2008 Best Online Stock Brokers – Finding a Stock Broker That's Right for You
Author: Jim | Filed under: Investing Tips
Buying stocks is one of the most over-hyped activities in the business world today. Online stock brokers allow you to bridge the gap between Wall Street and Main Street, so you can trade stocks in the blink of an eye with just the click of a button.
I’ve answered questions about “how to buy a stock” before, so let’s explore your options as far as online brokers go. There are many factors that should guide your decision, here are what I feel to be the top factors in deciding which stock broker is right for you:
- Customer Satisfaction
- This is probably the most important aspect of any online broker in my opinion. How do people feel about the service they are getting? This includes a sense of security that comes with the larger brokers with hundreds of thousands of customers and local branches you can visit for support. Does your broker assign an individual broker to every account, or are you doing it alone? On top of support features, people will generally report back on how fast transactions are made, which can be important to getting the best price on your trades.
- Commission Fees
- For me, this is probably even more important than satisfaction since I have less money at stake than the average investor. In short, brokers charge commissions on every trade you make to handle the transaction costs… how expensive are these? These costs can be anywhere from $1 to $20 per trade, so this can be a huge factor… or a non-factor… all depending on how much money you have in your account.
- Minimum Deposit
- Again, to some this is a non-factor, but it is definitely something you should consider if you are an average investor. Do you want that discount broker that has a minimum deposit of just $500… or are you going to look for the full-service kings that require upwards of $10,000 minimum in your account to start off.
- Research / Features
- Research is very important for every broker. Some of these fly-by-night brokers offer you nothing in the way of research. Most of the more established guys will give you free reports from Standard & Poor’s, Goldman Sachs, Reuters and other places that can help you make educated trades. On top of research, features like live stock tickers, after-market trading and even technical chart analysis should be important aspects of your broker. If you have the tools to be successful, you are far more likely to make money.
- The “Catch”
- What’s the catch? You should do your homework before choosing a broker. One reason I like Scottrade is that they don’t seem to have any, as all trades are just $7 forever. Other services have intro-deals that expire after the first month. For example, E-Trade has a free 100 trades deal, but when you read into it… it only lasts for the first 30 days. Other brokers will hike commission fees periodically, or charge you quarterly account fees for holding your cash. Finding all of the hidden terms is important, and can make or break your financing.
Now that we know about what we are looking for in a broker, it’s time to see what stock brokers are out there for you to use, and how the stack up in these five categories that I have outlined for you to apply when deciding where to house your cash. Introducing the Net Fool’s 2008 Value Rankings for Online Stock Brokers:
|
Broker Name
|
Satisfaction (out of 5)
|
Commissions
|
Minimum Deposit
|
Research/Features (out of 5)
|
|
| 1. |
4.4
|
$6.99
|
$1,000
|
4.5
|
|
| 2. |
4.6
|
$7.00
|
$500
|
4.0
|
|
| 3. |
3.9
|
$4.95
|
$0
|
4.4
|
|
| 4. |
4.8
|
$12.95
|
$2,500
|
4.1
|
|
| 5. |
4.1
|
$2,000
|
4.4
|
||
| 6. |
4.0
|
$9.99
|
$2,000
|
4.2
|
|
| 7. |
4.2
|
$5,000
|
4.8
|
||
| 8. |
4.1
|
$9.95
|
$0
|
4.3
|
|
| 9. |
4.4
|
$14.95
|
$0
|
4.6
|
|
| 10. |
4.8
|
$19.95-$8.00
|
$2,500
|
4.3
|
|
| 11. |
2.8
|
$0.00
|
$2,500
|
2.3
|
|
| 12. |
2.7
|
$4.00
|
$0
|
2.1
|
These rankings are based on my own experience, shared reviews from sources such as Barron’s, Standard & Poor’s, Forbes, Kiplinger and MSN Money. Please 
take note that the rankings are weighted toward lower-commission / lower-deposit “value” brokers, although all satisfaction and features are accurately represented.
Finding the right stock broker can be a real judgment call, and all of the “top 12″ options are very good services. While I feel that you would be best off with an E-Trade or Scottrade account, holding an account with ShareBuilder or Zecco wouldn’t be your worst option. If you have a lot of investing money, you should focus more on features and satisfaction, so a brokerage like Schwab, Fidelity or Muriel Siebert to fit your needs if commissions really aren’t a factor for you.
I hope that you all found this guide useful. Online discount brokers are a relatively new phenomenon, and have been improving day in and day out… making it easier, cheaper and faster than ever to place trades and make money in the stock market.
Stay bullish on the net!
-Jimvesting
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hhmm I’ve been looking for a broker for a while now, but they all seem expensive and I don’t feel like spending $500 dollars for a minimum. I’m gonna stick to not dealing with stocks at the moment, and I’ll keep studying them.
Very nice compilation of companies, would have helped me like 4 weeks ago when I was looking for a broker.
I’m surrprises that Forex is not in there. I thought they were one of the leader?
Germzs last blog post..Aweber Alternative
Twitter: @jimvesting
May 17, 2008 at 5:58 pm #
@ Germz: Forex is not for trading equities like the stocks you hear of, it is a platform for trading currencies.
