The Best Online Brokers

The Best Online Brokers: Revealed!
A Daily Reckoning Special Report
By Genevieve LeFranc

Dear Daily Reckoning Reader,

Six months ago, Susan and John (neighbors who invest together) bought a $1 penny stock.

They each spent $500. And their orders were filled at the exact same price.

After trading even for months, the company came out with a strong quarterly earnings announcement a few days ago. Afterward, the penny stock rose to $2 in a hurry – doubling John and Susan’s money.

As you might expect, the two decided to sell their penny shares. They immediately called their brokers and exited the trade – at the exact same price.

At the end of the day, John and Susan met at Starbucks to revel in their success. They pulled up their account summaries as they sipped on a skim latte. And to John’s surprise, Susan had more money in her account!

How could that be?

They each invested in the same company. They each bought the hot penny stock at the same price. They each spent $500. And their brokers each got them out at the exact same price. Yet Susan’s account showed a balance of $986. And John’s account was worth $950.

John almost choked on his girly coffee. “What gives?” he said out loud.

Well, it turns out, Susan and John used different online brokers for their penny stock investment.

The Difference Between Red & Black

John used Fidelity’s online services to buy and sell his penny stock shares. He paid $25 per buy and sell transaction. (So his total commissions were $50 for this trade). And Susan used Scottrade – a deep discount online broker with virtually no bells and whistles.

She paid $7 per buy and sell transaction. (So her total commissions were $14 for this trade).

When it was all said and done, Susan walked away with a total net profit of 97.2% and John made 90%. And the only thing that was different was their broker!

This minor detail is a big deal – especially for small-cap and penny stock investors and traders like you.

The lesson?

Using the right broker can save you thousand of dollars a year in profits. Choosing wisely can be the difference between making 30% a year and barely breaking even. In fact, having the right broker is the most important choice you can make – except for choosing what stock to invest in.

Luckily, there have never been more options for investors. This is both a blessing and a curse: Prices are lower and investor services are more personalized, but there is much more information to digest before making a decision. Read this before investing your hard-earned money, and do some of your own research. You can’t afford to take chances on the “wrong” broker.

We’ve designed this list to give you a head start — comparing commissions, fee structures and balance requirements— and include phone numbers, Web addresses and notes on the specific services the brokers offer.

Please remember, this guide is for information purposes only — and it’s just your first step in choosing a broker. We do not favor one broker over another, and it’s up to you to decide which one meets your needs.

We cannot stress this enough: Before you open any brokerage account, you should do some research on your own. Competition among discount brokers has resulted in lower prices and more possibilities for investors.

You may not choose any of these, but we suggest you check out the FINRA (Financial Industry Regulatory Authority) broker check tool to find out everything about your potential broker before you start investing.

You can also long onto and try out their Broker Comparison Tool, it’s a handy way to peruse your options all at once.

Please remember, this guide is for information purposes only — and it’s just your first step in choosing a broker. We do not favor one broker over another, and it’s up to you to decide which one meets your needs.

Don’t simply choose the one with the lowest price — you might find that it is worth paying a little more. There are a nine specific questions you should ask about an online broker before making your decision..

9 Questions Every New Investor Should Ask Before Choosing an Online Broker

#1 Does the broker have 24/7 customer service?

It’s 3:30 PM and you need to know why your sell order isn’t going through — who ya gonna call? Are those representatives well trained? Are you waiting on hold for 30 minutes?

If you can’t get your questions answered quickly and with efficiency, don’t take a chance.

Whether you’re a novice or rarely rely on customer support, it always helps to be able to speak with a real, live, knowledgeable employee who can make sure you can log into your account… or explain any discrepancies.

Our advice? You can even call or email with a fake question to see how quickly you receive a response, and what that response is like. Or, try the company’s website at different times during the day (specifically peak trading hours) to see how fast their site loads and if there are any broken links or technical issues.

