Discount brokers execute trades for clients without offering investment advice. They charge lower fees than full-service brokers and may offer additional services such as newsletters. Deep discount brokers charge a small flat fee per transaction and are best for experienced investors. When choosing a discount broker, consider fees, minimum investment, research offerings, and customer service. Popular discount brokers include Ameritrade, TD Waterhouse, and Scottrade.
Discount brokers are a great middle ground option for people who want to participate in investing but are wary of going it alone. Discount brokers do not offer clients any investment advice and do not walk you through the investment process. But if you know what you’re doing, discount brokers will act on your behalf and buy or sell stocks and trade options. Full-service brokers, on the other hand, will advise you on what to buy, when to sell, and how to split up your investment money. Some discount brokers offer monthly newsletters that print recommendations, but this is not a standard service and should not be expected.
Discount brokers offer different services, often depending on how great the local demand is and how extensive the competition is. For example, a broker may charge as little as $10 United States Dollars (USD) per transaction, or have percentage-based transaction fees. When looking for discount brokers, be sure to ask about additional fees for things like asset transfers, bank account transactions, and IRA custodial fees.
Deep discount brokers, an even cheaper service, should only be considered by those who know the investment market well and do not need anything other than the execution of buying and selling shares. Deep discount brokers typically charge a small flat fee per transaction rather than operating on percentages. The most popular discount brokers are Ameritrade and TD Waterhouse, while Scottrade leads the way when it comes to deep discount brokers.
If you are considering discount brokers, here are some questions to ask potential brokers.
What is the minimum opening investment you need?
Is there an account maintenance fee or do you charge additional fees if I don’t trade often?
Do they offer stock reports and research so you can keep up with the current market?
Do you have a local office or do you do all of your business online?
Do you offer customer service by phone? Good discount brokers usually have a 24/7 hotline where you can get stock quotes or ask a question.
Smart Asset.
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