From a stock trade commission fee perspective, OptionsHouse is one of the cheapest with a $2.95 fee. TradeKing charges $4.95 and E*Trade will charge you as much as $12.99 a trade. They are backed by PEAK6 Investments, which is one of the largest options trading firms in the U.S. and they are one of the few that offer a $9.95 flat rate options fee (others will charge you per contract).

For my more of thoughts on OptionsHouse, take a look at my OptionsHouse review.

OptionsHouse Free Stock Trades Promotion from personal finance blog Bargaineering.com.

$50 New Account Promotion

Prosper fell behind LendingClub because both had to enter a quiet period as the SEC reviewed their filings, LC just came out first. The “notes” were considered securities and subject to SEC oversight. Now that Prosper has started accepting new borrowers and lenders/investors, they’ve decided to really push it hard by offering a $50 bonus for new lenders who bid on two loans.

The only requirement is that the $50 sign up bonus cannot be immediately withdrawn and must be invested by bidding on loan listings before December 31st, 2009. If you don’t invest it, it expires.

Prosper is also running a cash rebate for investors. If you invest $1,000 – $4,999 then you’ll receive 1% cash rebate back into your account. Invest $5,000 or more and get a 2% cash rebate back into your account. The Cash Rebate Fall Promotion for Lenders program expires November 15th and the rebate is deposited by December 4th.

Do you have experience with Prosper that you’d like to share? A lot has changed in the last two or three years in the social lending world and I’ve been unable to participate because residents of Maryland can’t invest!

Prosper $50 New Account Promotion Offer from personal finance blog Bargaineering.com.

Fortunately in investing, we can use some of the tools to protect ourselves against it. I’ve recently been reading more about it and one of the best ideas I’ve seen is the use of stop loss orders and trailing stop loss orders to your advantage.

Stop Order

A stop order is an order to buy or sell once the price of the underlying stock reaches a specified price, called the “stop price.” Once it reaches the stop price, the order is put out on the open market. A buy stop order is an order to buy a stock after it reaches the stop price, which is always set to be higher than the current market price. A sell stop order is an order to sell a stock after it reaches the stop price, which is always set to be lower than the current market price.

You can also make it a stop-limit order by setting a limit price in addition to a stop price. The stop price activates the order and it becomes an ordinary limit buy or sell order.

Stop Loss Order

A stop loss order is just a name given to a sell order with a stop price. They use “stop loss” as a way to indicate the purpose of the order, since you are usually trying to stop a loss. The idea is that you set a stop price under the current market price for a sell order. If the stock falls to or below the stop price, you sell the stock in the market as a market order.

In general, a stop loss order is setup as a percentage of the current market price and is used to remove emotion from the decision making. You buy a share of Bargaineering (BRG) at $10 and decide you want to, at most, lose 10% of your investment. You would make the purchase and then set a stop loss order at 10% less than the share price, or $9. If BRG ever falls to $9, then you would sell the stock at market price. If it goes up, as it probably would , then you keep holding on.

Why a stop loss order? It’s recommended that you set up these types of orders when you are not going to be able to review your stocks on a regular basis. If you go away on vacation and can’t check your stocks for a while, a stop loss order can be used to protect you against a sudden drop you can’t respond to. It’s also said that these orders remove some of the emotion out of the process.

Trailing Stop Loss Order

A trailing stop loss order is a stop loss order that adjusts as the stock increases in price but doesn’t adjust when the stock decreases in price. In our case of BRG, let’s say the price goes up to $100. Your existing stop loss order with a stop price of $9 is probably not going to do you any good. With a trailing stop loss order, as the stock rocketed up to $100, the 10% trailing stop would adjust upward in lock step. At $100 a share, the stop loss order would have a stop price of $90 (10% under the share price). If the shares fall to $95 a share, the stop price remains $90.

