Online brokers make investing easy
By Jim Middlemiss • Bankrate.com

If you're tired of paying a broker for bad advice on where to invest your hard-earned money, maybe it's time take the market bull by the horns and manage your own portfolio.

A decade ago, that would have meant paying high fees to a brokerage firm and wading through a lot of paper on the hunt for that perfect investment. But thanks to the Internet and a growing selection of discount brokerages, it's now easier than ever to manage your investments.

According to Investor Economics, a wealth management research firm in Toronto, Canadians have about $1.5 trillion in investable assets. Discount brokers hold $123 billion of that sum, up from virtually nothing a decade ago, when the industry was in its infancy.

"Direct investing is appropriate for people who want to make their own investment decisions and who have the time to do it," says Marianne Hasold-Schilter, who heads up ScotiaMcLeod Direct Investing. "It involves researching and becoming comfortable with the decisions you're making."

Check the ratings and take a tour
So how do you get in the game? A good place to start is Watchfire GómezPro, a research firm that ranks online brokers.

It issues quarterly scorecards that rank sites on a number of criteria, from the types of tools and research they provide to costs and ease of use.

For the fifth quarter in a row, BMO InvestorLine retained the top spot, followed by CIBC Investor's Edge, Credential Direct and TD Waterhouse Canada.

Glenn LaCoste, chief consultant at Watchfire, says when it comes to online brokerage service, "Canada has really caught up to the US in terms of full functionality."

He says service levels have improved dramatically from the dot-com boom, when sites were often down or so busy they weren't able to process trades in a timely fashion.

But not all sites are built the same, so the one that's best for you might not be the one that works for your neighbour. That's why you need to understand what you're looking for.

Do you simply want to buy mutual funds, or are equities your investment of choice? Do you want access to new issues and IPOs? Most sites feature some type of research function and real-time stock quotes, but do you want third-party research? What about stock filters and tools to help you wade through the clutter?

The best thing to do is test drive some of the sites. Most have a demo button that walks you through their systems. You can also ask for a dummy account with which to log in and test the navigation and see how various features work.

Don't simply settle on using the discount brokerage offered by your bank. While it's easy to transfer money into the account, it might not be the best solution.

Many options for investors of all abilities
We've scoured the Web to find the best places to invest, whether you're new to online investing or an old pro. Below is a list of some of the major discount brokerages, in alphabetical order, and a brief description of what we consider their pros and cons. (In the interest of full disclosure, the writer currently uses TD Waterhouse and ScotiaMcLeod and is a former client of RBC Action Direct.)

While this list is far from exhaustive, it's a good starting point. If we've overlooked an online discount brokerage you like, let us know.

Ameritrade
This is the Canadian version of the popular U.S. online broker. It offers cheap trades, but only for US stocks.

BMO InvestorLine
This is a great site with lots of good tools and well-laid-out features. It has good stock filters but unfortunately doesn't provide access to the bevy of research at its sister firm, BMO Nesbitt Burns. It also lacks new issues.

CIBC Investor's Edge
This site used to be laughable but has come on strong in recent years, adding new tools and research from CIBC World Markets. It has a nice selection of new issues and access to fixed-income products. The stock filter is weak, but overall this site is vastly improved and worthy of consideration.

Credential Direct
This is the online offering from a group of credit unions. It has a modern, intuitive layout that is easy to navigate. The portfolio tools are particularly useful and make it easy to monitor your investments.

DisnatDirect
This online arm of Desjardins Securities, this site offers everything you need in a discount broker and them some. It's geared to the person who conducts a lot of trades, featuring lots of market analysis, reports and educational materials. It also provides access to new issues.

E*TRADE Canada
E*TRADE has it all -- lots of tools, research and educational materials. It includes stocks, bonds and new issues, though its offerings are limited compared to bank-owned firms.

HSBC InvestDirect Canada
This brokerage offers good access to third-party research from Merrill Lynch, as well as Standard and Poors. It also includes an alert feature to advise you of developments about your investments, but the site tends to be clunky in terms of navigation.

Qtrade Investor
This Vancouver-based independent has a lot to offer in terms of research, investment tools and educational materials and is too often overlooked. It has a nice stock screen feature and overall offers as much, if not more, than many of the bank-owned firms.

RBC Action Direct
This Royal Bank offering is a passable site, but there's nothing special about it. RBC would get a lot more mileage out of it if it tapped the resource of its full-service brokerage arm, RBC Dominion Securities, and provided more tools and research.

ScotiaMcLeod Direct Investing
There are good tools and lots of research available here. The Sounding Board feature allows you to get a report about your current holdings as they relate to your investment objectives, a nice leftover from when the site was Charles Schwab Canada. It has a nice portfolio modeling tool and great alert feature that keeps you abreast of your current investments or ones you're keeping an eye on. But the site can be painfully slow and is not the easiest to navigate.

TD Waterhouse
This site is good but takes some getting used to. It has good research and lots of variety in new issues. It also features good access to fixed-income products. The stock filter could be more sophisticated and it would be nice to be able to view all of your holdings at once, instead of just their balances. Navigation can sometimes be an issue and it's hard to retrace your steps to find that piece of information you unearthed and wanted to review again.

In the end, you might want to hedge your bets and open an account at more than one brokerage. That way you can access a wider array of tools and information.

Jim Middlemiss is a freelance writer and lawyer based in Toronto. He's a frequent contributor to the National Post, Investment Executive and Wall Street & Technology.