Joe Lan, CFA is a former financial analyst for AAII.


Discussion

Steve Atwell from CA posted about 1 year ago:

There's an error in the fee information for Vanguard. The fees aren't based on the value of the assets in your account, but the value of Vanguard mutual funds and ETFs held in your account.

The fee structure is good for people who mainly invest in Vanguard funds and also want to hold some additional assets. (If you want index funds, it's hard to go wrong with Vanguard's offerings.) But if you don't plan to hold significant chunk of Vanguard funds, the fee structure is such that you're probably best off with another broker.


Tony Armendariz from CA posted about 1 year ago:

I disagree that cost is no longer an issue with commissions in the $8-10 range.

When I was starting with small, short term, trades (Gorilla Trades), an investment of $1000 immediately loses 1.6% with the $8 buy & sell commissions.

For that reason and a trading agility reason, I switched to MBTrading.com for my smaller, faster trades. MBTrading has a rate plan of $0.01/share or 1$ minimum. For the $1000 trade, this costs me 0.2%.

The agility feature (Scottrade doesn't have it) allows me to set up a Buy Limit with automatic stop loss/take profit order ("TTO") before the market opens, and let my strategy unfold automatically.

Tony

(Yes, I do use Schwab, TDAmeritrade, etc for bigger longer term stuff).


Bill from IL posted about 1 year ago:

Does anyone have any thoughts about Interactive Brokers? Would appreciate your input.


PrescottJer from AZ posted about 1 year ago:

Maybe I missed it, but it would be helpful and possibly important to know the total number of respondents that produced the results stated.


Robert Emerson from FL posted about 1 year ago:

In response to Bill, I have used Interactive Brokers for over 5 years, and could not be more pleased. Their fees are incredibly low ($1) for up to 200 shares, their executions often result in a superior price for me, their platform although somewhat overwhelming to begin with is complete, yet easy to use, their range of financial instrument offerings is complete including not only stocks and options, but also bonds, futures contracts, and currencies. I have only used them for stocks and options, however. An interesting feature is the ability to trade on a number of different exchanges around the world, not just the US. I have yet to have a complaint of any sort with them. Their customer service is also excellent.


Peter Asprey from WA posted about 1 year ago:

"Since most online brokerages offer trades for under $10, cost is no longer much of a concern."

It is beyond me why folks would think this. If I can pay $1.00 instead of $10.00 WHY would I NOT pay less? I have accounts with three of the brokers listed, AND with IB. I've used IB for 99% of my trades. The primary investing system I use blends investing (long term) with trading (short term) and produces MANY small trades (diversification). Years ago, when still inventing this stocks-only (no options) system, I tried it with Fidelity, at about $8.00 per trade. The commissions ate so much of the profits, that the system was only marginally successful. IB's $1.00 trades made all the difference.

That said, if I was trading a several million dollar account, commissions wouldn't make much difference. But, after using the IB platform for several years, I'd still go with them. They get a "good" or better for every item on my checklist, and an OUTSTANDING for cost in the 1-10 lot purchases. Nobody even close.

BTW, the system referred to as "TtP-S" is totally free and developed by about 400 members--represented by a Yahoo Group of the same name.


Mark Sullivan from CA posted about 1 year ago:

Wow, a new online broker in the top 5. Usually it is just a shuffling of the usual most marketed brokers. AAII does a really disservice to it members with Top Five broker articles and only perpetuates those that have big marketing budgets. There is nothing "top five" about being the most used by members. AAII needs to get off its but and do some proper evaluations of online brokers. Set up some criteria and evaluate brokers in categories like best to start with if you have only $25,000, best bang for the buck, best stock tools, and best for buying bonds. Just because a online broker is not used the most by members doesn't mean it is the best, probably just the best marketed and that cost $$$ which you pay for.
Like others have said "$8.00 does matter". The one thing traders can control is cost.

I use TradeKing and love it @ $4.95 a trade no matter what the amount. Customer service is also great. Though I am always interested in other brokers none of which are in the top five.

AAII is suppose to be teaching its members how to invest not writing marketing articles for big online brokers.

By the way I love Joe Lan articles. They are great reads and very educational. I am surprised he was given the task to write the regular "top five" most used broker article.