#2 Are the broker’s trading accounts insured by the SIPC (Securities Investor Protection Corp)?

The SIPC was created in 1970 to protect investor holdings in the event of a brokerage firm bankruptcy. If your broker fails, it’s important to know if the broker of your choice provides any asset protection and/or account insurance. Scottrade, one of the brokers listed in our Top 10 Online Brokers post, provides SIPC insurance, but each broker should provide detailed information explaining what exactly is or is not covered under SIPC protection. Insurance and what it covers can vary based on your account type so do your homework here.

#3 How frequently will you be  trading and how will that affect your costs?

Think back to Sally and John. If you’re an active trader, trade execution fees can quickly add up and erode your potential profits. If you’re a traditional buy-and-hold investor and only touch your brokerage account once a month you may be charged inactivity fees. If this is just a hobby for you, the fees may prove costly. It pays to do your research to find the best deal that fits your personal investing style and habits.

#4 What additional fees and expenses will you be charged?

Before getting starry-eyed, be aware that you will be charged some fees, if not several. Look around for a broker with as few fees as possible, because like we said in #3, having to shell out for broker’s fees can put a serious dent your investment returns. Consider fees like commission, annual charges, account maintenance, inactivity penalties and whether order fees are flat rate or on a sliding scale based on the size of the trade.

#5 How long will it take for you order to be executed?

If you’re the impatient type or if the trade you’re making is time-sensitive it’s good to know how long you’ll be waiting for your order to be executed, or  for your money to show up in your account. Prices can change quickly so it’s advantageous to know how speedy your broker is, or if they encounter delays from time to time.

#6 What’s your “opportunity cost”?

“Opportunity cost” is high brow babble for: What else could you be doing with your money?

If investing is more of a light hobby for you, or you decided to watch a volatile market from the sidelines this time around, do some research into whether or not you can earn interest on the money that’s just sitting in your account, uninvested.

If you’re like most investors, you’ll likely have some cash hanging out in your brokerage accounts, and there are some brokers that will offer to pay you interest on that money. Some won’t offer you jack. But if you’re the type to sit in cash while you wait for a bargain to crop up, you might as well find out if you can earn some dough while you wait.

#7 How much independent research and online tools will you have access to?

A good online broker will offer clients both free and paid market research tools. E*TRADE and TD Ameritrade are two good options that provide excellent access to research, and TradeKing offers free top notch tools and trading software that includes real time data.

A lot of brokers claim to have independent research available. Check out their site beforehand to make sure the resources provided are up-to-date and would actually be useful to you. Other brokers can charge higher fees for including research services, so shop around.

#8 How easy is it to trade OTC or penny stocks?

Depending on your investing preferences, you might dabble in trading over the counter (OTC) or penny stocks. If this is something you’re eyeing, keep this in mind when selecting your online broker. Penny stock trades usually involve a large number of shares, so you’ll want to find a broker that charges a flat commission in order to save money on the per-share surcharge.

TradeKing, for example, charges an extra $.01 per share for stocks valued under $2 in addition to their commission fee. Make sure you get a clear definition of what the broker considers a penny stock; some consider anything under $5 a penny stock, others won’t trade anything below $1-3. You may even be limited in the number of penny stock shares you can trade per order or per day.

#9 What special deals, promotions, or incentives are being offered?

Start doing a little research on online brokers and you’ll see there are dozens to choose from. With a few exceptions, they’re offering similar services to similar investors.

This not only means the occasional free goody, but lower fees overall. Now that so many of these discount brokerage companies exist, they have to up the ante to compete for your business. Keep your eyes peeled for extra perks and benefits. Don’t base your entire decision on the $100 free cash you get for signing up. Compare it to the alternatives. Under certain circumstances, for example, something like free trades for a year could be a better deal..

#10 What’s the product selection?

