Are you constantly executing trades and are on the lookout for an affordable brokerage service that gives you more control over your investments? Then you are better off dealing with a discount broker instead of a stockbroker. The primary difference between these two is that discount brokers charges fees and don’t eat into your profits and neither is their support team always on your neck selling to you different stocks or constantly pushing you into making more investments.
The cost of service plays a key role in influencing a trader’s choice of a stockbroker. We are however of the opinion that every stock and equities markets trader should strive to look beyond affordability when vetting different discount brokers. Furthermore, most of these have their per-transaction around the same price level, between $0 and $7.
We set out on a mission of uncovering the different features that make the discount brokers unique while checking whether they are good enough to make you want to register an account with them and came up with what we consider the best 7 discount brokers for the year. But first, we seek to understand who a discount trader is.
- 1 Criteria used to rate these discount brokers
- 2 Best Discount brokers 2019
- 3 What to look for when deciding on a discount broker
- 4 Bottom line
- 5 FAQs
- 6 How do I start trading with a discount broker?
- 7 How is the Discount broker different from a full-service broker?
- 8 How much will the discount trader charge?
- 9 Are there additional fees by discount brokers that I should be aware of?
- 10 Must I use these brokers when trading online?
- 11 What product and services can I trade via a discount broker?
- 12 Can I trade these products and services for free?
- 13 Is there a minimum trading amount to trade with a discount broker?
Criteria used to rate these discount brokers
Our first area of concern was, obviously, the cost of trade by these brokers. We would then follow this up by checking any other feature that eases your interaction with the broker and affects how much you earn from your investments. Some of the factors we gave the highest consideration included:
- Availability and professionalism of research tools
- Minimum deposit or operating balance
- Customer service
- Versatility – availability of such trading platforms as mobile
- Offers and promotions
Best Discount brokers 2019
What to look for when deciding on a discount broker
The interests on savings are laughable with most even charging you, to keep and use your money, in the name of operating and maintenance costs. This has seen individuals turn to more profitable ways of earning from their savings. And as most turn to the cost-friendly discount brokers, it has created a fierce competition among these brokers, each trying to outdo the other. The result?Birth of the most ideal investment conditions. But as more discount brokers push ads to your face, how do you go about deciding on the best for your investments?
1. Confirm their commissions for different investments
Every discount broker has countless investment options they present to their clients and they all attract different per-trade charges. A broker may, therefore, come off as offering lowest trade costs in one type of investment, say incredibly low transaction costs for bonds and ETFs but overcharging the other, say individual stocks or options. If you are looking for a discount broker with low fees, don’t just look at the products on their banner, vet the transaction costs for the investments you are likely to engage with most.
2. Go through the fine print for hidden charges
Rogue discount brokers are known for sneaking in extra charge clauses in their fine print and introducing them at the most inconveniencing times. For instance, have you confirmed whether your low-cost broker charges deposit and withdrawal fees? And if they do, are they standardized for all the payment processing service providers such online wallets as PayPal, bank transfer, and debit card loading? If they did not disclose this when you were signing up, it is probably buried in a clause within terms and conditions. But who reads that?
3. Does the broker match your trading style
Do you wish to day trade or buy and hold? And how are your broker’s systems and technology adapted to this trading style? Ideally, scalping friendly brokers will often lower the per-trade fees for high volume traders. Alley invest, for instance, lowers per trade fee by $1 to $3.95 if you trade more than 100,000 daily while E*TRADE lowers it by $2 to $4.95 for similar transactions. Position trading-friendly companies, on the other hand, don’t impose overnight charges.
4. What is the minimum deposit amounts
Both TD Ameritrade and Merrill Edge have no minimum initial deposit or operating balances. You will, however, have to match your account balances to the level of your interested investment’s required minimum. It is not enough to look at the minimum operating balance required by the broker, you also have to consider the minimum amounts required for the investment you are interested in most.
5. Are you eligible for their promotions and offers
Almost every broker is offering promotions and trade discounts ranging from a tradeable cash bonus to commission-free trades. These are mostly given to new traders. There is a caveat though,you will have to first top up your account with the ‘qualifying minimum.’ Before choosing a broker for their 500 commission-free trades, check whether you can afford their qualifying minimum and such attached conditions as no withdrawals for a specific period of time.
6. Broker reputation
The last thing you need is committing your funds to a broker that has no regard for their clients. Therefore, even though a broker promises the lowest transaction costs, has no hidden charges, and has all the necessary premium analytical tools integrated into their system, don’t trust them with your money if they are of ill-repute. You can check their reviews from verified clients on such popular review sites as the Better Business Bureau (BBB).
By ignoring the full-service brokers and going after discount brokers, it is only fair that you want value for your money. The last thing you therefore need is lack of transparency on the part of your preferred discount broker in pricing and introducing numerous hidden charges in the name of annual, maintenance, and inactivity fees. Furthermore, and in this age of technological evolution and digitization, you need a broker that takes advantage of this technology maximally.
We, therefore, ensured that all the brokers on our list have the most transparent pricing guides. We are also technology crusaders and only included discount brokers that have shown great effort in embracing technology by way of fulfilling orders at the current market rate, integrating high-tech analysis tools into their systems, and availing them on such versatile platforms as mobile and web-trader.
How do I start trading with a discount broker?
Go through our list of discount brokers and choose that which appeals most to you. Head out to their website and click on create account or register. In most cases, they will require your name, email address and such other identification documents like your driving license, SSN, and phone number. Fund your account and you are ready to go.
How is the Discount broker different from a full-service broker?
Full-service brokers charge high trading fees, sometimes in excess of $100+ per trade, for investment guidance and portfolio management. Discount brokers on the hand charge less (some even offer free trades) but will not offer guidance on your investments or help manage your accounts. You are responsible for your investments and trades and extra help may incur additional charges.
How much will the discount trader charge?
There are no standardized charges for discount brokers and they can exercise their discretion in determining their trading fees. It, however, ranges from $0 to $10+. In this guide, we cover both affordable brokers (Alternative Brokers charging $0.005) and relatively expensive brokers (charging $6.95).
Are there additional fees by discount brokers that I should be aware of?
Yes. There are numerous trading and non-trading fees imposed by different discount brokers. These include annual and maintenance fees charged for hosting your account on their servers, the closing and transfer fees charged when you chose to close your trading account or seek to transfer funds therein to another account or broker, as well as the inactivity fee charged on dormant accounts or ones that don’t hit the required number of trades. Go through your preferred fine print checking whether they apply any or a combination of these fees.
Must I use these brokers when trading online?
No. Investing in the stock and equity markets through a broker is quite popular, but it isn’t the only option. You can decide to invest directly in a company’s direct investment plan. This is, however, quite complicated and not open to all publicly traded companies.
What product and services can I trade via a discount broker?
Some of the products that you can invest in through a discount broker include stocks, ETFs, Mutual funds, Federal, state and corporate bonds, options and Certificates of deposits.
Can I trade these products and services for free?
Yes. Some discount brokers allow for the execution of free trades with such caveats as a maintaining a given minimum account balance or executing a given number of trades a day. For short-term free trades, you can take advantage of the offers and promotions given by the different discount brokers. E TRADE, for instance, gives traders up to 500 free trades to be used within two years.
Is there a minimum trading amount to trade with a discount broker?
No. Your preferred broker is at liberty to set the minimum deposit required for the different types of accounts hosted on their service. In our review, we were biased towards brokers that demand near zero deposits and operating minimums as we find them more attractive to beginners.