John Ciak from NJ posted about 1 year ago:

Robert Emerson: Isn't there a monthly fee with Interactive Brokers, though? If so this makes them prohibitively expensive for less frequent traders.


S. Desai from TX posted about 1 year ago:

There are several topics missing in this review:
1) options screening, options tools and strategies. A comprehensive review of options screening which also includes the screen for underlying instrument is desired.
2) comprehensive screening for preferred stocks and MLPs. This is very valuable for those who want high yield.
3) margin rates. For example, Schwab quoted me 6.8% margin rate for margin over $100,000 while Fidelity gave me a margin rate of 2%! This makes a huge deal because I buy high dividend paying low beta stocks or preferred stocks on margin, and sit tight.
4) high quality paid and free 3rd party research is a big deal. For example, Can I buy research from Goldman or Lazard or FBR (to name a few) etc. Or from who else?
5) Tools training. Investor education is very useful for "self directed" investors. Which broker offers a comprehensive training program to teach its customers?
6) A very highly desirable feature that I don't see any broker offer is daily computation of Sharpe Ratio, Jensen's ALpha, and Treynor's Ratio of my existing portfolio. How would my portfolio's Sharpe Ratio change if I added/removed a particular stock or bond from my portfolio? What is my total return between any two dates so that I can "benchmark" my performance against that of other money managers or index?


Samir Desai from TX posted about 1 year ago:

Two people have praised IB in the commentary section. I believe that $1 or $10 commission does not make as much difference unless I am trading thousands of trades per year.
Being on the "right side" of the trade is far more important than the commission difference of $8 ("law of marginal utility or benefits" in economical sense).
I tried the IB platform. Yes, the trade is cheaper but everything else is cheaper...err poorer too with IB. I spoke with multiple IB customer service reps who were trash talking and condescending. The customer service hours are limited. Research is non-existent. And the platform is NOT superior. IB claims that their execution is better. Nonsense. I have had better results in my execution on Schwab and Fidelity platforms (between the bid-ask spreads) without much problems. In the US, it is impossible to get rid of the market maker (for reasons that would start a whole new topic). Many other exchanges in the world don't force the buyers and sellers to trade with the market-maker. Most buyers and sellers don't even know that in the US, they don't actually trade with any counter-party. They are just trading with the market-maker! So IB doesn't offer any special advantage in that. I would not recommend IB unless I live near their Chicago Headquarter. On google, search "Interactive Brokers Experience," you will find scores of people have listed that during the periods of high volatility, IB liquidated customer's stocks even when there was no margin call or the customers' were not given even a minute to decide which stocks to sell due to cover a margin call.

Other brokers don't provide analytics on my portfolio, IB doesn't either. For a large partfolio, analytics matter far more than trading cost.


Paul Findley from CA posted about 1 year ago:

IB Broker has a $10 monthly minimum charge. So if you do two trades, you'll pay $2 in commissions and $8 to make up the minimum.


bluescreen from california posted about 1 year ago:

To Paul:
the $10 montly minimum is a fee to have realtime quotes. When I opened my account with IB I knew I was not going to trade much for several months, so I did not subscribe to realtime quotes, and was not charged the $10/monthly.
Whenever I had to buy or sell something, I would look up the quote on a different broker account, yahoo, or bloomberg. Not being able to see the realtime bid/ask at IB probably caused me to have to lose a point or two in the execution prices, but if that is a concern you probably are an active trader, and probably trade way more than enough to avoid the realtime quotes fee.
So far I am very happy with Interactive Brokers.
Having most of the time both the IB trader and TDAmeritrade's Think or Swim open next to each other, i have the impression that quotes update a little earlier on IB than on Think or Swim (guess their real-time is more real).


jerry medow from Illinois posted 12 months ago:

errore on schwab- my fee for as many shares as I want to buy is 6.95-also no mention of streetsmart edge-the top platform-used by schwab


Peter Asprey from CA posted 12 months ago:

Sorry, I should have remarked about IB's "Activity Fee Minimum." If you place NO trades in a month, it is $10.00/month. That means they expect $10.00 per month in commissions. If you trade Five round-trip trades, the activity fee is $0.00. If you sat on your, ah, hands for a whole year, you WOULD pay $120. If you made one trade a month (12 RT trades at your $10.00/per trade, no activity fee broker), you'd pay $240 in commissions. If you did the same at IB, it would be $120. If you scale up to say, 10 RT/month, it would be $2400 vs $240. For large accounts, who cares. For the rest of us...it matters. I have better uses for my extra $2,200.

