Tuesday, April 24, 2007
Cheap frills - online brokers and what services and commissions they offer the investor - includes information of commissions and services
Online brokers were heavily engaged in a game of one-upmanship last year, testing how low they could go. The commission-slashing seems to have settled down for now--at rates unimaginable just a couple of years ago. Commissions at the top ten online firms have plummeted from an average of $32.19 early last year to just $15.77 early this year, according to an analysis by Piper Jaffray.
But even that's high for our winner this year. The cheapest guy on the Net, Brown & Co., will execute your market order for a mere $5.
Although low commissions Create the buzz about online brokers, it's not the only thing to consider when choosing and using one. A firm that's fine for active stock traders who want to do their own research may not fit the needs of buy-and-hold investors who want to keep stocks and funds in the same account or for investors who trade exclusively in their IRAs. That's why we didn't crown a "best overall" among the 16 online brokers in our survey. Instead, we picked the winner in each of seven different categories---not only for commissions but also for fees, margin rates, products and services, mutual funds, IRAs and investor tools.
Because there are more than 80 (and counting) online brokers, we left out the small niche players and brand new firms--some of which are likely to be gobbled up by banks and larger brokers. We also left out discount brokers that haven't made a big foray onto the Internet.
Advertisement
BROWN BEST FOR COMMISSIONS
At Brown, $5 gets you a market order for up to 5,000 shares of any stock listed on a major exchange or on Nasdaq. Add $10 for a limit order and Brown's $15 combo is the lowest for any firm on our list--but only slightly lower than Suretrade's $15.90 for a market and limit order on up to 5,000 shares. George Brown, head of the company that bears his name, keeps costs low by limiting customer perks; for example, his is the only firm that doesn't offer even the most basic research tools on its Web site. (Evidently, overhead is low, too: When we called for an interview, he answered his own phone.) Brown says business has increased 50% since the firm lowered its commission to $5 in March. "But I don't plan on reducing it any more," he says.
The highest trading costs in our survey are at Accutrade and Charles Schwab: Each firm charges $29.95 for each market or limit order up to 1,000 shares.
BEYOND THE LIST PRICE. Ameritrade and Web Street Securities do not set a limit on the number of shares covered by the basic commission, but elsewhere, high rollers can get nicked by additional charges for large trades. The other firms charge for each share beyond the limit, except Datek, which charges an additional basic commission for every 5,000 shares.
Depending on how it is applied, that charge of 1 or 2 cents per share (3 cents in Schwab's case) can sabotage the rates you signed on for. Discover Brokerage Direct and Waterhouse Securities recompute the entire order at the excess share price. So at Waterhouse, for example, a $12 market order for up to 5,000 shares jumps to $50.01 for 5,001 shares. And at E*Trade, the extra commission is figured on the whole order and then added to the basic commission (hiking the cost of a 5,001-share market order from $14.95 to $64.96).
Options traders are out of luck at American Express Financial Direct and Datek. The other brokers trade options at minimum commissions ranging from $14.95 plus $1.75 per contract at Web Street to $40 at DLJDirect.
BEST BETS FOR BONDS. Commissions for buying one Treasury bill range from $25 at Web Street to $60 at American Express. For ten NYSE-listed corporate bonds, commissions range from zero at DLJDirect to $50 at Accutrade, E*Trade, Quick & Reilly and Suretrade. Ameritrade, Bull & Bear, Datek, Discover, National Discount Brokers (NDB) and Waterhouse sell neither Treasuries nor corporates online. American Express and Fidelity will buy Treasuries for you but not corporate bonds.
BULL & BEAR BEST FOR OTHER FEES
The brokers in our survey don't go slap-happy with extra fees. Bull & Bear gets the laurels in this category for applying only one fee out of the seven we checked: $15 for an outgoing wire transfer. Of the other firms that charge only one of the seven fees, Waterhouse charges $25 for the same service; Datek charges $50 to issue a stock certificate--the highest fee for that service, which many online investors aren't concerned about. American Express and E*Trade charge five of the seven fees.
But even that's high for our winner this year. The cheapest guy on the Net, Brown & Co., will execute your market order for a mere $5.
Although low commissions Create the buzz about online brokers, it's not the only thing to consider when choosing and using one. A firm that's fine for active stock traders who want to do their own research may not fit the needs of buy-and-hold investors who want to keep stocks and funds in the same account or for investors who trade exclusively in their IRAs. That's why we didn't crown a "best overall" among the 16 online brokers in our survey. Instead, we picked the winner in each of seven different categories---not only for commissions but also for fees, margin rates, products and services, mutual funds, IRAs and investor tools.
Because there are more than 80 (and counting) online brokers, we left out the small niche players and brand new firms--some of which are likely to be gobbled up by banks and larger brokers. We also left out discount brokers that haven't made a big foray onto the Internet.
Advertisement
BROWN BEST FOR COMMISSIONS
At Brown, $5 gets you a market order for up to 5,000 shares of any stock listed on a major exchange or on Nasdaq. Add $10 for a limit order and Brown's $15 combo is the lowest for any firm on our list--but only slightly lower than Suretrade's $15.90 for a market and limit order on up to 5,000 shares. George Brown, head of the company that bears his name, keeps costs low by limiting customer perks; for example, his is the only firm that doesn't offer even the most basic research tools on its Web site. (Evidently, overhead is low, too: When we called for an interview, he answered his own phone.) Brown says business has increased 50% since the firm lowered its commission to $5 in March. "But I don't plan on reducing it any more," he says.
The highest trading costs in our survey are at Accutrade and Charles Schwab: Each firm charges $29.95 for each market or limit order up to 1,000 shares.
BEYOND THE LIST PRICE. Ameritrade and Web Street Securities do not set a limit on the number of shares covered by the basic commission, but elsewhere, high rollers can get nicked by additional charges for large trades. The other firms charge for each share beyond the limit, except Datek, which charges an additional basic commission for every 5,000 shares.
Depending on how it is applied, that charge of 1 or 2 cents per share (3 cents in Schwab's case) can sabotage the rates you signed on for. Discover Brokerage Direct and Waterhouse Securities recompute the entire order at the excess share price. So at Waterhouse, for example, a $12 market order for up to 5,000 shares jumps to $50.01 for 5,001 shares. And at E*Trade, the extra commission is figured on the whole order and then added to the basic commission (hiking the cost of a 5,001-share market order from $14.95 to $64.96).
Options traders are out of luck at American Express Financial Direct and Datek. The other brokers trade options at minimum commissions ranging from $14.95 plus $1.75 per contract at Web Street to $40 at DLJDirect.
BEST BETS FOR BONDS. Commissions for buying one Treasury bill range from $25 at Web Street to $60 at American Express. For ten NYSE-listed corporate bonds, commissions range from zero at DLJDirect to $50 at Accutrade, E*Trade, Quick & Reilly and Suretrade. Ameritrade, Bull & Bear, Datek, Discover, National Discount Brokers (NDB) and Waterhouse sell neither Treasuries nor corporates online. American Express and Fidelity will buy Treasuries for you but not corporate bonds.
BULL & BEAR BEST FOR OTHER FEES
The brokers in our survey don't go slap-happy with extra fees. Bull & Bear gets the laurels in this category for applying only one fee out of the seven we checked: $15 for an outgoing wire transfer. Of the other firms that charge only one of the seven fees, Waterhouse charges $25 for the same service; Datek charges $50 to issue a stock certificate--the highest fee for that service, which many online investors aren't concerned about. American Express and E*Trade charge five of the seven fees.
# posted by Medical Information : 11:59 PM
Subscribe to Posts [Atom]
