ADVICE
Online brokers give you power, cut costs
By Kim Komando
Gannett News Service
Both casual and heavy stock traders can benefit from using a discount-online broker. The savings can reach into the hundreds of dollars on large orders. But leaving a full-service broker for an online discount house can be intimidating.
A discount broker is not the best option for everyone. Full-service brokers can offer advice if you don' t want to spend the time researching companies yourself. When the market dives or soars, a full-service broker can help you maintain perspective. When you use a discount broker, only the computer is there to share your tears.
With a discount broker, you have full control over your financial activities. The person with the most at stake — you — is in charge. You don't have to wait until your broker gets back to you. And you'll save some cash. By eliminating the middleman, you'll find yourself doing more of the legwork but paying far less in commissions.
You'll probably conquer most fears after considering the savings involved. There are too many online stockbrokers to tell you about each one here. To give you an idea of what to expect, here's a look at three well-known firms that are typical of those you'll find on the Internet. The information about them is gleaned from their Web sites.
Scottrade. J.D. Power and Associates (www.jdpower.com) has ranked Scottrade highest in investor satisfaction with online trading services for four years. Only $500 is required to open an account. Online transactions are $7 per market order. Limit orders cost an additional $5. Trades placed on the phone cost $12. Scottrade (www.scottrade.com) also has more than 200 walk-in branch offices nationwide. Broker-assisted transactions start at $17. Scottrade offers free real-time news, research and stock quotes.
Ameritrade. This brokerage has a strong following among investors, according to Nielsen/NetRatings. You'll need a minimum of $2,000 to get started here (www.ameritrade.com). Ameritrade charges $10.99 per online order. This includes both market and limit orders. You also can place orders using an interactive voice-response telephone system for $14.99. Broker-assisted orders start at $24.99. Ameritrade offers research services starting at $9.99 per month. There are some free services such as an online streamer with the day's quotes.
BrownCo. Looking for a low price? This discount service charges $5 per online market order up to 5,000 shares. However, it requires an initial $15,000 account balance. Orders greater than 5,000 shares cost an additional penny per share. Online limit orders cost $10. Add $12 or more for broker-assisted transactions. BrownCo (www.brownco.com) offers free access to third-party research reports and news. Other online discount brokers include TD Waterhouse (www.waterhouse.com), Fidelity Investments (www.fidelity.com) and E*TRADE (us.etrade.com). Charles Schwab & Co. (www.schwab.com) offers both discount and full-service trading.
Discount online brokers cost much less than such full-service brokers as Merrill Lynch (www.mldirect.ml.com). For example, let's say you wanted to purchase 2,000 shares in company X at $5 a share. BrownCo would charge $5, Scottrade $7 and Ameritrade $10.99. Trading online, Merrill Lynch would charge $29.95, plus an additional 3 cents per share, for a total of $89.95.
The difference is more pronounced with broker-assisted transactions. Using the same scenario, BrownCo and Scottrade would both charge $17, while Ameritrade's rate would be $24.99. Merrill Lynch would charge $150, plus an additional 3 cents per share, for a total of $210.
