If you are thinking of investing in the rising stock market or just looking to start an IRA then you need an online broker. In today’s online world there are lots of good choices, but the key things to look for are still around cost, convenience and customer support. Luckily Barron’s, the leading investment magazine for everyday investor’s, has shortened this list in its annual survey of Best Online Brokers. The survey measures overall brokerage performance based on eight key aspects: trade experience, trading technology, usability, range of offerings, research amenities, portfolio analysis and reporting, customer service and education, and cost. So without further ado, here are my picks from the survey:
(4 Stars ****) E*Trade. The trading platform is a one-stop shopping destination (convenient), and features terrific mobile-trading applications. The broker has enhanced a number of services, including fixed income, research, retirement planning, active trader and advice-based tools. It’s also implemented some navigation improvements, allowing for greater site customization and focused on better customer service. Mobile Pro for the iPhone is one of the best mobile-trading apps we’ve seen, and includes streaming video and options quotes. As the year goes on, E*Trade plans to improve its mobile applications further; the firm is being rewarded by a huge increase in trades placed via mobile devices. This long established and leading broker recently announced a special promotion where new clients who deposit at least $2,000 will have commissions charged during their first 60 days of trading rebated for up to 500 stock or options transactions.
(****) OptionsHouse was again awarded a “Best for Options Traders” ranking. It also has very cheap $2.95 stock trades. The survey found the broker’s packed with tools for options traders, and it has added some for stock traders, too. It was awarded four stars for Trade Experience, Research Amenities, Portfolio Analysis; Report, and Customer Service; Education. The core of the Options- House platform is its risk viewer. President George Ruhana says, “We really want people to understand the risk associated with their positions.” He notes that a customer may have a position that is suitable on the basis of his margin but inappropriate for the size of his account. The potential effects of a change in the market on your positions, and your overall portfolio, are nicely laid out and understandable. Clients place approximately 100 trades per year. The firm launched a mobile-Web application in October 2009 that handles trades, order management, and portfolio management. An iPhone-specific app is planned for later this year. They are also currently running a special offer their new customers who get 100 free trades after they fund an account. Best of all, there are no time limit for trades.
(****) TradeKing. For the fourth consecutive year, online broker TradeKing has received high ratings. The firm was awarded a four-star rating on the strength of its options trading tools, as well as for its “Trader Network” that enables investors to interact to share ideas, its fixed income offerings, and its broad range of educational offerings, including its trademark Options Playbook and “All-Star” webinar series. On the downside, Barron’s said that there is some portfolio analysis functionality that is not available unless you use the Trader Network. You also can’t select a tax lot online when closing a position. The CEO of TradeKing, Don Montanaro, said, “Growing numbers of investors are putting their faith in online brokers like TradeKing to provide a better trading and client experience than they received from their professionally-managed relationships, and we aim to delight. From TradeKing, investors can expect to see a whole lot more product development, integrated social capabilities, education and all with our consistently stellar customer service in the year ahead.”
(****) tradeMonster has created a very useful and customizable platform, especially for options traders. The recently launched TradeCycle illustrates the steps a disciplined trader should follow when choosing a trade. The folks at tradeMonster consider this cycle a key to proactive investing. The steps all use key functions of the tradeMonster platform, such as research tools, strategy-selection tools, ways to test strategies and exit planning. The charting features are enhanced frequently, and include streaming implied volatility for every expiration and strike price, displayed against a 30-day average. tradeMonster maintains its own volatility database, which is a key component in choosing an appropriate options strategy. tradeMonster also added a trading journal in time for this review, which allows you to create an entry that captures the values for several indices, plus the underlying price and implied volatility, at the point an order is filled. You can attach notes to it and keep track of what you were thinking when you got into that trade. The firm has hosted more than 200 Webinars and 30 live events. CEO McGovern says, “In tough market times, that’s when people start looking for help, hitting the books and going back to basics.
