Update: On Friday, January 30th, Zecco announced that they would no longer offer $0 commission trades for investors with less than $25,000 invested. See a great list of low cost alternatives here.
Online trading is a relatively new phenomenon. Based on the information I can find, the first online trade took place in 1983, through what is now known as E-Trade. Since then, online trading has experienced explosive growth. Before that, if you wanted to buy stock, you had to do so through a broker. Since it’s inception, trading stocks online has gotten cheaper and cheaper. For the small trader (like me), minimizing cost is an essential part of making money. That’s why index funds are all the craze. You keep your costs low, and you have a better chance of outperforming. If you’re making large trades, it’s easier for your trading cost to seem small. Hopefully that’s the case for me sometime soon;)
I personally have been using TradeKing for the last couple years and have been pretty satisfied with it overall. Trades are just $4.95 apiece and option contracts are $0.65 each. Most of you know that you can do better than that now. It isn’t new, and anyone making online trades has probably already heard of Zecco (ZEro Cost Commission). Here’s the scoop, you get 10 free trades a month as long as you keep a balance of at least $2,500. It sounds too good to be true, but as far as I can tell, this is completely on the up and up. It’s been in operation since 2006. It looks like a great company – the ultimate discount brokerage, and the first one to take the price of a trade all the way to zero. (Of course they aren’t the only one, Bank of America offers free trades for customers who have at least 25k in their BAC accounts)
According to their site, Zecco makes their money from the trades you make above and beyond their 10 free ones, on their option trades, when people borrow on margin, on the cash balance you keep in your account, on their advanced tools and a bit off of advertising on their site. To me it seems pretty legitimate, and I know a lot of people that have been very happy with Zecco. By the way, Zecco would be a great place to buy ETFs if you’re buying them to keep your cost low.
It seems that not everyone has been satsfied with their customer service. Check out this article by Seeking Alpha (can you tell I like this blog?). Here’s another article, written shortly after Zecco unveiled their zero commission model, predicting that Zecco would fall on their face. I guess they still might, but it’s not looking good for that prediction as of right now. I actually plan on opening an account with Zecco in the near future. I’m keeping my TradeKing account, because it’s comfortable and I know it’ll be a hassle to move. If you use Zecco, or know of another zero commission broker, let me know the scoop by email or in the comments. Thanks for reading.
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