This has two benefits. The first is that you don’t have to monitor the stock on a daily basis. Second, you have essentially locked in the gains. If the stock falls under $90, then your broker would execute a sale and you still collect the proceeds from your then unrealized gains.

This was a very simple discussion of stop loss and trailing stop loss orders, so if you want to learn more I recommend you do a little more digging online about the various strategies and techniques you can employ using these orders. I think it’s important to understand the vocabulary so you can speak the language, hopefully I’ve achieved that here.

If you have insights or thoughts to add, please do so in the comments!

(Photo: brianglanz)

What is a Trailing Stop Loss Order? from personal finance blog Bargaineering.com.

So, we started looking at ways to diversify ourselves off the US dollar. It’s possible that the dollar could be replaced as a reserve currency but more importantly, we realized that in the increasingly global economy, it’s dangerous to have all your money be from one country. There’s a reason why gold spiked to over $1,000 an ounce and it’s because people wanted stability.

However, if you don’t want to own gold, are there other options? I think a foreign exchange currency CD might be a good idea. Before we make any decisions, we should do some research about them in the first place. I’m going to use Everbank as an example because I already have a banking relationship with them and their website offers up a lot of good information about their products. For our review I’ll use the MarketSafe BRIC Certificate of Deposit as the example.

Why a Forex CD?

The idea behind foreign exchange, or Forex, is that you get to trade you dollars for some other currency. When the exchange rate changes, you either gain money or lose money. The name of the game is trying to figure out the trends and buy other currencies when the dollar is worth more and sell them back when the dollar is worth less. If you were to get into it you would find it’s a little more complicated, but that’s the gist.

Why a Forex CD? You get to dabble in foreign exchange currency trading without actually getting involved in any exchanging of foreign currency. More importantly, with this MarketSafe CD, you get to dabble in forex without putting any principal at risk. You get exposure to the Brazilian real, Russian ruble, Indian rupee, and the Chinese renminbi currencies in the form of a three-year CD.

If you think the value of the dollar will fall relative to this basket of four currencies in three years, then you’ll want to deposit money into the CD. If you don’t think it will, then you won’t. It’s as simple as that.

What is the Risk?

There is no risk that you would ever lose your principal with a MarketSafe CD but that doesn’t mean you don’t assume any risk. Inflation risk is the biggest problem you have to deal with. Let’s say the dollar increases in value relative to the BRIC currencies, then you would earn 0% over three years. That doesn’t sound bad right? Well, inflation, despite being 0.19% this last year, probably won’t be 0%. Inflation would make your dollars, having been locked up for three years, worth less and less each year. This risk exists for any investment… if you aren’t moving forward, you’re moving backwards.

Anytime you invest your money, you want to compare your investment against a safe return. You have to decide whether you are getting enough in anticipated return to take on the risk you assume with that investment. A three year (36-month) certificate of deposit currently yields somewhere between 2.50% – 2.80% APY, as of September 2009. Your principal is protected in the MarketSafe CD but your anticipated return has to at least beat your 100% safe alternative investment. If you were to earn 0%, you’ve actually lost 2.80% plus whatever inflation took out the back door.

Next Steps

For now we’re going to pass on the CD as we do some more research in the space. I’m always hesitant to lock up anything for such a long time but a little bit of money might not be a bad idea just to get a little exposure. Do you have any experience in Forex or Forex CDs? Or have you been looking at ways to diversify outside the US? Any and all directions you can point me in would be very helpful!

(Photo: pingu1963)

Foreign Exchange (FOREX) Currency CDs from personal finance blog Bargaineering.com.

Investing isn’t my forte, I’m an adherent to simple investing through index funds with a little dabbling in individual stocks just to get my heart rate up during the day. However, I find that even if you aren’t big into the markets, it’s still especially important to keep abreast of the financial news of the day.

But that’s not the topic of this post, it was more a hat tip to Daily Crux because they introduced me to this article by Stansberry Research’s editor’s in chief, Brian Hunt. The article is titled How to Turn a 100% Gain into a 1,400% Gain and the main idea is that you shouldn’t act for actions sake, an idea that applies to almost any facet of your life.

