» INVESTING // TRADING THE BEST OF THE ONLINE BROKERS Fidelity and TD ameritrade are number one in our latest rankings oF 14 top discounters. BY ELIZAbeTH ODY ONE OF THE LESSONS RANK-AND-FILE INVESTORS SEEM requires that customers have at least two years of investing experience to have drawn from the brutal 2007–09 bear market is before opening an account.) that professionals can lose money just as easily as they unfortunately, brokers can charge you in many other, less-visible ways. can. a corollary is that keeping costs down is crucial. many now charge nominal fees for as a result, many have decided to take investing into sending paper statements (rather than electronic ones) or for sending you their own hands. “since 2008, our the rankings—from commissions to copies of old statements. other largest source of new accounts—after customer service to whether customers charges aren’t so nominal. merrill people transferring their accounts can purchase stocks overseas—is of edge, which is bank of america’s new from other discount brokers—has supreme importance in determining online-brokerage platform, scored been investors coming from full- who ends up on top. worst for annoying fees. it levies as service brokers or from advisers,” so rather than rank the brokers much as $100 annually for customers says don montanaro, chief executive based solely on what we think is im- with less than $50,000 combined in of tradeking, a discount broker. portant, we decided to ask you, our bank of america and merrill edge competition among discounters is readers, what you value in a broker. accounts, and it will charge you $95 if intense. as they battle for your busi- not surprisingly, costs topped your list you decide to transfer your account to ness, brokers are fighting on a variety of concerns—49% of Kiplinger’s read- another broker. Just2trade’s overall of fronts: undercutting one another ers cited commissions and fees as score was hurt by the $25 it charges on price, offering slicker and slicker their number-one issue when choosing customers to open an IRA, after which online-trading experiences, and out- a broker. but you said that an easy-to- you have to pay $35 annually. doing each other by introducing ever- use Web site and a broad menu of Vanguard received top marks for the more-compelling tools. investment choices are also important fewest and least-costly nuisance fees. to make sense of all the offers out concerns. With these considerations but it fell short of first place for overall there, we surveyed 14 of the biggest in mind, we set out to find the best costs because its commissions for buy- and best brokers in the industry to see discount broker to suit your needs. ing and selling bonds and options are which ones make your money go the on the high end. the all-around win- furthest. FIDELITY, the winner of our ll COMMISSIONS AND FEES ners on costs, optionsXpress and last survey (see “best of the online if commissions were the only fees you Zecco, offer competitive prices on brokers,” nov. 2008), again topped had to worry about, then Just2trade their full menu of services. our rankings, but this year it shares would be the clear cost leader. the neither Fidelity nor TD ameritrade the honor with TD AMERITRADE. broker entered the scene in 2007 with shines when judged on costs alone. each of the brokers we surveyed flat $2.50 commissions for stocks and Fidelity charges $75 for online pur- excels in certain areas and flops in mutual funds, and no other broker chases of mutual funds that are not in others. that means the weighting we has been able to undercut it. (Founded its no-transaction-fee network (how- assigned to each area considered in with active traders in mind, Just2trade ever, unlike other brokers, Fidelity 02/2011 KIPLINGER’s PERSONAL FINANCE » INVESTING // TRADING INVESTING // TRADING PRIORITY: # LOW 1COSTS 68of our readers % 63think% it’s very important to have a use an COMMISSIONS AND FEES OptionsXpress online broker www.optionsxpress.com broad range for managing some or Zecco of no-transaction-fee all of their investments. www.zecco.com mutual funds. RESEARCH AND TOOLS INVESTMENT CHOICES Fidelity Fidelity www.fidelity.com www.fidelity.com Charles Schwab Charles Schwab www.schwab.com WHAT YOU WANT IN AN www.schwab.com TD Ameritrade TD Ameritrade www.tdameritrade.com ONLINE www.tdameritrade.com BROKER KIPLINGER’S READER SURVEY EASY-TO-USE WEB SITE . E*Trade 6 1 www.etrade.com 88% trades of our readers’ Fidelity per month www.fidelity.com transactions TD Ameritrade is the average www.tdameritrade.com are conducted executed per investor. online, the rest over the phone. CUSTOMER