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
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.
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.
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?