I can't comment on the analyticals and customer support, except that in several years I've never needed CS. For those doing complex options trades and such, perhaps a specialist is worth it. I use Schwab's OX for my (infrequent) option trading.

If you're borrowing money ("margin") in quantity, those rates could dwarf everything. I don't use margin for my current trading systems.

OF COURSE, YMMV, and I think this discussion is useful. I also think that "top 5" analysis is NOT useful. They are all more or less equivalent, and the specialist brokers are left out.

Pete A
Bellingham, WA
10-26-13


James Perry from IL posted 12 months ago:

I agree with Peter the fees are much lower at IB. Your article focuses on full service/cost online brokers that were cheap 10 years ago but today they are expensive. People who invest on their own and have done so for several years do not need services that Fidelity and ETrade offer. They would save money by switching (from Etrade) if they do more than one trade on average per month.


James Perry from IL posted 12 months ago:

Oh, one more thing... Next time you do the survey you should include some other brokers besides the four listed above.


Vernon Roberts from FL posted 12 months ago:

The older I get, I guess the dumber I get.
One reason, I access articles like this less and less, is because everyone seems to be more interested in tracking everyone and in advertising than in providing information.

I *thought* this was a current article. However, I don't know WHEN it was written! So of what use is the information?
Saturday, October 26, 2013: date of Computerized investing link to this article.
Second Quarter 2013 : only date I see at the top of the web page.
Discussion
Steve Atwell from California posted 7 months ago:
......
How can someone comment on a Current article 7 months ago?
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It would be nice before I waste my time if a date of the "advertised" article (i.e.-in the email) would give a DATE of when the information was originally presented. (admittedly, I generally just download the pdf so not sure if I'm wrong on this)
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As to the depth or usefulness of the information, I agree with several of the comments above. If you compare what is presented in this "spreadsheet" with the information presented in the 2007 version (25 or so brokerage firms with indepth comparison table), one can see how things (i.e-regard presentation and usefulness) have changed.

Hope everyone has a great day and lots of sucess.


J Morlock from NJ posted 12 months ago:

I have been a Fidelity customer for the past 15 years and I have quite satisfied until they made a change in the way they calculate and report gains and losses on an investment.

Since January 2012, Fidelity has been calculating an investors cost basis using use the market price of acquired shares at the time they are acquired instead of using the actual amount the investor paid for the shares. The result is that reports of gains and losses are mis-stated / incorrect.

The problem is readily apparent when looking at dividend re-investments. When re-investing dividends an investors true cost of acquiring shares is zero, However, Fidelity calculates and reports the cost it at the market price on the date the shares are re-invested. This overstates the investors true cost of acquiring shares, understates reported gains, and it can show looses where there are investment gains.

I believe Fidelity made this change to reflect an investors tax cost basis (instead of an investors true cost ) because Fidelity doesn't have the capability to provide both sets of data.

An argument can be made to show the tax cost basis in an taxable account but I see no rationale argument to do so in an tax deferred account like an IRA where investors are not taxed on shares bought or sold.

I have called Fidelity several times to get this problem fixed but it has not happened as of this Oct 2013. I hope this posting will prompt other Fidelity customers to review there reports and call Fidelity to request this problem be fixed.




J Morlock from NJ posted 11 months ago:

Fidelity Update Nov 2013: I am pleased to report that Fidelity has just updated the cost basis of the positions in my retirement accounts so that reports of gains and losses reflect the actual cost I paid. Here is the message I received from them.

From: Fidelity
To: James Morlock
Topic: Account services and features
Subject: RE: Mistatement of Gains and Losses on Fidelity Investment Reports
Date: 11/18/2013 10:00 AM

Dear Mr. Morlock:

Thank you for correspondence dated October 28, 2013, regarding the cost information for your retirement accounts. I appreciate the opportunity to respond.

We updated your retirement accounts to track the position cost rather than taxable cost.

I sincerely apologize for your frustration caused by the enhancements made to our cost tracking system. I understand that these changes did not meet your expectations and assure you that this was not our intent. We believe that offering a superior customer experience is at the core of our continued success.

Mr. Morlock, we value your taking the time to share your thoughts with us.


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