Helping my Brother Choose an Online Broker

At Easter dinner my older brother asked me what online discount broker I use “to trade stocks.”  If you don’t remember, I already helped the younger brother with asset allocation, and yes, I only have 2 and I am the pain in the ass middle child.  Before I could explain to him which sites I use, I first had to understand what he meant by “to trade stocks.”

What Type of Stock Trading Account Do you Need?

I started with a simple question,

 Are you looking to buy and sell
or
buy and hold?

I’d like to think I know my brother pretty well, and I was pretty sure I knew the answer prior to asking the question.  My brother is a pretty conservative guy, and I think he was just looking for a place to buy and hold equities/funds.  Regardless of his answer I will give you the answer to both questions.

What I use to Buy and Sell Stocks

I don’t day trade, anymore, but I while ago I was, and to a large part still am, obsessed with selling covered calls.  I haven’t written much about it because the stocks I was using to sell covered calls all dropped in value, and I learned a valuable lesson that at that point in my life I wasn’t putting enough research into my stock choices.  Things are different now, but if and when I get back into it, I’ll write about selling covered calls for income.  After a ton of research I created an account with tradeking*.  Like everything else in my life I obsessively research, and almost paralyze myself with research!

 

After a ton of research I ended up with Tradeking, because there was NO minimum initial investment, how easy TradeKing* makes it to sell covered calls, and $4.95 trades!  At $4.95 they aren’t the cheapest but they are half the price of E-Trade.

Tradeking Covered Calls

The answer to my question was he thinks he just wants to buy and hold, so I gave him another choice.

What Online Broker do I Recommend for Buy and Hold?

When I went to set up my dividend paying portfolio, which I refer to as my perpetual income machine I needed a broker that had low cost purchases, free dividend reinvestment, and no account minimum.  So after some research I came back to my old Sharebuilder account, which sat dormant for years, when I was trying to be cool (see above trading account).   They have 3 different pricing plans. sharebuilder rates

I chose the Standard Option, and I think my brother will choose that option as well.  It allows for up to 6 automatic trades per months for $2 bucks – lowest out there that I was able to find.  Sharebuilder has 2 huge shortfalls.  One it has a relatively expensive sale cost ($10 vs Tradeking’s $5), but I don’t want to sell, and the other is that they are automatic trades done on a Tuesdays each week.  Depending on your goal, this could be a huge roadblock.

Sharebuilder is currently running a “Tell a Friend Program” where I get a few trades and you get $50 to start your Account!  You just have to contact me to get it.

Readers:  How do you like my recommendations? Do you have any others you use?

8 Responses to Helping my Brother Choose an Online Broker

  1. Why use a broker at all? If he knows what stocks he wants, a lot of S&P 500 let you buy directly with low or no commission, plus free reinvestment. Google – Mellon Investor Services or Computershare. The downside is you get multiple 1099s each year – one for each stock.

    Are those affiliate links?

    • I doubt he has the knowledge nor the desire to use this account to pick 4 or 5 horses to bet on. In the end I think the account is going to be used as a learning experience, first with ETFs (and general market knowledge) and move on from there.

      The Tradeking is an affiliate link (The one with the *). The Sharebuilder link is NOT an affiliate link as I don’t have a relationship with them other than as a customer.

  2. I think you asked the right questions on selecting on online broker. If asked the question what online broker should I use the answer is none unless you are going to buy ETF’s or sell covered calls.

  3. I’ve used Fidelity, OptionsHouse, Scottrade and Sharebuilder. OptionsHouse is fast, lots of webinars if you like that sort of thing, site look and feel isn’t the best. But their rates are great, plus they offer free cost basis tracking (most people underestimate how important this is come tax time).

    Fidelity has top notch customer service, site’s excellent and provides commission free trades on 25 of Blackrock’s ETFs. (They are the largest ETF company). The 25 shares are well thought out and not lame ones!

    Scottrade.. I like them. Doesn’t excell in anything in particular, but overall a good online broker with least amount of hidden fees.

    Sharebuilder is ok. Very minimalistic in features.

    I wrote reviews of some these brokers.

    Also, Schwab too provides commission-free trades on their etfs.

  4. You guys are so lucky in the US — all your options look cheap compared to us here in the UK, and we’re not exactly an expensive country.

    $5 a trade? I’d trade all day! :)

    We pay tax when we buy shares too. (0.5%. Eek!)

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