In the article, Hunt cites famed stock trader Jesse Livermore: “It never was my thinking that made big money for me. It was always my sitting. Got that? My sitting tight!”

So many times we use effort and action as a proxy for performance. How many hours did you spend on that job? What did you do? What steps did you take towards reaching that milestone? HOw many people are on the project?

Success isn’t determined by what you do, it’s determined by what you accomplished. In investing, don’t buy or sell stocks simply to do buy and sell because only your broker benefits . Buy when it makes sense, sell when it makes sense. In your own life, act only when it makes sense to act, not because you are tired of sitting around!

Don’t Act For Action’s Sake from personal finance blog Bargaineering.com.

None of the funds on the list have a sales load of any kind and I was surprised to find a fund as cheap as 0.09%. I was even more surprised to find index funds that charged over 1%. Check out State Farm S&P 500 Index B – it has a 1.49% expense ratio and a 5% deferred load! (a deferred load is a fee that is charged when you sell an asset) It has $425M in total assets too and each one of their customers is getting ripped off.

Cheapest S&P 500 Index Funds

If you know of an S&P 500 Index fund that should be on the list, please let me know.

Cheapest S&P 500 Index Funds from personal finance blog Bargaineering.com.

Terms & Conditions:

To qualify for this offer, new accounts must be opened and funded with $2,500 or more. Account funding must occur within 30 days of account opening, and one trade must be executed within 180 days of account opening, for account to qualify. Offer is not transferable or valid in conjunction with any other offer. Open to US residents only. One offer per household. TradeKing can modify or discontinue this offer at anytime without notice. The minimum funds of $2,500 must remain in the account (minus any trading losses) for a minimum of 6 months or the credit may be surrendered. Other restriction may apply.

Tradeking $50 New Account Promotion from personal finance blog Bargaineering.com.

Mark recently authored The Rookie’s Guide to Options and he approached me with a novel guest post idea. You don’t normally associate options with passive investing but he is going to explain how you can use options, specifically collars, to protect yourself when passive investing.

Let’s begin by agreeing:

• a) Passive investing beats active investing – for all but the few talented traders who consistently outperform the markets. Let’s also agree that none of us is a member of that elite group.
• b) The rules: allocate assets, diversify, buy and hold, don’t panic by selling into market declines etc. These are the most commonly used methods to minimize investment risk. They are constantly repeated by journalists, bloggers, brokers, financial planners and financial advisors.

Should most of us follow this advice with confidence? Do we save a portion of each paycheck, invest passively, and confidently accept whatever happens?

I vote ‘no.’

I ask: Why own an investment portfolio that’s unprotected against loss? Why allow your financial security to be threatened by severe market declines? Sure, the market is likely to trend higher over the years, but why take that chance?

Today’s investors can do better. Times change: stock is the core holding of almost every prudent investor’s portfolio, yet only 100 years ago the idea of owning stock would have been considered lunacy. Today, new investment tools are available, and professional advisors ignore them. You can’t blame them for protecting themselves. Offering sound, but not universally accepted, advice that may result in lost money is an invitation to a lawsuit.

Where Options Fit In

Options were created as risk-reducing tools and can be used to protect your investment portfolio against significant loss. Consider a single option strategy – the collar. As passive investors, assume that the stock market portion of your portfolio consists of ETFs (please: do not buy 2X or 3X ETFs because they do not perform as advertised) that mimic the performance of specific broad based indexes, such as SPY (S&P 500) or IWM (Russell 2000).

Assume you own 100 shares of SPY, currently trading near 107. That investment is worth $10,700.

If you buy one SPY Oct 105 put, you get the right (that expires on the 3rd Friday of Oct) to sell 100 shares of SPY at 105 (the strike price), no matter how far SPY declines. Ignoring the cost of the put for now (it’s about $140), your losses are limited to $200 in this example (pay 107, sell 105). There’s nothing special about this put and you can buy a put with a different strike price or expiration date.