Also, its not “spending” $500. A better way to put that is “minimum funding,” because you aren’t paying anyone x dollars to open an account, that’s just the money that you have in your account for trading stocks… it’s all your money!
So that’s why I didn’t understand anything from the Forex simulator! I once downloaded a fifty thousand dollar simulator for Forex, and I kept seeing weird numbers and symbols and countries… I thought they had something to do with stocks as Forex appears on results in Google when you search stocks.
Nice to get that cleared up thanks.
Germzs last blog post..Free .edu Link
Scottrade is the best from what I hear. Commissions are low, no hidden fees, and service is great. But if you’re going to buy stocks, take the Warren Buffett approach and learn about the company before you buy its stock. The buy-hold-and-pray mentality doesn’t work.
Flimjos last blog post..The Flimjo Recap – May 18, 2008
Twitter: @jimvesting
May 18, 2008 at 12:00 pm #
@ Flimjo: I agree that buy-and-hold is overrated, good point. I use Scottrade, and I like it a lot. The fact that they aren’t hiding anything is really assuring… and everything is just $7 fee no matter what (options trading, after-hours trading, etc.). My only complaint is that the interface makes it a bit hard to track your performance other than daily, and there should be a few more researching tools. Overall, I’m satisfied though
Before you start trading, you absolutely have to know what stocks you want to buy and hold for a while, which is called going long or holding a long stock position.
great list of companies… back in the day when i used to be heavy into stocks i used to use a company called BuyandHold.com they allowed me to buy DRiP stocks (dividend reinvestment plans) they were great ( at the time) because i didn’t have to buy a whole share of stock.. I could buy an amounts work… ehhh besides all that again great list I shall look at a few and maybe jump back into the stock game..
androos last blog post..How Much is a Blog Really Worth?
I’ve recently attended a workshop sponcered by Investools and is in partnership with the broker of Thinkorswim. how would you rate these co. I am new to all of this. Some insite would be greatly appreciated. And are you tied to any broker co.
Etrade is not $6.99 a trade. It is $9.99 plus some small amount that I never figured out why. But it is not the fee, it is their services that suck big time! I put in a Change order but it did not go through because the Cancel order (for the change) was pending. I login many times during the day and the cancel order was still pending. So I called – only to find out their phone support is only up to 8 p.,.
are they charging you re-enter fees as well?
Etrade? What a joke. They may be paying the most per referral but they sure as hell aren’t the best broker. Anyone that looks at their fine print knows they are a rip off. Charles Schwab has decent fees except they are not flat, so if you do trades of 10k shares it comes to more than $200. Fidelity and CHarles Schwab are too expesnsive in my opinion. TD Ameritrade’s fees seem okay but they have an account closing fee and funds withdrawal fees ($100 and $40 if memory serves). I use Scottrade right now as I only ever pay one fee ($7 a trade) and they allow online money transfers. When I get $50,000 I may look into WellsTrade (Wells Fargo’s brokerage) they give you free trades but have many fees but they get waived if you meet certain conditions.
Etrade is such a ripoff. They charge a re-entry fee for every order you place and then cancel, which isn’t mentioned anywhere in there literature. It is anywhere from $4.95 to $9.99 per change AND in addition to the transaction fee of $9.99 so you actually pay $9.99 x 2. It truly sucks. I’ve spent over a grand on hidden fees with Etrade every year I’ve been with them.
They are also the only place to park cash that earns decent interest. What a dilemma.
Well im shopping around now after learning that the info of my TD account (like cost basis) is/was WRONG! and nobody can explain why. By this i am saying i could not trust the info on my own acc. page. I learned this after making a trade based on what they claimed my ave. cost basis was only to find out the trade was a loss… so fyi on TD
I personally wouldn’t go back to TD Ameritrade. Many fees, and what seems
like mistruths…I have just signed up with a new broker (fees are great, called
OptionHouse) stock trades only 2.98; have found tho that they don’t have trailing stops on options overnight. You have to redo them each morning, so I
might change again. I also have a very small (used to be larger : ) with Scottrade, and they are great, but they too are not providing trailing stops on
options: they do have for stocks. I am seriously looking at Trade Station, am
still trying to figure out on all the fees, and I have heard good things about Think or Swim. Happy trading all!!!
WAT ABOUT TRADEKING OR SHAREBUILDER….
I’d probably go Scottrade or look into Trader king.
Have TD Ameritrade, rather pleased. Use to Have E-Trade, worst company ever I had under 25k in my account and they started charging a monthly maintenance fee of 20 bucks..I hope E-Trade goes out of business.
I am new to all of this. Some insite would be greatly appreciated. And are you tied to any broker co.
I just signed up with Sharebuilder.com. I just put $50 into my account and will begin trading tomorrow morning. I want to start little until I get the hang of it. I’m 24 years old and new high school science teacher, and this all new to me. By the looks of the posts, some of you have some experience in the online trading world. I was wondering if any of can offer me some assistance or advice with all this stuff.
Thanks,
Tommy