SERVICE PRIORITY: E*Trade www.etrade.com EASY- BEST ovERALL scoRE Scottrade # Fidelity www.scottrade.com TO-USE www.fidelity.com Vanguard TD Ameritrade www.vanguard.com 2WEB SITE www.tdameritrade.com KIPLINGER’s PERSONAL FINANCE 02/2011 doesn’t ding you again when you sell foreign bourses available, respectively. dustry comparisons for stocks, and de- such funds) and $100 to purchase them We also appreciate a brokerage that tailed portfolio information for funds). over the phone through a representa- can get clients access to IPOs. charles and we like navigation bars that let tive. TD ameritrade will hit you with schwab, Fidelity and TD ameritrade you get where you’re going without a $50 tab if you transfer your broker- all scored well here. schwab custom- too many clicks. age account or IRA to another broker. ers, for example, were able to partici- the notable laggards were muriel pate in 81 stock IPOs in the first ten siebert and Just2trade. navigation ll INVESTMENT CHOICES months of 2010. on the siebert Web site was so choppy both Fidelity and TD ameritrade it made us seasick. We found the site’s excel when judged by the range of drop-down menus to be unintuitive. investments they offer. to rate a bro- “Schwab retail it was difficult to find research and ker’s investment choices, we looked tools, and we grew weary of waiting at everything from mutual funds and clients can buy for pages to load. the Just2trade exchange-traded funds to the ability site was only marginally less vexing. to trade on foreign exchanges, obtain no-load mutual We found it difficult to track down initial public offerings of stock and funds from nearly something as simple as a mutual fund get new bond offerings. quote. While the site’s bare-bones feel For no-transaction-fee funds, charles 400 companies may be well-suited for investors who schwab can’t be beat. schwab retail without paying are there just for cheap trades, we clients can buy no-load mutual funds were looking for a little more. from nearly 400 fund companies a transaction fee.” without paying a transaction fee. ll CUSTOMER SERVICE muriel siebert takes second place, When you need help or more informa- with about 250 no-fee fund families all the brokers we surveyed offer tion, you want your broker to respond available. TD ameritrade and Fidelity access to corporate and municipal accurately and pleasantly without tie for third place, with both brokers bonds. some, such as Fidelity, hold an making you wait around all day. We offering funds from about 240 families. inventory of bonds. others, such as tested every broker’s representatives TD ameritrade is now the clear Just2trade, hold no bonds in inven- by phone—and, when available, by leader for no-fee ETFs. last october, tory but employ traders who will work e-mail as well—with questions ranging it began waiving commissions for 101 with a customer to track down a given from easy to tough. e*trade’s reps ETFs for all customers who hold on bond that interests him or her. We aced our tests. they demonstrated to the funds at least 30 days. “We want gave points to brokers that let custom- thorough knowledge but also took to make ETFs work to the best value ers buy bonds online and that offer the time to look up the answers to any of the long-term investor,” says TD new bond issues. We also gave points questions they couldn’t immediately ameritrade executive vice-president to the six brokers—which include answer, and they treated our phone peter sidebottom. the list of funds, Fidelity and TD ameritrade—that testers with courtesy. scottrade and which spans nine ETF providers, can get foreign bonds for clients. Vanguard also impressed us. was handpicked by analysts at fund most brokers’ customer-service researcher morningstar. Vanguard’s ll WEB SITE lines will put you through to a warm offerings are also formidable. its if you do most of your trading and body within 90 seconds. only USAa customers can trade all 63 Vanguard research online, you require a broker tripped up here—on one occasion we ETFs—many of which are the lowest- with a well-designed Web site. in waited more than 15 minutes to speak cost ETFs within their categories— general, brokers impressed us on this to a rep, who then missed a softball with no commissions. point. but we had nits to pick, too. question we pitched to him about globe-trotting investors will appre- rather than bare-bones trading pages, IRAs. but all around, charles schwab’s ciate muriel siebert’s winning list of for example, we prefer screens that reps were the least helpful over the 49 international exchanges available show a quote for the issue you’re trad- phone.