To complete the collar, sell one call option, which gives someone else the right to buy your SPY shares at the call’s strike price. You collect cash when selling the call – and you can easily arrange for this cash to offset the cost of the put, giving you the collar for approximately zero out of pocket cost.

If you elect to sell the SPY Oct 109 call, you accept the obligation to sell your shares at 109 – but only if the call owner chooses to exercise his/her rights. Obviously your maximum sale price (109) limits potential profits.

You can own this per collar for no cash (call priced a few pennies higher than the put). You are guaranteed that your position cannot lose more than $200 and that your profits cannot exceed $200 as long as the collar is in place.

Collars are flexible and provide alternatives:

• a) To possibly make more money on a rally, sell calls with a higher strike price. The collar costs more because you collect less cash for the call.
• b) If you prefer to pay less (or even collect cash) when establishing the collar, choose a call with a lower strike price.
• c) Buy a put with a higher or lower strike price. That’s similar to changing the ‘deductible’ on an insurance policy.

Are collars for you? They’re not for everyone, but owing passive investments with no chance of incurring large losses, coupled with the opportunity to grow your account over the years – that works for me. The problem is that not everyone is willing to accept a limit on potential profits, nor is everyone willing to be a hands-on investor (trades can be made monthly, quarterly, annually). Don’t trust any financial advisor to makes these trades for you -at least not until collars are more widely recognized as tools for the Prudent Investor.

How well do collar perform compared with buy and hold? Recent data says better than expected.

Passive Investing Protection with Options Collars from personal finance blog Bargaineering.com.

The aspect of TradeMonster that really jumped out at me is the first thing I’m going to review – paper trading.

Practice Paper Trading

This is the first broker, that I know of, that lets you open a paper trading account (called Paper Trade) with all the features of a regular trading account. To do a TradeMonster review and not talk about this feature would be a travesty! That means you can open an account for free, pay no fees, practice trading stocks or options, and still use all of the tools available to regular brokerage account holders. You get real time streaming quotes, charts, and balances; all the stock analysis; performance charts, projections, risk analysis; as well all their options spreadMAKER tools (for complext options). It’s generous of them to offer all these tools for someone who isn’t paying a penny.

If you want to practice, I can’t think of a better place than here. It’s like behind able to test drive a Ferrari without having to pay the price when you slam it into a wall.

Commission Pricing

• Stocks: TradeMonster charges a flat $7.50 equity commission on up to 5,000 shares, which is higher than what my current broker of choice, TradeKing, charges. TradeKing charges $4.95 a trade, unless you trade stocks priced less than $1, then they add a $0.01 per share premium on top of the $4.95. If you’re using anyone else, chances are their prices are going to be higher than TradeMonster for stock trades.
• Options: TradeMonster charges $12.50 for up to 20 contracts, $25 for 50 contracts, $50 for 100 contracts, and $250 for 500 contracts. TradeKing can only beat that pricing if you purchase 10 contracts, which is $11.45, otherwise the commission structure is higher at every other tier ($17.95, $37.45, $69.96, $329.95 respectively). The disparity is even higher when you talk about multi-leg spreads.
• Mutual Funds: Here’s where I think TradeMonster has a competitive edge over competitors because they charge $15 per mutual fund purchase and it’s free to sell. TradeKing charges $14.95 on both the purchase and sale on no-load mutual funds (which is standard commission pricing). So if you want to invest in both stocks and mutual funds, TradeMonster has a favorable commission structure for that.
• Bonds: The commission on Municipal, Corporate, Agency, and Treasury Bonds is $15.00 per trade, which is actually equal to or cheaper than TradeKing. TradeKing charges $4.95 per bond with a $14.95 minimum fee. If you were to buy Treasuries with TradeKing, the fee jumps to $24.95 per transaction.

