The best online brokers by consumer reports and how/why sign up

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On the june 2007 issue of consumer reports, the “money lab” evaluated 19 major online brokers that are accessible to investors using a standard webbrowser.

consumer reports gives each an overall score, and categorizes things such as trading, minimun trade fee, mutual funds, NTF funds, banking and asset management, research and education, and customer support. Half of their overall score was based on trading which is divided into the cost of most common trades (<1000 share lots), the cost of special trades (options, bonds), and scope of online trading (allowed bond trading? foreign stock? after hour trades?)

1. Firsttrade securities- 92
2. E trade financial- 87
3. Trade King- 86
4. Charles Schwab- 85
5. Scottrade- 75
6. Terra Nova- 74
7. TD Ameritrade- 73
8. Choice Trade- 70
9. Options Xpress- 62
10. Muriel Siebert- 58
11. Fidelity Investments- 55
12. Banc of America Investment services- 54
13. Stock Cross financial- 46
14. Wells Fargo- 46
15. Trading Direct- 42
16. Investrade- 42
17. T. Rowe Price- 31
18. Netvest-31
19. Vanguard Brokerage - 26

If you strictly follow consumer reports for every buying decision that you do, then just go with the ranking and sign up for first trade.  However, as smarter than the average bear consumers, you need to figure out how this ranking should apply to you.  First of all, what kind of investment broker do you want?  A good start here is that you have already narrowed the list dramatically to online brokerage companies by reading this article. As savvy consumers, you want the most bang for you buck.  As frugal as we can be, that will imply that we want to pay as little as possible…hopefully as little as zero dollars.

A lot of interest has sparked over a new online brokerage company called Zecco.  They offer zero dollar trades on stock.  I don’t have an account with them yet but I will sign up with them soon.  The brokers that I use currently is TD Ameritrade as my taxable account and Etrade for my retirement account.  I’m just going to leave my TD Ameritrade account alone until I decide to sell my stock that I have with them currently.  Etrade had a promotion for 50 free trades when I signed up so it hasn’t cost me a penny yet.  Any future trades will be done with Zecco.

Why isn’t everyone doing Zecco? First of all, its a new company and many don’t know if their business strategy of no cost trades will be sustainable.  They may come up with other ways to make money with other fees.  Others stay with their current broker because they’re used to being with them and don’t want to switch.  Another reason is that the other companies might provide other services like independent research that they can get access to.   However, if you can do your own research with yahoo finance and other free tools on the net, then you only need a broker to facilitate a transaction.

So how does all this apply to you and I?  First, you should look at the list of online brokers here and check them out and see which one you want to do business with.  There are various ways to make a trade.  The simplest way is to make a market order which is to buy a stock at the market price when you execute your order.  Another way to make a buy or sell is to do a limit, which basically means that you will buy or sell your stock only when the stock reaches a certain price.  The cost of a market or limit order can vary based on what company you work with.  Most of these companies offer both retirement and taxable accounts.

A lot of these companies have promotions or discounts or specials when you open an account with them.  I think that its a great time to open an account when they have promotions such as free cash or free trades.  Remember also that if you have a particular company or fund that you want to buy, it takes time to create the account, fund the account, and verify your information before making your first trade.  Also remember that costs can vary when you start to talk about mutual funds, especially if you buy another broker designed fund from through a different broker.  In general, you do not have the same issues with exchange trade funds.

if I made any mistakes please let me know as I am not an investment banker or financial expert 

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