You may not have even considered this question before — seasoned vet or otherwise –, but it’s an important one. The majority of people primarily think about buying stocks, but there are several investment services and alternatives that you won’t necessarily find with every broker that you should consider. From CDs, municipal bonds, and futures, to options and gold and silver certificates, there are many opportunities you could be missing out on.

[Editor’s Note: While every effort has been made to keep the information as up-to-date as possible, prices and other data are subject to change. So make sure to check before you sign up with any broker.]

Okay, that’s a lot of info. Think hard about each of those before you read on.

Go ahead. We’ll give you a minute…

[jeopardy music plays]

♪…♫…♩… ♬


Okay… okay… not trying to rush you…

♪…♫…♩… ♬

… now?

Great. Now, you’re finally ready to parse our top ten online brokers list and take the plunge.

Read on, s’il vous plait…

The Daily Reckoning’s Top 10 Online Brokers

#1TD Ameritrade

TD Ameritrade is the company formed from the merger of TD Waterhouse and Ameritrade. rated TD Ameritrade #1 Online Broker overall for the fourth year in a row.

This broker provides customers with an impressive variety of trade tools to play with (LIKE WHAT) and ranks #1 in five categories; research amenities, long-term investing, range of offerings, customer service, and number one for novices.
PHONE: (800) 454-9272
COMMISSIONS: $9.99 per trade
EXTRA FEES: For options + $0.75 per contract
ACCOUNT MINIMUM: None, but in order to be eligible for most promotions, you must have $1,000 in your account
EXCLUSIVE OFFER: Trade free for 90 days + get up to $600 cash.

#2 Fidelity

Fidelity offers a lot of research capabilities and is marketed for the more serious investor (with a higher net worth) who likes the bells and whistles of a full-service broker but the price and convenience of a discount broker.

It offers full service and discount brokerage options to clients, as well as operating a large family of mutual funds and over 180 retail locations. The company currently maintains a 4.2 overall rating on their site, with plenty of five-star reviews:

Working with my accounts at Fidelity is as easy as it gets. I really feel more secure in my investments because of all of the tools Fidelity offers. I was a broker for 35 years and I wish I had the tools available to me that I get from Fidelity. Fast action on trades, instant response from my inquires — really a great pleasure to work with Fidelity.” March 2013

“I tried many other brokerage firms and have found Fidelity to be the best. Gotta love the low commissions, lots of research, cash management account with ATM fee reimbursement, 24/7 live person availability, and credit cards that pay 2% back. Bravo Fidelity. Bravo.” January 2015
PHONE: (800) 343-3548
COMMISSIONS: $7.95 per trade
EXTRA FEES: for options + $0.75 per contract
EXCLUSIVE OFFER: Try Active Trader Pro® and get 200 commission-free trades.

The original online broker continues to be one of the most popular discount brokerage options today, and is a cheap option for active traders who don’t need a lot of hand-holding. The company also features free research, trade tools, and education on their website and trading platform.

If that wasn’t enough, the company offers mobile account access with E*TRADE Mobile Pro, which offers arguably the best mobile trading platform today.
PHONE: (800) 387-2331
COMMISSIONS: $5.00 per trade
EXTRA FEES: For options + $0.75 per contract

-Trade free for 60 days + get up to $600 with your new account
-Try Active Trader Pro® – get 200 commission-free trades, and get up to $600 when you open an account, plus 60 days of free trades for deposits of $10k or more

#4 Charles Schwab

Charles Schwab was the first discount broker on the market, and it revolutionized the way trading was done. While Charles Schwab may have been the pioneer in the discount broker world, it’s no longer the cheapest. Although Schwab is one of the largest discount brokerages in the world, it prides itself on providing full-service features to its clients. In 2014 they were rated 4.5 Stars Overall and #1 for Retirement Services by
PHONE: (866) 855-9102
COMMISSIONS: $8.95 per trade
EXTRA FEES: for options + $0.75 per contract
ACCOUNT MINIMUM: $1,000 (waived if linked to a checking account), $2,000 for margin trading
EXCLUSIVE OFFER: Earn 300 Commission-Free Online Trades.