Tools

At E*Trade you get access to a suite of Power E*Trade tools if you’re an active trader that makes 30 trades a quarter. At TradeKing, you need 25+ trades a month to get access to their streaming quotes tools. At TradeMonster, everyone gets access to the tools and they’re browser-based, so you don’t have to download anything.

Since their pedigree was in options trading, a lot of their tools have options traders in mind. They have several powerful tools, most notably SpreadMAKER and AdjustTRADE, designed specifically to help you tailor your options trading. They also have portfolio simulators that let you see how your trade would react to market changes without your money on the line.

Summary

If you want powerful tools and the flexibility to get good pricing on any trade, TradeMonster is a pretty good choice. I’ll be sticking with TradeKing for now because I only use my broker to trade stocks and I don’t use sophisticated charting tools, so TradeKing’s $4.95 trades and lack of sophisticated tools for a low volume trader like myself is not an issue. You’ll be hard pressed to find these types of tools at any other discount broker, which is probably the strategy TradeMonster is going for.

I hope you enjoyed this TradeMonster review and learned a lot about the service. Do you have an account at TradeMONSTER? I’d love to hear your opinion about it.

TradeMONSTER Review from personal finance blog Bargaineering.com.

Email Newsletter subscribers will already know this (you should sign up if you haven’t already, you get a couple free eBooks!) but Lending Club is running a promotion this September where you could win $2,500 if you are Lending Club’s 250,000th subscriber.

Click here to sign up and if you are the 250,000th registered investor, you win $2,500. You don’t have to invest a thing, you just need to become a registered investor.

If you do invest, the average return over the last twelve months has been 9.6% APY, which is a pretty nice return. Can’t beat that with the stock market over the same period of time! I’m personally not an investor because I can’t be, Maryland residents can’t invest through Lending Club, but I probably would’ve given it a try if I were allowed to. So it goes sometimes.

Contest ends when September ends, be sure to review the contest terms & conditions to confirm your eligibility. Good luck!

Lending Club 250,000th Lender $2,500 Giveaway from personal finance blog Bargaineering.com.

So what defines cheap? Ultimately it comes down the dollar amount because you’d have a difficult time arguing that $12.99 is cheaper than $4.95. However, I think that just looking at the cost of the stock trade may be a mistake. Certain brokers charge you less but they offer you less in terms of tools, service, or both. Sometimes you have to review all the factors to make your decision.

Below I’ve listed a bunch of discount stock brokers that I’m familiar with and included my thoughts on all of them. The only two I have an active relationship with (opened an account, deposited funds, and have executed a trade at) are E*Trade and TradeKing. At the moment, I am slowly transitioning from E*Trade to TradeKing.

Best Online Brokers with Cheap Stock Trades

TradeKing

TradeKing is where I currently do most of my stock trading because they charge only $4.95 a trade, whether it’s online or broker-assisted. There is no minimum balance, there are no account maintenance fees, and despite the relative thriftiness of their service, they consistently rank highly in industry publications. Most notably, they’ve been recognized as having excellent customer service on numerous occasions. Another area that TradeKing excels at is in their educational products. They have an extensive options tutorial classroom where they teach you everything you could possibly want to learn about options trading. Finally, most brokers will charge you a fee if you want to transfer your account, TradeKing is willing to reimburse you that fee up to $150.

Scottrade

Scottrade charges $7 per trade online with no account maintenance or no inactivity fees. The fee for trading stocks over their phone system is $17 and broker assisted trades are $27. For mutual funds, they maintain a list of NTF Funds where they charge no fee and only $17 for funds outside the NTF program. For loaded funds, there is only a sell fee of $17 (there is the load itself too). Scottrade has been in business for a long time, I remember seeing advertisements on Yahoo! Finance back when I was a teenager, so this would make them the grandfather of the bunch.

Click here to learn more about Scottrade!

