ONLINE BROKERS AT A GLANCE

(Image credit: Photo by Anna Knott)

published 16 June 2006

Competition among online brokers is tough -– which is good news for investors. As a group, they’re providing more services for customers than they did just a few years ago. We examined 11 firms on a variety of criteria, ranging from transaction costs and fees to research and mutual fund offerings. Take a quick glance at some pros and cons of each brokerage, and see which one offers the best of what you’re looking for.

Online Brokers at a Glance

PROS: OptionsXpress is tops in our overall ranking. This relative newcomer has a lot going for it. The brokerage boasts fast service, a wide selection of mutual funds, and low fund prices. Its brokers are quite knowledgeable, too.

CONS: Stock-trading commissions aren’t the cheapest (at $14.95), and the brokerage doesn’t offer any funds without transaction fees. (Note: All brokerage commissions listed in this slide show are for trades of up to 1,000 shares.)

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Online Brokers at a Glance

PROS: Siebert's customer service is good. The firm also offers a solid selection of stock research from both large and boutique firms.

CONS: Siebert’s Web site is hard to navigate and could stand some improvement.

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Online Brokers at a Glance

PROS: If you have at least $250,000 in your Wells Fargo brokerage account, you can enjoy 50 free stock or fund trades yearly -– as long as you open a Portfolio Management Account, the company’s high-end checking account. Wells Fargo also scores points with us for paying decent interest on cash balances: Its money-market fund pays 4%.

CONS: Commissions outside the PMA program are on the high end, at $19.95. And of the brokerages we surveyed, Wells Fargo has had the most run-ins with clients and regulators

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Online Brokers at a Glance

PROS: Firstrade is the Wal-Mart of online brokers -– no frills, but low prices on stocks and funds. Firstrade doesn’t charge anything to buy or sell any of its no-load funds. It also receives the clean hands award for fewest squabbles with regulators and clients.

CONS: Firstrade’s Web site is among the most difficult to use, and the brokerage offers little stock research.

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Online Brokers at a Glance

PROS: If you crave stock research, Fidelity is by far the best choice. Altogether, you get as much research from Fidelity as you do from most full-service brokers. And you get free access to Fidelity funds. Fidelity’s Web site is also exceptionally easy to navigate.

CONS: Fidelity brokers didn’t perform well when we quizzed them with sample customer questions. The firm also receives low marks for execution because it routes a large percentage of trade orders to a firm it owns, instead of shopping trades around for the best possible price.

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Online Brokers at a Glance

PROS: If you love Vanguard funds, this online broker is a contender. Its money-market fund pays a generous 4.4% interest on cash balances. And it minimizes nickel-and-dime fees. Vanguard also earns high marks for trade execution because it spreads trades among a variety of market participants.

CONS: Commissions are surprisingly high for Vanguard: $25 per trade for a $50,000 account; $22.50 if you have $500,000.

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Online Brokers at a Glance

PROS: TradeKing offers the cheapest stock commissions around. This newcomer has been operating only since December 2005, and overall improvement is expected.

CONS: Stock research offerings are still slim. So is the firm’s selection of no-load mutual funds. Also be aware that the brokerage provides no cost-basis information, which could cause a headache at tax time.

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Online Brokers at a Glance

PROS: Schwab is great for clients who want clear direction. It supplies plenty of stock research, with an emphasis on its own computer-generated Schwab Equity Ratings. Its brokers are the most knowledgeable we encountered. Schwab offers more than 5,000 no-load mutual funds, almost 4,000 of them with no transaction fee.

CONS: If you want to buy or sell a fund not included on Schwab’s no-transaction-fee list, you’ll pay dearly. Schwab also imposes several incidental fees: $95 to close your account and $2.50 to send you an old statement, for example. The company isn’t generous with interest on cash balances, either: If you total account is worth less than $100,000, your cash earns as little as 1%.

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Online Brokers at a Glance

PROS: E*Trade’s Web site is simply terrific.

CONS: E*Trade offers fewer than 1,750 no-load funds. And cash balances under $5,000 earn as little as 0.2% annually. Slow phone-response time and high extra fees hurt the brokerage’s ranking as well.

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Online Brokers at a Glance

PROS: Scottrade charges low stock commissions, though not the lowest around.

CONS: Scottrade offers fewer than 1,800 no-load funds and fewer than 1,000 without a transaction fee. Customer service can be slow.

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Online Brokers at a Glance

PROS: TD Ameritrade offers below-average commissions on stock trades and a solid selection of no-load mutual funds.

CONS: You’ll pay $49.99 each time you buy or sell a fund not on TD Ameritrade’s no-transaction-fee list. The brokerage pays no interest on cash balances under $2,000. And if you use margin -– that is, borrow money against the value of your account -– be prepared for a high interest rate. Also be aware that the firm doesn’t provide tax-basis information for clients with less than $50,000. Its Web site isn’t all that easy to use, either.