Discount Broker Comparison

The best online discount brokers don’t necessarily offer the best value for investors. Before selecting an online brokerage, it’s better to know how much it will cost you to invest with it, even though cost isn’t the only concern.

When I look for a discount broker, one of the most important pieces of information I always pay close attention to is the commission that the broker charges for buying and selling stocks. I want it be as low as possible. The research process involves comparing a few brokers at the same time to determine which one has the better pricing plan. Unfortunately, that’s not always a straightforward process, because when I went to a certain broker and checked out their commission & fee page, I often found that they only compare themselves with their peers who charge a higher fee. They want to show potential customers that they are the best choice in terms of costs. But that’s hardly the case if you put all brokers together for a fair comparison. For example, this is what you will see at Zecco:

And we know Zecco’s current commission at $4.50/trade isn’t the cheapest, though it’s below what many other discount brokers change for stock trade. BTW, the Free in the above picture comes with very high requirements. Maybe it was before Zecco changed its pricing policy, but definitely not now.

The reason for brokers to only show high-cost competitors is obvious and understandable: Nobody wants to tell people there are cheaper options available, unless they have other features to separate them from others. This certainly won’t help a potential customer to find the right broker he/she wants. For me, I usually had to go to a few brokers’ websites and cross-compare their fees before selecting which one to use. I always think it would be nice if I can find all broker commissions in one page without going from one website to another.

Well, if that’s what you are thinking as well, then here’s the table I put together with how much discount brokers change for trading stocks, mutual funds, and options, plus minimum deposit required to open an account. As you can see, I have excluded brokers that charge $10 or more per trade. Some well-known names in that category include E*Trade ($12.99/trade), Charless Schwab ($12.95/trade), and optionsXpress ($14.95/trade), etc. I just think it doesn’t make any sense to pay $10 commission to be a few thousands of dollars worth of stocks. Also, from the table, it seems that using a broker, even a deep discount broker, to buy mutual funds isn’t a good idea because fees for trading mutual funds (all non-load, transaction-fee funds) are generally much higher than fees for stocks/options. Some brokers do offer non-transaction-fee funds, but the selections are usually limited. For mutual funds it’s better to go directly to the fund company instead to avoid any additional fees.

The table is by no  means complete. I will add to it when I find other brokers with discount rates. If there’s any other brokers you know that charge less, please also let me know.

*TradeStation offers both per-share commission plan and flat-fee plan. $9.99/trade is flat-fee plan for 1 – 9 trades/month.
**ThinkOrSwim’s per-share commission is $.015 per share ($5.00 minimum)
***AB Watley Direct’s 90-day introductory rate. $9.95/trade ongoing commission.
+ShareBuilder $4 commission for automatic investment plan. $9.95 real-time trade. ING mutual funds only.

Of course, commission & fees are the only factor that one should consider when selecting a discount broker. Zecco used to be really cheap, but then there are lots of complains about their sub-standard customer service and poor website. That said, if you are like me who always wants to keep the cost of trading stocks or ETFs low, then brokers with low commission are the first ones you want to check.