E*Trade Financial

E*Trade Financial is the one with the talking baby and they charge from $12.99 a trade down to $6.99 a trade, based on your volume. $12.99 is the standard rate, $9.99 a trade if you make 30-149 trades a quarter or have $50,000 in assets, and $7.99 a trade if you make more than 150 trades a quarter. While I don’t advocate you ever make a ton of trades to get cheaper stock trades, I want to let you know that volume does get you a lower rate (though other brokers charge less to begin with). Much like others on this list, there is no account minimums and no account fees if you get online statements and confirmations. Finally, E*Trade usually runs a promotion where you can get 100 commission-free trades in the first 30 days if you fulfill some account requirements.

Click here to learn more about E*Trade!

TradeMONSTER

TradeMONSTER is a Barron’s four star rated broker (2008) that charges $7.50 a trade up to 5,000 shares. They only charge $15 on mutual fund purchases, $0 on sales. They are a subsidiary of an options trading firm, OptionMonster, and were formed in 2007 by several industry veterans. While I haven’t used the tools, the screenshots reminded me of the application available to Power E*Trade customers. If you want the tools, I don’t think any other broker will give you access to them for free and only charge you $7.50 a trade. If you’re happy using a web-based trading platform, then you won’t be able to take advantage of the suite of analysis tools available through TradeMonster’s app. TradeMonster has a minimum opening account balance of $2,000.

Click here to learn more about TradeMONSTER!

Cheap Stock Trades at Discount Stock Brokers from personal finance blog Bargaineering.com.

Why?

Because it’s too difficult for 99% (a completely unscientific statistic) of the general public to outperform the market over an extended period of time.

Every week, at least one person will ask me for a hot stock tip. Almost every single time, I tell them to buy a basic Vanguard S&P 500 index fund. If they keep up the pressure and want something more aggressive, I tell them to buy the Vanguard Small-Cap Index Fund which passively invests in smaller, higher growth, but higher risk companies.

Now, before the pro-index fund, Boglehead crowd showers me with kudos and the pro-trader crowd throws flaming bags of dog crap on my porch, allow me a few moments to debunk the Get Rich Quick by Becoming an Active Trader myth.

1. Successful investing requires counter intuitive human emotions. The best time to buy stocks is when everyone is scared senseless, and the best time to sell is during a period of irrational exuberance. In other words, you must have the courage to go against the herd at all times. So if listening to the doom & gloom news scared you so severely that you sold your stocks in February 2009 only to buy them back in May 2009 (at a higher price), then trading isn’t for you.
2. You don’t follow the stock market nearly enough. I often compare active trading to having seats along the first or third base line. You have an excellent view of the game, but if you aren’t paying attention to every single pitch during that game, a sharply hit foul ball can ruin your day in less than a second. Same goes with being an active trader. You must follow the market on a daily — if not a minute by minute — basis. If you can’t devote the time and attention the market requires, find yourself a safer place to sit.
3. Traders that appear on CNBC aren’t that different than Billy Mays. A trader’s job is to make money. Period. To do so, some traders don’t mind becoming “pitchmen” and letting you know their stock picks are greatest thing since sliced bread. Shortly thereafter (often without a second CNBC appearance), those same traders will begin cashing in profits if their stocks increase in value. They’ll sell half their positions at a 10% profit (or some arbitrary profit point), and let the rest ride until they don’t expect any further price appreciation.
4. You don’t know when to sell. We are constantly bombarded with tons of research on why you should buy a stock, but rarely are you told why (or when) to sell. Until you sell a stock, you’re holding onto nothing but unrealized gains (assuming you’re not in the red). Depending upon your trading discipline, knowing when to sell a stock is just as important, if not more important, than knowing which stocks to buy.
5. Having the tools isn’t enough. Just because you have a hammer, a set of blueprints and hundreds of 2×4s, it doesn’t mean you’re ready to build a house. The same goes with trading once you assemble an active traders tool kit. Discount brokers might try to convince you that trading is so easy even a talking baby can do it (e.g. the hilarious E*Trade baby commercials), but it doesn’t mean everyone can do it successfully right out of the gate. Take a lesson from gold rush history, where the people who had the best chance of making money were the store owners that sold tools to the gold miners, not the miners digging for gold.
6. How much is your time worth versus outperforming the market. Active investing requires a huge time investment. Researching the fundamentals, reviewing stock charts, etc., can easily be equivalent to having a full time job. As The Simple Dollar points out, even if you have the skill to outperform the S&P 500 by just 1%, your hourly wage for a 25 hour work week over last 10 years would be a pathetic $0.77 per hour. Even when you extend the 1% out-performance ratio over a 30 year time horizon, you get a paltry minimum wage salary of just $7.34 per hour. Hardly worth the time investment unless you consider trading to be some sort of personal hobby or equate trading to a no-limits game of Texas Holdem.

