you’re going to invest in stocks, it makes sense to find the least expensive option. Here are some of the more popular choices, updated August 2010. What are your experiences with these brokerages?
| OptionsHouse | $2.95 | |
| SogoTrade | $3.00 | |
 | ShareBuilder | $4.00 |
| Zecco | $4.50 | |
| $4.95 | ||
| Scottrade | $7.00 | |
| E*TRADE | $7.99 | |
| Fidelity | $8.00 | |
| OptionsXpress | $9.95 | |
| TD Ameritrade | $9.99 |
. This online brokerage features low $4.95 online trades. SmartMoney Magazine has awarded TradeKing the award for Best Discount Broker in 2006 and 2007 and Best Customer Service among discount brokerages in 2008. New account holders can qualify for a $50 bonus by maintaining a $2,500 minimum and executing one trade within six months.
ShareBuilder. ShareBuilder’s lowest commission fee on an account without a monthly fee is $4. Last year, ShareBuilder was incorporated into ING Direct. Out of all the discount brokerages listed here, ShareBuilder is the only one with which I’ve had direct experience, and I haven’t had any problems. I currently have three investment accounts, each initiated with free money from account opening bonuses. I invested in one exchange-traded fund and two stocks, MSFT and AKAM. The accounts haven’t fared well, but since I’m playing with small amounts of free money, I am not shouldering much overall risk to my portfolio.
If you trade more often, ShareBuilder is willing to give you a discount on your commissions and some free trades, but you’ll have to fork over $12 or $20 each month. Keep in mind that the low commission will only qualify you for a bulk purchase. That is, if I place a $4 order today, it won’t be executed until next Tuesday with all this week’s orders. If I wanted to purchase a stock in real time, I’d have to spend $9.95 for a real-time purchase.
No matter which monthly plan you join, you’ll have to pay a $9.95 fee for selling. If you are asked for a promotional code, use 25WOLS for a $25 bonus.
Zecco. Zecco offers up to ten free trades every month if you maintain a minimum of $25,000 with the brokerage or a minimum of 25 trades. Otherwise, each trade costs $4.50. These are all real-time transactions, not bulk, like ShareBuilder. Zecco charges $10 if you want to buy a no-load mutual fund, however. That’s an unappealing fee, and it’s a reminder than one should keep holdings in an appropriate account. Zecco might be a good low-cost option for stock trading, but Vanguard and Fidelity might be more appropriate for mutual funds.
Both Zecco and ShareBuilder will not charge you for inactivity. It doesn’t hurt to let your account sit if you decide to stop trading, at least until they change their terms and decide to begin charging an inactivity fee.
E*TRADE. If you have less than $12,000 at E*trade, this brokerage will charge a $12.99 commission fee for each trade. Additionally, E*TRADE will charge a quarterly fee unless you meet one of the many conditions described here.
My comapny stock purchase plan is maintained by E*trade, and due to the market’s poor performance, I’m waiting until the stock is higher before selling my shares acquired over the past two quarters. By combining more share sales in one transaction in the future, I’m also saving on transaction fees. It costs $19.95 every time I sell ESPP shares, so I can save money by not selling four times a year (and also, I hope, waiting for the stock to rise).
Scottrade. Three years ago, Wachovia announced they were adding a $50 annual fee to my discount brokerage account. I tried to get the fee waived, but my protests fell on deaf ears. Rather than paying the $50 fee once and continuing to do so every year, I opted to pay the $75 account termination fee to move my funds to Scottrade. Scottrade offers no account fees other than the $7 commission for online trading. As I was holding only one mutual fund and I didn’t plan to do any trading, the account was free for me.
When I opened up my new Scottrade account, I was referred to a “local” branch. The closest branch was an hour away. I didn’t have to visit the branch to open my account and transfer the mutual fund shares, but they did call me quite often until they realized I wasn’t planning on buying any more products.
TD Ameritrade. TD Ameritrade is “that broker with the actor spokesperson,” formerly TD Waterhouse. To trade stocks online, TD Ameritrade charges a $9.95 commission.
