7 of the cheapest discount stock brokers
Firstly, What exactly are discount stock brokers?
A discount broker is a broker that offers a “no frills” approach to brokering. Unlike a full server broker that is likely to offer you research, trading advice, retirement planning, help with tax and much more. A discount broker just offers the “bare bones”, the ability to trade stocks, possibly other financial instruments but little else.
A discount broker is the best option for many stock traders.
The big advantage of discount brokers is that the commissions are usually much much lower. Most of the tips and advice offered by full service brokers are really not worth the extra money and can really cut into your returns.
You can usually get most of the information they offer for free online too.
Let's just have a quick look at the difference the cost per trade could make to your returns:
Let's say you have $25,000 and you make 100 trades over a year. At $4 per trade that would be $400, which is equal to around 1.6% of your account.
If you use a more expensive broker that charges $15 per trade, it would come to a whopping $1,500 which would mean you would need to earn a 6% return before you broke even! These numbers do not include any taxes you may incur.
How cheap are discount stock brokers?
This is the cheapest discount broker i've ever seen. They charge just $2.95 per trade.
Zecco
They charge $4.50 per trade
You get 10 free trades each month if you have an account size greater than $25,000 or make 25 traders in a month.
They charge $4.95 per trade. They also offer extended trading hours.
Scottrade
This firm charges $7.00 per trade
Sharebuilder
This broker is part of the ING group. They charge $9.95 per trade, but offer trades at $4 when you use automatic investing. They also offer a $50 promotion at present when you transfer your account to them with a minimum of $500.
OptionsXpress
They charge $9.95 per trade if you make more than 8 trades per quarter, otherwise the price is $14.95.
TD Ameritrade
They charge $9.99 per trade. You get to trade free for a month when you open an account with at least $2,000. Accounts over $25,000 get a $100 bonus as well as a month of free trades.
Conclusion
There are many online discount stock brokers out there and they all eagerly want your business. You can afford to be picky and shop around and get the best deal for your money.
Of course, you want to trade stocks to make returns better than the risk-free rate the bank offers, not give it all away to greedy stock brokers!