Bottom line is that you can probably find better, more profitable things to do with your time. So save yourself the time investment and the money you’ll likely waste on trading commissions. Find something more worthwhile to occupy your entrepreneurial spirit because goodness knows being a full time trader isn’t exactly a fulfilling career.

And if my reasoning has failed to convince you, maybe some sage advice from the world’s most famous and articulate investor (Warren Buffett) can change your mind. If not, then best of luck to you.

This is a guest post by Matt SF at Steadfast Finances.

Even Day Traders Recommend Index Funds from personal finance blog Bargaineering.com.

Then I learned about TradeKing, which charges $4.95 a trade. $4.95 isn’t free but it’s certainly cheaper than E*Trade, where I was paying $9.99 a trade. Not only were the trades cheap, but TradeKing had been winning best customer service awards and best discount broker awards for years. So when Zecco stopped offering no-strings attached free trades, I knew we needed to compare the two straight up to get a better idea of which one was tops.

TradeKing vs. Zecco

VS.

Stock Trade Commissions

• TradeKing: TradeKing charges a flat $4.95 a trade, which is half the price of other discount brokers like E*Trade.
• Zecco: Zecco will give you 10 free trades if you maintain a balance of at least $25,000 or you execute 25 trades each month. If you can’t satisfy those conditions, trades are $4.50, forty five cents cheaper than TradeKing.

You might argue that Zecco should win on account of cheaper commissions right? Even if you don’t have $25,000, the $4.50 is cheaper than TradeKing’s $4.95, you save about a dollar on each round trip (buy and sell). I would agree with you if it weren’t for the fact that Zecco is consistently rated in the bottom three in broker surveys.

For options trades, TradeKing is again slightly more expensive than Zecco. Zecco charges $4.50 a trade plus 50 cents per contract. TradeKing charges $4.95 per trade and sixty-five cents per contract.

Other Account Features

• Account minimums: Both brokers are identical for this category – both have a minimum account balance of $0 for cash accounts and $2,000 for margin accounts. Neither charges an inactivity fee.
• Transfer fund refunds: Zecco doesn’t offer to cover your transfer fee if you leave another broker but TradeKing will up to $150 (learn more about that here).
• Online community: This is an area where TradeKing really outshines Zecco, in part because TradeKing started the whole idea of creating a community for their broker clients. Zecco also has their version, ZeccoShare, but the tools and interaction is not as sophisticated as TradeKing’s.

Awards

In the awards category, there really is no comparison. TradeKing has been in the top five in both Kiplinger’s best discount brokers survey and Smart Money’s best online brokers survey, Zecco has been in the bottom three of both. Zecco has been plagued by continued reports of poor customer service, whereas TradeKing has been lauded for their superior customer support.

In fact, if you try to find an award that Zecco has won, you’ll come up empty handed. While I don’t see awards as a reliable way to decide who you will do business with, the fact that they haven’t won anything is pretty telling. You don’t have to win every race, but you have to place or show at least once!

