Online brokers make investing easy
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
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.
This is the Canadian version of the popular U.S. online broker.
It offers cheap trades, but only for US stocks.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.