The Best Low-Cost Online Brokers

My wife and I keep our retirement accounts with Vanguard. In those accounts, we have a mix of low cost index funds. We also have a small amount of money at Vanguard in taxable accounts, but we typically dump that money into our retirement accounts when they aren’t maxed out. That being said, we also hold some individual stocks. For those we use a low cost online broker. We originally wanted to keep this money at Vanguard as well, but they charged around $20 a trade, which is ridiculously uncompetitive. If Vanguard was anywhere close to what you can get from one of these low cost online brokers, our individual positions would have been with them as well. I think Vanguard is a great place to buy index funds and/or have an IRA, because they have amongst the lowest costs, and that’s what they do best. However, if you’re going to hold shares of individual companies, you might want to consider some of the following options. Like a baseball team, we’ll have a lineup of nine providers. In no particular order:

TD Ameritrade – Our leadoff hitter, TD Ameritrade, charges $9.99 per trade. If you sign up right now and fund your account with at least 25k, you get $100 and 30 days of free trades. I can’t speak as to their level of customer service. $9.99 per trade is a better deal than what I could have gotten if I had done all my trades at Vanguard.

Scottrade – Scottrade bats second in our lineup and starts the price war off by offering $7 trades. Unlike TD Ameritrade, they don’t seem to offer any special incentive to sign up for their service. I can’t speak to their level of customer service. Broker assisted trades cost $27.

E-trade – E-trade offers 100 commission free trades for signing up or a free Blackberry. Since their trades range from $7.99/trade to $9.99/trade, you’re getting a theoretical value of around $799-$999. Of course, if you read the fine print, you have to make the 100 trades in your first 30 days. If you have a value slant as an investor, I doubt you’ll be making 100 trades in your first 30 days of trading. Plus, they require you to pay for the trades up front and then reimburse you. To get the $7.99 rate they require that you make more than 150 trades per quarter (not me). To qualify for the $9.99 rate you need to have at least 50k in assets or make between 30-149 trades. Their standard rate per trade is $12.99/trade if you don’t meet the above criteria. I’m not sure why their pricing structure has to be this complicated. I really like the aesthetics of their site, but I wouldn’t even consider using them. Do you really want incentives that encourage you to trade more when you can undercut their best price somewhere else?

Sharebuilder – Sharebuilder allows you to set up an automatic investment plan to purchase stocks each month. They charge $9.95/month if you make real time trades, like you would with the services above. However, if you sign up for one of their investment plans, each month you pay just $4…but that’s $4 monthly (or weekly, or bi-monthly), per stock that you’re systematically investing in. See all of their prices here.

Zecco – You know all about Zecco. They used to have 10 free trades/month for anyone who had at least $2,500 worth of cash and securities in their account. They’ve upped the minimum to qualify for that deal to $25,000. All their trades above the ten, or all of their trades if you have less than 25k worth of assets, are $4.50/trade. The reason to go with Zecco was always their free trades. Their customer service has a less than stellar reputation. Still $4.50 per trade is very competitive.

Tradeking – Tradeking is what I personally use. Trades are $4.95 apiece. I’ve rarely needed customer service for anything, but my limited experience with them has been excellent. Very competitive price, too. There are lots of tools available here as well. I recommend them.

Wells Trade - Similar to Zecco’s offer, Wells Fargos trading arm offers 100 free trades if you have at least $25k in assets with them. One difference is you can count loan balances and deposits with Wells Fargo toward your $25k. Anything above and beyond the 100 trades per year will cost you $5.95 per trade.

Just2Trade – $2.50 per trade. I can’t find anything that gives a minimum to open an account and get that deal. I don’t know much about them, but I really like their site. Check them out if you’re looking for low cost. They market themselves as being for “serious” investors. If you’re a comedic investor, I guess they’d suggest you look elsewhere.

Sogotrade – $3 per trade. As an incentive to sign up, they offer 100 free trades for 30 days. After that it’s a very competitive $3 per day. Lots of these sites have a compare us to our competitors tab – but they’re very selective as to who they compare to. Obviously, no one compares to anyone with lower prices.

There are other online brokers that you can use, but these are some of the lowest cost options. It’s an industry that’s in a constant price war. Prices keep falling. I think eventually all of the broker’s will be comparable to those with the lowest prices. Competition is a great thing for the consumers, of course. If you know of other, better low-cost options, please let me know. Thanks for reading.