(****) OptionsXpress underwent a site redesign that cleaned up navigation considerably. The firm allows its customers to trade a wide variety of financial products in a single account. The suite of tools has been consolidated into “hubs,” so that they’re much easier to find and use. In addition, optionsXpress rolled out a variety of streaming tools and data, including streaming options chains and customizable charts. You can enter and modify an order from a chart, which is a function many technical traders want. The mobile application, OX Mobile, is well designed, with streaming real-time data, charts, and watch lists, and stock, options, and futures trading. CEO David Fisher says, “We found that customers are doing significantly more trading through these phone-based apps than we thought possible.” Portfolio margining calculations help traders who hedge their positions keep their margin costs down. You can see how much price improvement you got on a particular order when you look at your order status screen, which is a nice touch. On the downside OptionsXpress is one of the few brokers left with tiered pricing and $14.95 per trade puts them near the top of the stock commissions list.
(***) Scottrade – Famous for its CEO ads and $7 trades, this broker beefed up educational resources (online and at its 450 branches) which helps and lowers costs for many investors who used to look to financial advisors for hand-holding now seek knowledge elsewhere. Rodger Riney, Scottrade’s founder and CEO says, “We have always focused on providing exceptional customer service and feel it is important to have branch offices where our customers live and work.”
(***) Zecco. This broker was reported to have a much improved website along with company focus on improving support (I personally attest to this!). Quote display, plus access to enhanced research, are much easier to use and Zecco added options features in the last year. The Zecco community is nicely integrated into the new Web platform, including the ability to share screeners. Special offer for new customers: First 10 stock trades per month are free for accounts with $25,000 or more.
Although Barron’s names a No. 1 broker, that doesn’t mean it’s the right pick for your style of investing, so have a look at your own investing styles and goals (long-term investing, options trading, international investing and high-frequency trading) and use the above list of quality and highly rated online brokers to make your pick. You can see the full list and ratings at the Barron’s website.
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- Weekly Wrap – Cheaper Online Stock Trading and My New Costco-Amex Card
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{ 9 comments… read them below or add one }
>A small correction: OptionsHouse 100 free trade has a 60 day limit. I recently joined OH and wrote a review about them. Love their commissions, hate the platform! But overall, the experience has been good.
Absolute true!!!
Faced that during the worktime.
>OptionsXpress has a lot going for it. You'll like its fast service, wide fund selection and low fund prices. It's very simple and easy to use.
>I know this sounds like spam but I had some capital losses this year and used a wonderful new application from netbasis.com to figure out my cost basis. They had information dating back to the 1920s. Cut major time from asking my slow ass cpa to do it. If anyone used something similar or needs to for their extensions please check it out…seriously. Great article too.
>Choosing an able broker is one of the most important decisions a trader has to make before trading begins. The primary factors influencing the choice of broker are the spreads offered by the broker, the execution time for trades, and the comfort level with the trading platform.
>Choosing the right broker can make all the difference. Really. From trade execution to margin rates, your broker can impact your bottom line.
>A small correction: OptionsHouse 100 free trade has a 60 day limit. I recently joined OH and wrote a review about them. Love their commissions, hate the platform! But overall, the experience has been good.
>Have you seen Kiplinger's rankings For a $50,000 Account
1) OptionsXpress
2) Muriel Siebert
3) Wells Fargo
4) Schwab
5) Fidelity
6) Vanguard
6) Firstrade
7) TradeKing
9) E*Trade
10) Scottrade
>OptionsXpress has a lot going for it. You'll like its fast service, wide fund selection and low fund prices. It's very simple and easy to use.
>What about Fidelity? It offers a full range of services to online investors, from international trading to checking accounts. The firm is known for its large selection of investment products. Its easy-to-use website provides great… education, planning and analysis resources to help you make the best choices. Fidelity has a three-tier commission structure; those who make fewer than 36 trades a year and have less than $50,000 in assets pay $19.95 per trade, for example. There are no extra fees, and the minimum is $2,500 to open an account. Fidelity provides mobile applications, and you can check your accounts or make trades while on the go.
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