Do You Use Online Trading Yet?
Prior to the World Wide Web, trading stocks required making use of brokers at a full service brokerage. To trade stocks, you would have to call or visit your broker, who would place trades on your behalf, usually for a steep fee.
Managing your portfolio similarly involved a management fee, typically a percentage of each trade or a percentage of your portfolio annually.
While full service options still exist today , the Web introduced new possibilities for consumers via new online stockbrokers, such as Fidelity, TD Ameritrade and E-Trade, among many others.
Using online services enables stock buyers to perform most stock transactions online via a few clicks of the mouse. The advent of electronic trading floors also mean that buyers and sellers can be matched faster and trades are typically instantaneous.
During the recent economic downturn more people than ever started using online brokers to reduce their costs. The recession led to fewer investments in equities. To attract new customers, many online brokers also reduced their commissions and fees.
Commissions are therefore now at the lowest they have ever been, also due in part to improvements in technology and
lowered costs of computing and data communications.
Who are the Online Brokers?
Fidelity, Charles Schwab, TD Ameritrade and E-Trade are examples of leading online brokers. SmartMoney magazine ranks Fidelity number one in its 2010 rankings of 17 brokers.
Fidelity charges $7.95 per online trade, with no charges for account inactivity, handling or maintenance fees. There is a $2,500 minimum to open an account — and a $250 minimum for additional investments.
Charles Schwab is ranked number two by SmartMoney, with their large set of no-load, no-transaction-fee funds. They charge $8.95 per online trade, with no limits on balances, shares traded, or frequency of trading. There is a $1,000 minimum to open an account — and a $100 minimum for additional investments.
TD Ameritrade is perennial favorite and is now regarded as the leader in no-fee Exchange Traded Funds (ETFs). They charge a flat $9.99 per trade no matter how many shares you trade. There is also no minimum investment to start.
Other favorably mentioned companies include E-Trade and OptionsXpress.
Fidelity, Vanguard, and Charles Schwab also offer full service brokerage services for those seeking personalized services and perhaps have larger assets to manage.
Do you use online brokers? How do you rate yours? Let us know and don’t forget to tweet this article if you like it.
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Category: Bonds, Mutual Funds, Stocks