12 Ways to Compare Your Online Stock Broker
Having the best online stock broker is very important as an investor. Paying high commissions and receiving little on the research side won’t do you any good long term. This article will give 12 unique way to compare your online stock broker to others, and help you find the best broker to suit your needs.
I have covered the 5 Top Online Stock Brokers here on the blog prior, and this should make a great compliment to that list. Online Stock Brokers include TD Ameritrade, Etrade, Options Express, ShareBuilder, Scottrade, Zecco, TradeKing, Interactive Brokers, and more.
Comparing Online Stock Brokers
This list of 12 factors to help you compare your online stock broker are not in any particular order. Every investor is different and as a result factor 1 (trade costs) may not mean nearly as much as factor 11 (account security). It all depends on personal preference.
- Trade Commissions - What does it cost to buy stock? Does the fee change based on the type of order or size of order? For example, does it cost less to place a market order than it does to place a limit order? The best you can get from your broker are what are known as flat-fee commissions. This means that regardless of how many shares, the stock price, or the order type it will cost $x.xx per trade. This means every time you trade there is no hidden fee or cost, you pay exactly what they list.
- Customer Service - When you pick up the phone and call your broker, do you get a run around or help fast? Can you even call your broker and get help with your account? You may think your $4 trades are great but when you have no help at all your preference may change. I know some brokers who actually time their responses and literally will respond to emails in minutes. How you are treated as a client is more important to some than others, and even to those that don’t rely on customer support too often, knowing you have award winning service there when you need it should be comforting.
- Trade Tools - Trading successfully is a lot easier when you have great tools to help make it possible. And I am not talking paid tools, I am talking free tools. Your broker should be giving you access to a wide variety of tools to help your make the most of each and every trade. From real time streamers to last sale tickers to live news feeds and for some even level II quotes. Would you climb a mountain without proper gear? Of course not, so don’t try to trade your way to financial freedom without a great broker assisting you with free support.
- International Exposure - This is strictly a location based factor, but nonetheless is an important one. I don’t care how much you love a particular broker, if you live in South Korea and they aren’t open there you won’t be using that broker. When comparing brokers find out where they offer services and if they cover your country.
- Account Minimums - Do you have to deposit several thousand dollars before gaining access to cheap trade commissions and trade tools? One of the most common catches of an online broker comes tied in with the account minimum. You may think you signed up for $4 trades, but once you place that first order and get charged $15.95 you will be in for a rude awakening (Sharebuilder is the example here, and there are many more that do this). A good broker will only have you deposit less than $2,000 and gain access to ALL services, tools, and most importantly flat fee commissions.
- Other Fees - Most people overlook this, but your stock broker is like a bank, and as you probably know banks love to charge miscellaneous fees. Most of the fees from your broker will come with transferring funds into or from your bank, and one of the most overlooked fees is the minimum balance or inactivity fee. A good broker won’t charge you such a thing, but some do, and if you either A. don’t trade for x months, or B. don’t keep your account up to a specific fund level you will get charged. Just like a gift card drains out after non use, with a bad broker so will your funds (this typically only affects those with several hundred dollars).
- Market Research - Does your broker have its own access to key fundamental and technical data on stocks your are considering for purchase? What about a stock, mutual fund, or ETF screener? Market research may not matter if you have an external paid service, but for those who don’t your broker should provide you with access to good quality research. The bigger brokers typically have great data readily available.
- Investment Options - Your broker should have access to not only stocks, but mutual funds, ETFs, and the like. Then there is the opposite, brokers like Zecco require a margin account to get started, so if you can’t get margin approval then you can’t trade with Zecco, period. Some brokers will charge more to invest in mutual funds, etc. which goes back to trade commissions, but the bottom line is having those options should be available.
- Retirement Accounts - Can you fund a Roth IRA or other retirement account with your broker? Retirement accounts are extra bonuses if your broker has them. Almost all of the bigger brokers do, and for most people these can actually come in very handy. The convenience of logging in and having both my accounts under one tab makes my life a whole lot easier.
- Banking - The new era for big brokers is to offer banking and other financial services to you as a client. And it goes beyond money market accounts and CDs. Checking accounts and home mortgages are also now starting to be offered more. Etrade for example has cash ATMs which are now more commonly being found in malls and the like. Imagine having your investment portfolio, checking account, and home mortgage all under the same roof. It is now possible.
