Discount brokers are everywhere. Not long ago, only a few companies offered the ability to trade stocks with low commissions. If you wanted to trade with a full-service brokerage, it might have cost $30 for each transaction. For this fee, you would talk with a broker assigned to your account, who would help you make trading decisions. Of course, the transaction fee and the promise of earning money encouraged these full-service brokers to suggest trading as much as possible.
Companies soon realized that they could offer a self-service model of stock investing, reducing overhead costs by eliminating the human broker, and passing that savings onto investors through reduced trading fees. In order to keep the volume of trades high, some discount brokers offer incentives to encourage more buying and selling.
SmartMoney recently looked into a number of discount brokers in detail in order to determine the best among a variety of categories:
For our 18th annual ranking of brokers — itself top-ranked by the Web site ConsumerSearch — we scrutinized a wide range of factors, from trading commissions and account fees to the cost of certain banking services and margin rates. In addition to parsing survey responses from the brokerages, we consulted with research firms and put brokers through our usual litany of customer-service tests.
Here is SmartMoney’s top ten discount brokers:
| Broker | Commission | Comments |
|---|---|---|
| 1. Fidelity | $7.95 | I use Fidelity for their Charitable Gift Fund. |
| 2. E-Trade | $9.99 | My company stock purchase plan is held at E-Trade. |
| 3. TD Ameritrade | $9.99 | SmartMoney is impressed with this company’s customer service. |
| 4. Charles Schwab | $8.95 | Schwab’s low-cost index mutual funds are cheaper than Vanguard’s. |
| 5. TradeKing | $4.95 | TradeKing claimed the top spot in this list in 2006 and 2007. |
| 6. Scottrade | $7.00 | A few years ago, I moved some investments from Wachovia’s discount brokerage to Scottrade and I’ve been happy. |
| 7. WallStreet-E | $7.99 | I’ve never heard of this company. |
| 8. Firsttrade | $6.95 | Firsttrade received average marks from SmartMoney and still made 8th place. |
| 9. Just2Trade | $2.50 | With this commission, Just2Trade is a discount discount broker. |
| 10. Muriel Siebert | $14.95 | This is the most expensive broker in the top ten, but offers good customer service. |
Others just missing the top ten include OptionsXpress, Zecco, and my current preferred discount broker, ShareBuilder. Who is your favorite discount broker?
See more details at SmartMoney.
Updated March 24, 2011 and originally published July 16, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
Rank: Platinum
Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
{ 4 comments… read them below or add one }
My mortgage had paid in full 6 years ago, I work until I turn 55 then I can draw my early retirement. I don’t own nobody money, (no c.c. debts) and I do not need someone to advice how to manage my own money. Am I doing the right thing?
You can’t go wrong when you have no credit card debt, and if you’re planning to take an early retirement, you must be doing something right.
How come ShareBuilder didn’t make the cut?
Hi Flexo, Nice succinct treatment of discount brokers. I’m adding the link to the appendix in my upcoming eBook on investing. Regards, Barb (fellow Yakezie :))