Online brokerages -- the best deals
it comes to the do-it-yourself world of online trading, the first
thing most people want to know is how much it will cost to trade.
But some investors place more importance
on the amount of cash needed to open an account. For others, the
services provided are the primary issue.
In short, no one online brokerage
will fit the needs of all investors.
Five firms don't offer touchtone
trading. That can be a major drawback because it eliminates a mid-price
trading option. Most firms charge their lowest rates for online
trades, have a slightly higher fee for touchtone trades and charge
the most for trades involving a representative.
So, if you want to trade when you
don't have access to a computer, those five firms force you to pay
the highest fee by using a representative. That could make those
firms more costly to use in the long run than a company that offers
touchtone trading even though they might have cheaper fees in other
While not offering touchtone trading
weighed heavily in evaluating the best companies for stock trading,
it seems to be less of a drawback when it comes to mutual fund trading.
Rarely do you hear of a hot tip in a mutual fund that makes an investor
reach for the nearest phone. You'll have to decide based on your
own trading preferences and needs.
Here are the picks for the best in
three categories: overall excellence, the best for stock traders
and the best for mutual funds.
Overall excellence -- the top
for dollar, the company that will make your investment money go
furthest is Brown & Co. It charges $5 for an online market order
and $10 for a limit order of up to 5,000 shares. The company's fees
for mutual funds are low, too. The rap against Brown is the $15,000
minimum to open a stock account. But that probably isn't an issue
for anyone but the newest investors. What may be more of an issue
is that this isn't the company to use if you need investment advice.
Brown keeps its fees low by targeting investors who want to make
their own decisions.
would be the place to go if you're looking for a little more in
the way of service and are willing to pay slightly higher fees.
Scottrade's fees are super cheap -- $7 for online market orders,
$12 for limit orders and only $500 opens an account. Another plus
-- those fees are for unlimited shares.
When it comes to mutual funds, Scottrade
sticks with the $500 minimum and doesn't charge a transaction fee
for non-NTF load and no load funds.
and Scottrade tend to run neck and neck in our surveys. Ameritrade's
trading fees are slightly higher but still very good -- $8 and $13
for online market and limit orders, respectively, with no limit
on the number of shares. Right now Ameritrade requires $500 to open
an account; that's supposed to go to $2,000 after June 26, 2001.
& Co. doesn't have a minimum to open a stock account and it
simply requires the fund minimum to trade mutual funds. While Bidwell's
trading fees are relatively low -- $12 online market, $15 online
limit -- those fees are only good for up to 1500 shares. Still,
for most investors, 1500 shares are far more than they'd trade.
rounds out the top five. It also requires no minimum to open a stock
account and charges just $15 to trade unlimited shares for either
an online market or limit order. It requires the fund minimum when
it comes to mutual funds and offers a selection of several thousand
The best for stock trading --
the top 10
& Co. again takes the top spot when talking strictly about trading
stocks. No one beats its low fees. Just pony up the $15,000 minimum.
$15,000 is too much, Scottrade's minimum is $14,500 less and may
be a great option for you. Not only does it have a low minimum and
low fees, it also has 130 branch offices -- a nice perk for online
traders, knowing that when you want to you can discuss your account
with someone in person.
only has a couple of branches, but its fees are very low and its
trading support personnel are top notch. Like most of the online
brokerages, Ameritrade has been hard-hit by a slowdown in trading
during the tech bear market. The company has announced two rounds
of layoffs this year and plans to add a quarterly maintenance fee
to generate revenue.
& Co. gets a lot of points for not requiring a minimum to open
a stock account and for its relatively low trading fees. Just make
sure you don't need a representative to help place a trade -- that
can cost up to $60 for 500 shares.
missed out on getting the No. 4 spot in our survey because its fee
for an online market order is $15, three bucks more than Bidwell's.
Since that's the most popular way for online investors to trade,
it counts a lot. Otherwise, Dreyfus has a better deal with no limit
on shares and cheaper fees for having a representative-assisted
Discount Brokers has no minimum and charges $14.75 for an online
market order up to 5,000 shares, and $19.75 for an online limit
order. Our research team experienced only one snafu with them when
no mutual fund information was included in the packet we requested.
came into being, since our last survey, when Credit Suisse First
Boston gobbled up Donaldson, Lufkin, Jenrette and took over its
online brokerage service, DLJDirect. There is no minimum to open
an account and it's $20 for an online market or limit order up to
Waterhouse has a $1,000 minimum to open an account, but its $12
and $15 fees for online market and limit orders up to 5,000 shares
are on the low end of the scale. The company has 170 branches across
Express has no minimum to open an account and its fees are reasonable
-- less than $20 to trade up to 3,000 shares for either a market
or a limit order. However, having a representative assist you place
an order will cost $75. The $50 annual maintenance fee is waived
with four trades a year or a $25,000 balance.
E*Trade is one of the biggest and best-known online brokerage firms
and is aggressively building a presence offline with ATMs and kiosks
in SuperTarget stores and expanding its online presence with an
online bank. Its online trading fees are reasonable and the company
requires only $1,000 to open an account. But it charges a $15 quarterly
maintenance fee. The fee is waived if you make two trades every
six months or maintain a balance of $5,000. Another negative is
it took 19 days and two requests for our research department to
receive an information packet.
The best for mutual fund trading
-- the top 10
takes the prize with its wide selection of more than 7,000 individual
funds, a $500 minimum and no transaction fees on any mutual fund
transaction. That's a big change from our last survey when Scottrade
charged a $17 transaction fee on all mutual fund trades.
Street Securities has no minimum to open a mutual fund account and
charges no transaction fees for trades over $500.
Lynch Direct does not have touchtone trading and does require a
$2,000 minimum to open a mutual fund account. There are no transaction
fees if you hold your mutual funds for six months. No NTF funds.
wants $500 to open an account and offers no NTF funds. Datek charges
$9.99 on no load transactions. There is no transaction fee on a
non-NTF load fund. Datek offers more than 3,000. No touchtone trading.
requires a $500 minimum to open an account and a flat $18 to trade
mutual funds. The commission on non-NTF load funds is $18. The company
offers more than 9,000 mutual funds.
& Co. requires just the fund minimum and charges $19 to trade
mutual funds -- but funds are available only by phone. Sales load
is also $19.
Discount Broker has no minimum to open an account. There's no transaction
fee on non-NTF load funds and there's no sales charge if held more
than six months. The company offers more than 880 NTF funds; charges
$20 if the purchase is under $5,000, but charges $51 if the fund
is sold in less than six months. If you ask the trading support
personnel to mail you an information packet, be sure to let them
know you also want mutual fund information. None was included in
the packet sent to our researchers.
wants a $1,000 minimum deposit but requires you to hold NTF funds
for only 90 days to avoid paying an early redemption fee. There's
a $24.95 transaction fee for buying and selling non-NTF no load
funds, and the company charges a relatively high $49.90 to exchange
funds within the same family. There's no transaction fee on non-NTF
has 642 NTF funds and a brochure that clearly defines them. There's
a redemption fee for selling a fund in less than six months. There's
no transaction fee on non-NTF no load or load funds held longer
than six months.
Muriel Siebert requires the fund minimum to open an account and
has nearly 1300 NTF funds. Fees are imposed for redemptions in less
than 90 days. There's a $35 fee for trading or exchanging non-NTF
no load funds, but no fee for non-NTF load funds. Be careful when
talking to trading support personnel. Our researchers found the
knowledge of fees for non-NTF no load mutual funds varies.