make real time trades, it can cost you the difference in getting a stock at your preferred price.
Discount firms are the most common and the fastest growing sector of online trading companies. Both Lee and Barnes trade with discount brokers directly on the World Wide Web. Lee is a customer with Discover Brokerage Direct (www.lombard.com), and Barnes uses ETrade (www.etrade.com). These two firms offer competitive trading prices and comprehensive research, data and portfolio services. They both offer a $14.95 commission rate for market orders on listed stocks up to 5,000 shares. (ETrade requires a $1,000 balance for cash accounts for market trades and $2,000 for options.) Discover Brokerage is consistently rated as the No. 1 brokerage firm, while ETrade is one of the best known. BLACK ENTERPRISE recommends both of these services for overall excellence, ease of use and customer service.
Lee has been investing for over 15 years and is really enthusiastic about trading online. She chose Discover Brokerage for her online transactions because, at the time, it had the lowest prices. “It is easy to access and you can do your own research and look up real-time quotes,” says Lee. Dean Witter, Discover & Co. purchased the former Lombard Brokerage late last year; since then, it merged with Morgan Stanley in February. Now, online trading accounts for 55% of Discover Brokerage’s total trades.
Lee gives the firm high marks for
customer service. “They are responsive when I have questions and issues regarding my account. They’re always quick, right there on the phone.” Although she is happy with her account, Lee has been checking out other firms that offer lower fees and other types of services.
Barnes prefers ETrade’s slick, user-friendly site. The company is a pioneer in online investing and has been in business since 1992. It provides many services for its customers, including breaking news, customized investing pages, market charts and commentary and the ability to devise a dummy portfolio.
Although many firms advertise and highlight low-cost trading–meaning cheap and/or flat-fee commissions–beware that these appealing prices may not apply to all types and quantities of trades. While some firms offer flat-fee commissions for equity trades, others vary their prices depending on the number of shares you trade. The more you trade, the lower the price. Also, some low prices are tied to a minimum balance requirement.
Deep discount firms such as Empire Financial (www.lowfees.com) offer very low fees and not much else online. These no-frills services are limited to offering investors the ability to trade online and not much more, except links to other services that you must pay to give you research and data. You are completely on your own. These brokers are designed for extremely savvy and experienced investors who have access to up-to-date information elsewhere.
Some brokerage firms offer “zero-cost” trading, but there are many restrictions involved with no-cost trading including high account balances and order minimums. Empire Financial’s restriction for commission-free trading is a $10,000 minimum account balance. That’s the low end of the spectrum. Others require $500,000 minimums