#5 Scottrade

Providing over 500 local branch offices and offering its clients a $7 flat fee trades, Scottrade is an easy to use broker that makes the client experience a priority with access to live representative assistance throughout the day.

The broker also offers real-time streaming watch lists among a variety of tools and research at your disposal. Scottrade is one of the cheapest online brokers you will find. Like E*TRADE, Scottrade is a very bare-bones broker. But it is cheap!
PHONE: (800)-619-7283
COMMISSIONS: $7.00 per trade

-For stock prices under $1, you are charged an additional fee of 0.5% of the total principal in addition to the $7 flat commission
-For options, $7.00 + $1.25 for limit and market orders

EXCLUSIVE OFFER: Get $100 in transfer fees refunded.

#6 optionsXpress

Acquired by Charles Schwab in 2011, OptionsXpress is known for its feature rich platform, Xtend, and large variety of quality tools for options traders. Clients worldwide can use these advanced tools, along with a broad spectrum of investments including equities, options, mutual funds, futures, ETFs, and bonds.

The company has gotten top rankings from Barron’s, Forbes, and Kiplinger’s. A significant difference between optionsXpress and most of the other online brokers: optionsXpress charges nothing for trades made with a broker’s assistance.
PHONE: (888)-280-8020
COMMISSIONS: $8.95 per trade
EXTRA FEES: For options, $14.95 per trade
ACCOUNT MINIMUM: None, $2,000 for margin trading
EXCLUSIVE OFFER: Receive $100 cash with any new account.

#7 TradeKing

Unlike other brokers, TradeKing’s $4.95 commissions include broker-assisted trades, which often cost near $50.  The broker was rated 4.5 stars for customer service in 2014 by, and their online investor community, the Trader Network, is home to over 500,000 traders sharing ideas and research.

If you’re new to the investing game, and want a excellent customer service from a broker who will help guide you through your trading decisions, TradeKing is a smart choice.
PHONE: (877)-495-5464
COMMISSIONS: $4.95 per trade
EXTRA FEES: For options, + $0.65 per contract, for stocks under $2 + $0.01 per share
EXCLUSIVE OFFER: Get $150 in transfer fees reimbursed.

#8 Firstrade

Firstrade may not be quite as well-known as some of the other online brokers, but it’s definitely worth a look. It is truly a deep-discount brokerage service that should only be used if you need no help whatsoever.

PHONE: (800) 869-8800
COMMISSIONS: $6.95 per trade

-For stocks under $1, add half a cent per share
-For options + $0.75 per contract


#9 Interactive Brokers

Interactive Brokers’ commission structure is a bit more complex than most, but it’s worth thumbing through. The brokerage firm is popular among professional traders and institutional investors, and offers individual brokerage accounts for more advanced traders. They also have some of the most competitive margin interest rates among other brokerage firms out there.

Interactive Brokers is aimed primarily at highly experienced and professional investors. If you do not have investing experience under your belt, stay away from IB. Lastly, it’s important to note that IB has a complex fee structure that varies from exchange to exchange. See their website for details.
PHONE: (877) 442-2757
EXTRA FEES: For options + $0.70 per contract
ACCOUNT MINIMUM: $10,000; $3,000 for investors under 25

#10 thinkorswim

Don’t let the lack of capital letters fool you — thinkorswim is a serious broker that’s become a favorite of traders. The company’s acclaimed trading platform can be downloaded for free at their website, and allows you to test paper trading of stocks, options, futures, and forex. Thinkorswim was acquired by TD Ameritrade.

PHONE: (866) 839-1100
COMMISSIONS: $9.99 per trade
EXTRA FEES: For options + $0.75 per contract
ACCOUNT MINIMUM: None, $2,000 for margin trading

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