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Smart Money 2009 Best Online Brokers

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Another year, another Smart Money broker survey! We’ve been reviewing SmartMoney’s best broker series for several years now (here’s 2008) and it’s always valuable to see how the different brokers fare from year to year. In the 2009 broker survey, we didn’t see too much change compared to 2008.

Unlike last year, which featured a merging of the discount and full service broker lists (in which TradeKing lost a #1 ranking they enjoyed for several years), they didn’t make any big changes to the way they analyzed the brokers. (here’s the list if you want to take a peek)

#1 E*Trade

I’m not surprised to see E*Trade take the top spot again because they really do offer a great service. They scored five stars on every category except mutual funds & investment products (only Fidelity, Charles Schwab, and TD Ameritrade scored five stars in that category). A nice feature about E*Trade is that you can open an E*Trade Bank account as well, letting you earn a little interest on your funds while you wait for the right stock market opportunities. If the stock market isn’t your bag, you can always invest in bonds and other financial instruments too at an affordable price.

#4 TradeKing

TradeKing, the other stock broker I use, charges a mere $4.95 a trade, which is the cheapest of the top ten brokers on the list. In fact, the second closest is Firstrade at $6.95 a trade. The cheapest of the top ten? E*Trade and TD Ameritrade, with fees of $9.99 a trade. The knock against TradeKing is with their product offerings, because they don’t have much in the way of mutual funds, investment products, or banking services. However, in the arena of trading tools and customer service, what I consider the two more important features of a stock broker, they scored perfect marks. If there was a discount category, I feel TradeKing would likely take that easily (I’m sorry, but $9.99 a trade isn’t “discount”).

Top 5: Same Faces, Different Order

Compared to 2008, the names of the top five brokers didn’t change but their order did slightly. Last year, the order was E*Trade, Fidelity, TradeKing, TD Ameritrade, and then Charles Schwab. This year, it was (along with the comment):

  1. E*Trade (no change): Strength across the board notches top ranking for the third straight year.
  2. Fidelity (no change): Keeps No. 2 spot with robust product offerings and biggest mix of funds.
  3. Charles Schwab (up from 5th): New, easy-to-use Web site, but takes time to prepare an online trade order.
  4. TradeKing (down from 3rd): Short on some product offerings; strong on customer service.
  5. TD Ameritrade (down from 4th): Large selection of trading tools. Missing some banking services.

One interesting note, none of the commissions changed from 2008.

Zecco Slips

In previous years, Zecco had the unfortunate task of being close to last. This year, they took a one step closer to the front of the class as they finished 15th out of 16 brokers! With “free” trades, if you meet certain minimum account balance and transaction guidelines, it’s difficult to compete on service with companies charging for stock trades. One positive note is that customer service has improved but so did the requirements for free trades, which hurt their rating.

Personally, I use E*Trade and TradeKing for all of my non-retirement stock market investments. I like E*Trade because some of my savings were in their online savings account, so I kept it there. I prefer TradeKing simply because the cost of trades is half that of E*Trade. Half! And you don’t sacrifice tools or customer service, can’t beat that.

{ 17 comments, please add your thoughts now! }

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17 Responses to “Smart Money 2009 Best Online Brokers”

  1. eric says:

    Have you ever talked about your non-retirement investments? Curious to hear!

    • Jim says:

      No I haven’t, but it’s mostly index funds at Vanguard (total market, 500 index, and a ginnie mae bond fund) and some individual stocks.

  2. jillianlou says:

    I think they should have a best “starter” broker category. I started my Roth IRA with Sharebuilder because I could only afford to put in $75-100 per month. That wasn’t really an option at many of these “best” brokers.

    • Jim says:

      The downside of Sharebuilder is that when you sell, it’s $9.95 a trade, which makes the round-trip cost more than some of the discount brokers. For example, if you do a scheduled trade at $4 and then later sell it at $9.95, the total cost is $13.95, which is more than TradeKing at $4.95 each way.

  3. “(I’m sorry, but $9.99 a “isn’t “discount”).

    Too young to remember?

    You obviously never used a full-service broker.

    These were fantastic prices not too many years ago, but today there are deep discount brokers.

    • It was, but with some companies going even lower than Tradeking (Just2Trade, Sogotrade, Zecco when it’s free) – I find it hard to be impressed with $9.99/trade either. Of course, if you’re buying 1000 shares at a time, price might not matter much. For small fish, like me, however, I use Tradeking for my individual stock investments and Vanguard for my retirement accounts. Fees matter.

      • Jim says:

        I do the same exact thing, except I use E*Trade and Tradeking for individual stocks out of convenience (I had savings at E*Trade). But I’m slowly transitioning all of it to TradeKing because $4.95 is a pretty good price.

  4. Jay says:

    Hey Guys,

    Need an advice from you. I have just entered in professional life 2 months ago after graduating. I want to start investing a little amount of money in stocks as a beginner. Which online broker would be good for me? I am not going to invest thousands of dollars and I think I would make a very few transaction per month.

  5. Julian says:

    Can international users who are not citizens or affiliated with the country the stock being traded use these services?

    I tried E*Trade once but I needed to be a US/Canadian Citizen or be living in the country permanently to participate.

    • Jay says:

      That would be a question for me as well. A friend of mine who is not a citizen or permanent resident is using TradeKing. It would be interesting to find out what restricts one to use ETrade.

  6. Lucy says:

    Not much change from last year, it looks like. Though, I do love how Charles Schwab had lowered the operating expenses for a number of its equity mutual funds. And their min investment amount is merely $100!

  7. thomas says:

    I have Fidelity and I am very happy. I will admit however that I do not have any experience with other brokers.

  8. Kyle says:

    Just came across this site.
    I am looking for broker to open IRA account to rollover 401k. Which is better among Vanguard, Fidelity and TD Ameritrade? I am going to invest the money to various funds. TD Ameritrade is advertising $500 reward for rolling 401k, which is very tempting but suspicious that there might be catch. I will appreicate your opinions. Thanks.

    • Jim says:

      I rolled my 401k into Vanguard because I liked the selection of funds. I think that your best option is to go with Vanguard or Fidelity if your intent is to go with funds. Check the funds you want, compare expense ratios, and pick the cheapest one. I know that Fidelity’s Spartan 500 index fund has a 0.10% expense ratio whereas Vanguard’s 500 Index has a 0.18% expense ratio, so if you were to go all S&P 500 index then Fidelity is a better choice. You’ll have to do the legwork to figure out that comparison for all the funds you’re interested in.

    • Tony says:

      Kyle,

      Same like you looking to do a 401K rollover, TD AmeriTrade is sneaky about the $500, its a sliding scale, $100 (for > $25), $250 (over $100K) and $500 (over $250K) ..

  9. zach says:

    I am surprised that a brokerage like Think or Swim, MB Trading, and Interactive Brokers doesn’t make this list. They are all receive top marks from Barron’s. I know like MB Trading at IB require like a min 10k, but TOS is 3k. TOS has superior charting software that they provide you with for free. They as well have a web-based trading platform for those who have their desktop software blocked by company firewall (when at work).

    They offer you the option of .015/share (5 dollar min) or a flat 9.95 a trade if you trade more than 5,000 shares a month.

  10. aua868s says:

    with no-transaction fee from Schwab…i think their ETFs would be interesting!


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