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Computerized Investing > Second Quarter 2011

Online Discount Brokers

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by Joe Lan, CFA

Being a member of AAII most likely means that you do your own investing in some form. Due to their relative low costs and ease of use, online discount brokerages are one of the most popular methods of buying and selling investment holdings. Since most discount brokerages have similar pricing models, each makes an effort to distinguish its service from competitors by offering more powerful research and analytical tools for the do-it-yourselfer.

We set our focus on the top five most widely used online discount brokerage services, as rated by our members. Although we only review the top five, the survey results from our members indicate that these five brokerages combine to account for about 72% of total use.

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Discussion

Tom from PA posted over 3 years ago:

Where did Vanguard fall in your member survey? I have a few accounts there, IRA mutual funds and two brokerage accounts. I rate them very high in all of your categories.


John from WA posted over 3 years ago:

Good, smooth back office operation is as or more important to me than trading performance, and I recommend that future surveys include user experience with customer service in the evaluation criteria.

I have no accounts at Fidelity, but I have multiple accounts at the other four firms, so I can compare my experiences with them directly.

All four firms do on-line trades with good speed, accuracy and reliability. Trading and analysis platforms are different but comparable. However for back office operations, Schwab and TD Ameritrade stand head and shoulders above E*Trade and Scottrade.

Schwab and TD Ameritrade seem to have experienced back-office people who know how to get things done right. E*Trade recently took much more time and hassle in delivering checks from accounts there than did the other firms. E*Trade also once failed to generate an on-line alert that lost about $20K when an rights issue was both credited to the account and expired during month between statements. I have also had repeated difficulty with Scottrade, with their distributed small branches, following written instructions to transfer stocks and funds between accounts at the same branch without reminders and corrections. And if you have a problem during the evening or weekend and get an account lockout, as is easy to do with their password criteria and security questions, you have to wait until the next work day to call your individual branch when personnel are present; they have no 24-hour internet response person or group.

It would be nice to know which firms can do back office functions right every time as well as they trade stocks.


Shawn from KY posted over 3 years ago:

I'm an avid user of Ameritrade and its Think or Swim platform.

One of it's most useful features is the ability to see current bid asked prices at most exchanges at the same time as you place your order. Once your order is entered provided it is better than the current market you will see it within mere seconds.

It is a huge asset in achieving favorable executions.

For those interested in formulating their own strategies, here's a link to my published books -- most of which may be read online instantly through Google.

https://sites.google.com/site/wealthcreationretention/home



Sonia from FL posted over 3 years ago:

Fidelity's "analysis" is wonderful for mutual funds but deplorable for accounts of any type that hold individual securities of company stocks: Any stock that trades on a U.S. exchange is listed as "DOMESTIC", even if it is a Chinese, Australian, Canadian company...except if it's an ADR. Furthermore, no "pink sheet" listings are labeled as, e.g., Canadian, even though the name and CA SEDOL is part of the listing.

As a result the Portfolio Analysis is useless...and so is the Retirement Income Planner, because the portfolio performance, beta and risk, is dependent upon the "Analysis"

Examples of securities that I hold - listed as domestic by Fido, include ERF, PUDA, SVM,
WINNR, AT, CCJ, and ECA. Examples of Cdn securities held as "pink Sheets" & relegated to the "Unknown" column of the "analysis" include AETUF, PBNMF, COSWF, etc.

Analysis can't handle EEQ, NMM, AMJ, and TOO.

So if your portfolio only has Mutual funds (where the breakdown is finely - tuned, even for non-Fidelity funds), +/- US Corporations or ADR's, then the analysis seems to be O.K.


Felix from CA posted over 3 years ago:

I've had accounts with Etrade, Scottrade, Fidelity, and TD Ameritrade (and with the latter, since it was Datek). I have to agree with another comment that Ameritrade's customer service (back office handling) is superb. The one time that I had a problem maybe 5yrs ago with was a nuisance (but didn't cost me anything but time), they responded by giving me something like 50 free trades for a month. Scottrade's web site is too "simple" for me, painful to get detailed quotes while looking at positions as I recall; execution was not good. I made same orders on fidelity and ameritrade while scottrade's never executed. I've since closed it and moved assets to ameritrade (thankfully no transfer out charge by scottrade).
Fidelity was pretty good, but I still most comfortable with Ameri. One day I'll try Schwab. I have an account with Vanguard. Not too nice to use compared with the rest, but the costs are commission is low enough to make it worthwhile ($2 per trade).


R from CA posted over 3 years ago:

I have experience with Ameritrade, Vanguard, Wells Fargo, and MBTrading. I just pulled my 7 figure account at Vanguard because their of their clearing bank snafus and poor customer service.

I have 4 separate accounts at Wells Fargo: good for slow trading accounts because of the 100 free trades per year.

Ameritrade has good customer service and is willing to negotiate commissions and/or free trades. Their market triggers give flexibility, but awkward to setup.

MBTrading is hard to beat for active traders. $5 commissions, great trading tools, and an incredible array of order types. My favorite is the trailing stop for a *buy* order as well as a sell. Haven't seen it elsewhere.


Joseph from VA posted over 3 years ago:

what about tradeking?


Dave from AZ posted over 3 years ago:

You should've included Interactive Brokers for this subject - arguably the hands down best priced broker out there if "discount" was the topic of conversation.


Joe from IL posted over 3 years ago:

The brokerages firms that we included were the top five brokerage firms by use according to our members. There are numerous brokerages firms out there that may be cheaper, or that certain members may feel provided better execution or research. With that said, the five brokers that we listed account for close to 80% of the usage by our members.

Although this does not cover all the discount brokerages, the vast majority of what our members are using are being covered.

As always, we appreciate your comments.


Jim from NY posted over 3 years ago:

I think that the survey overlooked one important factor to consider. Once upon a time, Schwab, Fidelity & Vangurad protected the interests of small investors. They had managers with 15 years or more of experience to make recommendations. Today, no one is speaking out for the small investor and the three that I deal with are all silent on the shananigans at the larger firms on Wall Street, including major conflicts of interest and misinformation.


Allan from FL posted over 2 years ago:

I was looking for comparisions on option trading including commissions, otherwise article excellent


Allan from FL posted over 2 years ago:

I was looking for comparisions on option trading including commissions, otherwise article excellent


James from CO posted over 2 years ago:

Since TDAmericatrade totally integrated with Think or Swim CD's have been a bit of a struggle. TOS is really nice however for options and stock trades. Also it even has range bars now. In general TDA has very nice set of tools at reasonable prices. I suspect they will eventually fix their bond problems.


Bob from OH posted over 2 years ago:

Looking to start doing some my own trading. What trade site would be best beginner-friendly site to use


Mark from KS posted over 2 years ago:

I'd like to see Just2Trade compared as well.


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