Several years ago I fired my financial advisor. I started subscribing to the Sound Mind Investing Newsletter (SMI) to us as an investing resource. SMI provides some guidance, and I take care of your own investments. I immediately started to look for the best online stock broker. After you learn how to start investing and what you want to invest in, your next most important question is how do I find an online stock broker?
With so many cheap (and getting cheaper) options that allow you to buy and sell stocks, mutual funds, ETFs, and index funds online, I highly recommend that you consider using one of these venues for purchasing investments online. You simply cannot compete with these low online prices. Besides, the convenience is worth its weight in gold.
When searching for an online discount stock broker you must remember that “the best” company is going to be based on your trading needs. You’ll need to look over the chart below and evaluate each company based on the following:
- How much money do you have to invest?
- Do you buy stocks, mutual funds, index funds, or a combination?
- How often do you buy and sell funds? Do you buy monthly, one time, or according to your value averaging schedule?
- How selective are you about fund availability?
Important things to look for in a good online discount stock broker:
- A good selection of no transaction fee funds (NTF). These are mutual funds you can buy without any commissions or transactions fees.
- A good selection of fee-free ETFs (buy and sell without paying a commission, but still have an operating cost). ETFs are a good way to diversify your investments by purchasing some index type ETFs.
- Minimal transactions fees on non-NTF funds. For many people, this is the cost that will make or break their investment. How much does it cost to buy and sell?
- No maintenance fees. Depending on your account balance, you may be required to pay a fee. I prefer to look for places where I don’t have fees.
|Broker||Mutual Fund FEE (non NTF)||Stock Fee||ETF Fee||Minimum to open|
|* TD Ameritrade||$9.99||$9.99||$9.99 (some free )|
|* Fidelity||Fidelity funds free then $7.95||$7.95||$7.95 (some free)||$2,500|
|* Charles Schwab||$8.95||$8.95||$8.95 (some free)|
|Vanguard||Depends on account balance. From free – $7.||Depends on account balance. From free – $7.||$7.00 (some free)||?|
Disclaimer: The information in this chart is current at the time of posting and I’ve done my best to ensure the accuracy of the above chart. However, you should still confirm with each individual broker regarding their current prices and policies. The chart does include affiliate links.
* Brokers I have personally used so I can give additional feedback regarding my experiences.
In my investing lifetime, I’ve had accounts at TD Ameritrade, Fidelity, Charles Schwab, ShareBuilder, and Firstrade. My general reaction is that none of them stand out over and above any of the others for any reason. All have had relatively simple application processes. I’ve made calls to customer service at TD Ameritrade, Fideltity, and Firstrade and have not had any unpleasant experiences.
Therefore, I would be happy to personally recommend any of these five – depending on your investing needs. I tend to use each account according to the type of transactions I make at each broker (depending on fees).
My primary account is at TD Ameritrade, but I have a special pricing arrangement through an old program that is no longer available to new customers. To be honest, I’m not sure I would use TD Ameritrade to trade mutual funds if I didn’t have the special pricing plan. Right now, I get unlimited mutual fund trades for a low annual fee. At times, I’ve invested in stocks for amusement. I did all those transactions through ShareBuilder. When I want to purchase an index ETF, I use the free ETFs available through Schwab. We no longer have accounts at Firstrade or Fidelity, but that is because we changed how we do some investments, not due to any problems with either company.
Which Online Discount Broker Would I Choose?
In this day and age, it is relatively easy to transfer funds between accounts. As such, I would probably initially go with the company that had more competitive prices. If you don’t like them, you can switch over to a more expensive option. Remember, opening a new account is a great way to get some bonus cash.
Signup for a ShareBuilder account and get $25 bonus if you use the following code: 25WO10.
For independent research you can review this list of best online stock brokers.