These are the low-cost stock trading brokerages I am familiar with, though I’ve had personal experience with only a few. If there are any others I should know about, please leave a comment with some information. Also, please share your experiences and reviews.
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{ 16 comments }
Man, you work through your “to-do” list quickly! Thanks for the informative article.
I’d love to see the same thing written up for us Canadians. It’s something that interests me but I don’t know where to begin, and get overly confused as soon as I visit one of those trading sites.
Woohoo! I just checked since I thought that sharebuilder still charged 15.95 to sell. Yep, you were right with $9.95.
Hey Flexo, thanks for the writeup on the different brokerages. I gotta ask – did you check out any of Zecco’s social features (ZeccoShare)? We think it really sets us apart!
Tony (Zecco Product Manager)
As of March 1, 2009, Zecco changed their policy regarding the minimum account balance required to be eligible for free trades. People should be aware that the minimum account balance to obtain free trades has increased from $2,500 to $25,000.
While this may not impact most “traders” who are accustom to paying fees for trades, the responses from Zecco customers were not positive. Per some of the other comments posted, review the “social community” responses to the recent changes. It appears that a number of customers felt alienated by the adjustment to the business model and applying those changes to existing customers.
It is important to note that Zecco still does not offer after hours trading, so if this is a feature that you value, it may be worth it to explore other low-cost brokerage options.
I became a customer of Zecco in 2007 and was initially attracted to the company because of the free trade model. I retained my ETrade account because I prefer the format and they provide better research and after-hours trading, which Zecco does not offer. In terms of customer service, I have always had positive experiences.
E*Trade really rapes us on ESPP commissions. Even selling multiple blocks as a single transaction it seemed like they just multiplied the commission by the number of blocks.
Beware of Zecco trading! They will execute canceled orders if it will push you into the paid trades number! Very scary! Best to stay far away from this one.
Customer service was totally incompetent as well when I complained about the canceled orders being executed.
I went back to Scottrade for now, the trading interface is much better, and canceled orders go away immediately, and you can change them as many times as you like.
As a young company Zecco is working out a few kinks, but improvements are being made quickly. We kick ass thanks to our social network and transparent investing community. What’s also cool is that investors can join our community without opening a Zecco account, so collaboration is free and transparency is celebrated.
John (ZeccoShare Community MC)
i have had bad experiences with sharebuilder as they restrict the securities that you are allowed to invest in saying it must meet their criteria but when you show them that it does they then use the excuse that allowing you to invest in it will drive up the price and then you will be able to buy fewer shares
i think that they are hiding something as i always thought that when you buy shares in something it is a good thing if the price goes up
I’ve had problems with Sharebuilder as well. They recently lost a $600.00 check I mailed to them. After ten days, they blamed me. They also didn’t place trades that I had ordered at the opening of the markets as I had requested. My total loss due to their messups— $600.00 approximately. I’m now looking for another broker. Too many excuses.
I took a good advice and signed up with scottrade.com and got 3 free
trades with this promo code: YWEU0574
Anyone have experience with Sogo? I have Zecco account and find them very good, except for foreign stocks? I’ll be working on that with them :)
I too had a very bad experience with Sharebuilder. They gave me wrong information and then they said it was my fault that they took double of the amount I requested to be transferred from my bank account. One supervisory said it was our fault, they’ll take care of it but I would have to call another day. I called another day, they said they can’t honor what they said before because this is a new day with new rules. I’m taking my business elsewhere. I’m looking for another company that honors their promises.
Have anyone heard of, or have experience, with the following brokers: Interactive Brokers, TradeStation, TradeKing, SogoTrade, OptionsHouse, OptionsXpress, thinkorswim (owned by Ameritrade), FirsTrade, TradeMonster, Zecco, ScotTrade, e-Trade, ShareBuilder, Fidelity, Schwab, Vanguard, TDAmeritrade? Has anyone heard of Penson Financials and Genesis Securities?
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.
Charles Schwab is amazing. It has my favorite funds available in an IRA with low initial contribution requirements. The Index funds have a low contribution as well. Checking account is awesome. The ETFs have no commission costs. The 2% cashback visa card is fantastic. The customer service is great.
I love those guys to death.
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