If you visit the E*Trade homepage, you’ll see a big yellow star that names E*Trade the #1 premium broker of 2007 by Smart Money magazine and “Best of the Breed” in Money Magazine in August 2007. If you visit the Scottrade homepage, you see a blurb about a J.D. Power and Associates Award for “Highest in Investor Satisfaction with Online Services” award. And if you visit Zecco homepage, they don’t have any awards posted. Does that mean E*Trade is better than Scottrade and Scottrade is better than Zecco? Maybe, maybe not! So I wanted to match up all the awards and ratings and come up with my own ranking of the best online discount broker.
The List: I started with all the Premium and Discount brokers from Smart Money 2007 Brokerage Ratings page and then removed anyone with commissions greater than $10. That left me with E*Trade, Banc of America, TD Ameritrade, WellsTrade, Scottrade, Firstrade, WallStreet*E, SogoInvest, TradeKing and then I added TradeMONSTER, because they offer competitive pricing trades, and Sharebuilder, because they offer a unique discount purchasing program. I removed Banc of America, WellsTrade, and TD Ameritrade because they’re affiliated with larger banks, I wanted standalone brokers.
Best Discount Broker: TradeKing
TradeMONSTER offers competitive pricing for trading stocks, only $7.50 a trade up to 5,000 shares. On options, they also have very competitive rates, with a single leg optionst rade of 10 or 20 contracts costing you only $12.50. If you trade 50 contracts, the price only goes up to $25. On TradeMONSTER, you can trade anything you could imagine in the markets from your standard stocks and options to ETFs, mutual funds, and bonds. Take a look, I think you’ll be pleasantly surprised at the powerful tools they give to every account, regardless of how much you trade.
OptionsXpress is always in the conversation whenever you talk about the best online stock brokers. Despite their name, OptionsXpress deals with much more than stock options and equity trading, or stock trading, is an area they excel in. With no minimums and no account fees, their current rates are $9.95 per equity trade. While that’s higher than TradeKing, it’s a price that puts it ahead of bigger names like E*Trade. OptionsXpress was named the #1 discount broker by Kiplinger’s in 2006 and they routine win accolades from Barron’s and Smart Money magazine.
E*Trade, one of the priciest of the online discount brokers, with a $9.99 trade commission, has won several awards in its own right. #1 premium broker of 2007 by Smart Money magazine and “Best of the Breed” in Money Magazine in August 2007. One startling ranking was one for Kiplinger’s in 2006, where E*Trade was rated 9th (the only other online discount broker on the list was Firstrade at #4 – #1 was optionsXpress but their trades cost $14.95).
Sharebuilder isn’t really a discount broker in the traditional sense because you pay $4 a trade but it has to be done on a schedule, meaning the following Tuesday. So in a sense you can buy stock at a cheap price but you have less control over it. Sharebuilder was recently acquired by ING Direct and they’re also, currently, the only broker to offer promotion codes for free money.
The Awards Sites
Below are links to the award pages I could find:
- Update: Smart Money just released the results of their 2008 Brokerage Ratings.
- Smart Money 2007 Brokerage Ratings – The rankings from 2007 listed TradeKing as the number one discount broker, their second in a row. The full ratings, in order from best to worst, were Scottrade, Firstrade, OptionsXpress, Muriel Siebert, WallStreet*E, SogoInvest.
- 2006 Kiplingers Ratings – For a $50,000 account, the rankings were: optionsXpress, Muriel Siebert, Wells Fargo, Firstrade, Fidelity, Vanguard, TradeKing, Schwab, E*Trade, Scottrade, and TD Ameritrade.
- For JD Power & Associates, I invite you to search on their site.