Review – Which Broker Should I Use? Online Discount Brokerage Review (#brokerage, #trading)

Review – Which Broker Should I Use? Online Discount Brokerage Review (#brokerage, #trading)

I’ve been through a few brokers already in my short investing career. I found answering the question, “How do I trade X?” to be a mysterious one in numerous cases. It turns out the answer was often much simpler than I originally thought.

In the interests of saving other investors some time, I’m going to share what I’ve learned. This is not an endorsement of any of the brokers mentioned, I am not an affiliate/referrer (though I probably should be if I am writing posts like this) and ultimately I don’t care who you use– YMMV.

First, some info tables

I created a few tables to compare online discount brokerage features. The first is a commission and fee schedule for Scottrade, TD Ameritrade/Think or Swim, Fidelity and Interactive Brokers. Please note, this is not exhaustive nor comprehensive, it’s just the info I care most about for the kind of trades I do:

Brokerage Name Scottrade TD Ameritrade Fidelity Interactive Brokers
Stocks (online) $7 $9.99 $7.95 $1/min, 0.5% of order max
Stocks (broker assist) $27 $44.99 $32.95
Stocks (intl) Limited, $7/$27 Extensive and reasonable Extensive and reasonable
Options (online) $7 + $1.25/contract $9.99 + $0.75/contract $7.95 + $0.75/contract $0.25-0.70/contract
Options (broker assist) $27 + $1.25/contract $44.99 + $0.75/contract $32.95 + $0.75/contract
Addtl Fees N/A N/A Activity fee minimum $10/mo

Next up is a comparison of international markets you can trade in with Fidelity and Interactive Brokers, “O” means you can trade there online, “BA” means you can trade there with a broker assist and a blank means no online trade (and potentially no access with a broker, either):

Country Fidelity Interactive Brokers
N America
US O O
Canada O O
Mexico O O
Europe
Austria BA O
Belgium O O
France O O
Germany O O
Italy O O
Netherlands O O
Spain BA O
Sweden O O
Switzerland O O
Norway O
Portugal O
UK O O
Asia
Australia O O
HK O O
India Indian residents only
Japan O O
Singapore O O
New Zealand O
Notes: Claims it can reach nearly any stock in the world via broker assist

For trading Net-Nets

Which is the best online discount brokerage for trading Net-Nets in the US? I’m going to go with Scottrade here. Unless the shares have some restriction or are trading for under $1, it is only $7 per trade making Scottrade by far the cheapest (unless you’re trading in size on IB).

For trading all common stocks (US and international)

For a wider scope, I go with Fidelity. It’s $7.95 in the US for online trades and although the fee varies by country elsewhere, I’ve generally found it to be reasonable. Fidelity claims you can get access to almost any equity market in the world through their brokers, as well. I like that there is no activity or account maintenance fee, as well, which is something that irks me about IB.

For trading corporate debt and cap-arb

I tried doing a capital structure arbitrage trade through IB and not only could they not locate the debt for me because it was a convert and they don’t do converts, I also found their interface to be so confusing I wasn’t even sure if I had bought the related options properly when I put the trade on. IB has a terrible interface and their trade documentation is similarly obscurantist.

As a result, I prefer Fidelity and TDA/ToS. I have found in a few situations that TDA/ToS actually was able to find me bonds that Fidelity couldn’t, which surprised me. But overall, they both work well.

Overall

Fidelity gets my overall vote and I do and will continue to do most of my trading through their service. I have been told by so many people that IB is the way to go but I just find the GUI to be too difficult to understand. It’s outside my circle of competence, it appears! For US Net-Nets, I’ll use Scottrade just to make my trading costs absolute bare-bones and for a hard to find bond I’ll call up TDA/ToS (although they have been stumped to find me certain securities, as well) but more times than not, I am placing trades through Fidelity.

Though, one thing I do like about IB is they offer an account where you can manage a pool of sub-accounts (up to 15) without having any licenses or anything like that, which could be a good option in the future if I ever want to try managing  OPM. Plus, if you ever set up an account with Covestor you must use IB.

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