The Best and Worst Discount Brokers
I have always wanted to be the guy whose phone rings in a crowded room and say, “Excuse me, I have to take this one – it’s my broker.” Unfortunately for me, this big-headed moment probably will never come, thanks to the rise of discount brokers. Discount brokers like E*Trade and Fidelity, are companies that allow users to buy and sell securities, research investments, provide various banking services, and different trading tools via the internet. Not only do they allow for quick and easy access to trading, but they generally do it at a discount compared to full service brokers. The cheaper prices and accessibility, in my opinion, are the reasons the demand for these services is growing. As the demand continues to increase, so too does the competition for our business. This leaves us with options.
SmartMoney Magazine has recently ranked their top sixteen discount brokers by doing “rigorous analysis,” taking into consideration various elements including: commissions; interest rate on cash waiting to be invested; mutual funds and investment products; banking services; trading tools; research; and customer service. Where did my discount broker rank? You guessed it, dead last. Sharebuilder is number 16 on their list of 16. Should I panic and switch alliance to a more noteworthy broker? I don’t thinks so and here is why…
Ignoring mine and my wife’s employee sponsored retirement plans; my investing consists of about one trade once every two months in my Roth IRA. Nearly all of my investments are in large indexes like the S&P 500 via an Exchange Traded Fund (ETF) - always being mindful of expense rations. I typically wait to invest until the market starts sliding or investors start panicking and selling off. Occasionally, I will purchase separate stocks, but in relatively low dollar amounts and always keeping my portfolio of single stocks to less than 10% of the whole. I guess you can say I am a conservative and patient investor betting on the long-term gains of the market.
Hello? Buy, buy, buy! No wait….Sell, sell, sell you idiot!
Because of my investing approach, Sharebuilder works perfect for me. With only $4 trade commissions (on Tuesday’s), I manage to keep all of my commissions down to less than one percent of my total investment. Sharebuilder also ranks high on this list of interest on cash waiting to be invested. This is important to me because money waiting to be invested should be earning top dollar. Sharebuilder ranks low on the list for research, trading tools, and banking services – all options I don’t really care about. I’m not researching penny stocks or making quick trades from my cell phone and I do my primary banking with Wachovia. Although I am disappointed in Sharebuilder’s customer service ranking, I hope this article will give them an incentive to invest more of their resources back into their customers.
Who’s your broker? Where do they rank? Do you agree/disagree with the rankings? $
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Comments
@hank: Well the most important thing I guess, is that if you are going to do it, pay the least for it. Maintenance fees are a bit of a waste when you’re not paying for anything.
For example, one of the fees with mutual funds is called the 12b-1 fee. It used to be that this fee went towards the marketing of mutual funds when they first became available (circa 1980). They really don’t need that “marketing money” anymore but you still pay it. Kinda sneaky.
I’m using Vanguard for my Roth IRA and Sharebuilder for my investments (right now this only consists of some shares of E-Trade. Very speculative but it’s experiment money anyway).
Besides that my company’s 401(k) is through Fidelity and I think we have a good choice of funds there. I buy my CD’s through ING.
I barely buy individual stocks so Sharebuilder works fine for me right now.
I’m not surprised to see TdAmeritrade ranked towards the top. I am, however, a bit surprised that their customer service wasn’t rated higher. I haven’t had anything but pleasant experiences with them.
The only thing with them, though, is that you don’t want to leave cash in the account, as it barely does anything for you.
I’m actually not a big trader anyway yet. I’m sticking in mutual funds that are buy and hold and use Schwab, so it costs me a few bucks to make the trade, but I don’t plan on moving anything for a while. Don’t know if my meal ticket is trading enough to use a discount brokerage I guess yet…