Friday, June 15, 2007

The search for a discount broker

Summary: Scottrade is bad, Sharebuilder is great, TD Ameritrade is great

When I started investing this time around, things had changed significantly. I used to use Charles Schwab and they charged $29.99 per trade! Now I'm with Scottrade and I have to say... I'm not happy. $7 trades are nice, sure, but all too often their website is frozen for up to a minute. I really mean frozen, not just slow. You click on the "My Account" tab or what have you and it just sits there. No matter what you click, nothing happens. Then a minute or two later, everything works quickly. Their site is never slow, it's either frozen or fast. I've experienced it from multiple locations with multiple ISPs, so I'm pretty sure it's not a problem on my end. It's not a huge deal since I'm not a day trader, but I find it very annoying. I also found it annoying that I sent them a complaint and they never replied, even to say "Only you are having this problem" or something.

The other reason I don't like Scottrade is their lack of an automatic, commission-free, dividend reinvestment program. I was going to open up an IRA with them but that, in combination with one of my favorite stocks AAV, a dividend work horse, stopped me. In the early years, even low $7 trades are going to eat a big chunk out of my IRA's measly holdings. It would also mean that I would have to let dividends just sit there as cash, earning 0.1% interest (gee thanks Scottrade!), until next time I made a contribution. AND it would mean I would have to invest significant amounts of money in the same stocks every year, unless I wanted to forgo share growth in that company.

No, thanks. So I looked around for a more suitable broker. The two I came up with are TD Ameritrade and Sharebuilder. Sharebuilder is, of course, awesome. The $4 trades are pretty much unbeatable, unless you go with a shady startup like Zecco. One problem with their IRA accounts is they have a $25 maintenance fee, but at least you can have that paid from your linked banking account and not from your IRA. The other problem is the "real-time" selling price, which is about $20 -- a bit ridiculous in this day and age. Sure it encourages you to be a long-term investor, but come on. Sometimes you actually do need to sell.

So I went with TD Ameritrade. They have dividend reinvestment with fractional shares, pretty low prices, no maintenance fees, and (I think) better research tools than Sharebuilder OR Scottrade. In fact I like them so much more than Scottrade that I think I will soon transfer my regular account to them as well.


JonathanRaleigh said...

I use sharebuilder. Would you prefer TDAmeritrade over sharebuilder? or pretty close race between them?

Jon said...

It's pretty close I think. For long term investing with infrequent trading, I'd say Sharebuilder is excellent. I want to occasionally make quick trades though, like if a stock falls quite a bit on some news that comes out. Waiting until Tuesday of the next week could be too late. That's why I went with TD Ameritrade for now, but who knows how often those opportunities will ever come up :)

discount broker said...

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