Summary

I don’t want to count Zecco out but the recent shift from a free commission model to a pay commission model, thus invalidating their name “ZEro Cost COmmissions,” isn’t a good sign for them. If you have $25,000 and can muster the ten free trades, I think it’s worth using them to save a few bucks. Just recognize you may be in for some customer service headaches, but I’ve never called my stock broker in all my years of investing (retirement accounts excluded).

However, if customer service is more important than forty-five cents in commission, then TradeKing is probably a better choice for you. I use TradeKing myself and while I’ve never called their customer service, I’ve never had any reason to complain about TradeKing yet.

To Open An Account…

Click here to open a TradeKing account, and,
Click here to open a Zecco account.

What are your thoughts? TradeKing or Zecco?

TradeKing vs. Zecco: Discount Broker Comparison from personal finance blog Bargaineering.com.

Did you know that National Friendship Day was August 3nd? Since 1935, Congress declared the first Sunday in August to be National Friendship Day.

I didn’t, but that’s because my friends never told me! (I just lobbed a softball, someone crush it out of the park already…)

Well, my friends at TradeKing (har har, I think they just like my money) just sent me an email telling me about a promotion where if you refer a friend to TradeKing, both of you get $50.

Here are the important details of the $50 referral promotion:

• It must be a new account opened between July 31st and August 31st,
• The referred friend has to fund their account with at least $1,000 within 30 days,
• The referred friend has to execute at least one trade (trades are $4.95 a piece) within 180 days of opening the account,
• The funds must remain in the account for at least 180 days.

Is this a good deal? If you don’t have a TradeKing account and have been thinking about it, now’s a good time to do it. If you just want the money, trades are $4.95 a piece so you’re talking a round-trip cost of $9.90, plus your trade is at risk in the market, for a promo of $40.10 on a $1,000 six-month deposit (puts the interest APY, if you like to think in those terms, at ~8%+ APY).

Want in? Shoot me an email with this contact form and I’ll send you a referral. (or directly email me at: )

TradeKing $50 Promotion: National Friends Day! from personal finance blog Bargaineering.com.

What I saw were some storied franchises being unfairly punished for the sins of other companies, so I tried to take advantage. I bought shares of companies like Kraft and Costco, Apple and Southwest, and after I bought them, they continued to fall (because the investing gods hate me). So I bought more. My crowning achievement, in terms of intestinal fortitude, has to be Yahoo, which I’ve purchased on five separate occasions since the very first announcement that Microsoft was interested in buying them. If you know what the share price was then, you’d probably be surprised to know that I’m actually profitable on the investment (at least on paper) because I kept on buying.

By buying a stock multiple time, you create what are known as tax lots.

In my example with Yahoo, I purchased it five different times on five different days. When I go to sell, I have to tell my brokerage which of the five lots I want to sell. This is important primarily for tax purposes. As you know, if you hold a stock for more than a year, the tax rate on the profits is at the long term capital gains rate, which is at most 15%. If you hold a stock for less than a year, the tax rate on profits is at the short term capital gains rate, which is your marginal tax rate.

There are some great techniques you can use, by specifying how you sell your lots, to minimize your tax burden. I won’t go into them all here but you can read about it at Investopedia.

So what are some strategies? Well consider this, let’s say that you carried over some losses from last year (I know I did!). If you have $5,000 of short term capital losses and $2,000 of long term capital losses, you might want to structure your sale such that you take short term capital gains first. Common sense would say, sell the older shares first because you pay less in taxes (long term capital gains). However, since you have $5,000 of short term losses, you should sell the short term ones because those get offset against the $5,000. You can wait until later on to sell the long term, perhaps by then you’ll have overcome all of your losses from last year!

That’s only one case of where the general advice (sell old shares first for lower taxes) is not the correct advice and why knowing your tax lots is very important.

(Photo: blmurch)

What Are Tax Lots? from personal finance blog Bargaineering.com.