- Account Security - A growing concern for all with the advancement in computer hacking, scams, and credit fraud, your broker should offer you great protection. If your money gets stolen straight from your account do you know if you are liable? I know that my broker has my assets backed and guaranteed no questions asked if anything should go wrong. As Allstate insurance so commonly asks in their commercials, “Are you in good hands?”
- Speed - For most this won’t matter, but for the active trader this is critical. I won’t rat out any brokers here but I have tested and tried quite a few and I can tell you that as an active trader make sure your broker speeds are up to par. If you can’t even process an order without having to refresh your order page then perhaps you should consider changing your broker. Nothing drove me more nuts then trying to day trade when my orders were taking seconds (yes seconds) to process so they could be filled.
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Posted by Blain Reinkensmeyer on October 9, 2007 at 6:24 pm --
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I picked TDAmeritrade basically because of its flat fee of $9.95 and because I know others that have been satisfied with it. I considered switching to Zecco, but I don’t think they are 100% reliable yet.
I also prefer to use 3rd party financial sites for my news. Although Ameritrade has some good stuff on it.
I’ve been with TD Ameritrade since they were K Aufhauser. Not a bad firm. I’d like to throw some money in an Interactive broker account and give them a try. Anyone have experience with them?
It is often assumed that brokerage accounts have the proper insurance coverage such as FDIC and SIPC, but in these days of internet brokerages and scam sites, I think it is important to ensure that the brokerage you are looking at has the correct coverages to ensure your money is protected.
Just a thought.
The Dividend Guy
I ran into that problem with a LARGE forex broker that went bankrupt due to its bond division… lost 60% of my money as they decided to use it as collateral (as if i lended it) to pay their debtors. OUCH. Damn Refco.
Jonathan, I’m with interactive brokers Canada and I find them pretty good. $1/100 shares but it costs extra for data feeds. I’ve done a review of Interactive Brokers on my site if you want to check it out.
I’m with Ameritrade too. I tried IB for a little while, but a lot of their tools are blocked in my office (yes, the evil AT&T wants me to work while I’m here).
AMTD offers a lot of extras that fit into #7. AMTD has another option available, izone.com, that seems good if you don’t mind not having phone access to cut commissions in half. I just haven’t taken the wise step of moving my money to a new account.
-Alex
I have an Izone account and find it awesome. What I did is kept my Apex account, moved all my funds but $100 into my Izone account, trade out of there and just use Apex for the streamer, level II quotes, etc. it works splendidly
Use Tradestation and love it. There charting software is great, no need for a outside service. There Radar screen and order matrix make is so easy for daytraders like myself. I believe the costs are very similar to IB. Not sure if it is available to residents in Canada yet. Also there are no charges if you trade 5000 shares a month, only have to pay a few bucks for data fees.
also forgot to mention the automated trading. I haven’t even tried to use it but looked at the demo they have. Looks great for someone that has a trading strategy they want to backtest and trade. Also the support forums are great for anyone that needs help with the coding.
Blain, does izone not use all the same bells and whistles as the regular amtd account, such as the streamer, level II quotes, etc?
Can you link accounts? I manage both my brokerage and IRA through amtd and love the convenience of not having to log into each seperately.
You can link accounts, I do that. How do you like your IRA accounts btw? I am thinking of opening one.
For Izone though, tool access is limited to just a regular TD Ameritrade account. Izone gives you a variety of extra tools for free, for example I think level II quotes are extra with a standard account. Not sure though if things have changed.
@MDJ Thanks I will check out your review.
I use Ameritrade and have for a while now, primarily because of the flat commission rate. Also have an account with ETrade, but don’t trade on it as much. ETrade has better research, but I don’t find it worth enough to pay the extra commission money.
Just to clarify for those who are thinking, “What’s Aaron talking about, Etrade is $9.99 per trade.” Ya, it’s $9.99 per trade if you have atleast $50k in your account
Etrade is a broker designed for active traders, period.
Sharebuilder is probably the best for beginners simply because there is no minimum. You can invest as little as you want, I think.
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