Skip to footer

Five brokers' secrets you should know before trading online

No one knows where the market will head this year or if the wrangling in Washington will lead to real progress on the deficit. But there is one financial trend we do know is not changing anytime soon: Retail investors are overpaying their brokers for trading online. A recent NerdWallet study found that over 17 million investors with the three largest online brokerages – Schwab, E-trade, and TD Ameritrade – are paying more than $1.8 billion every year on trading fees and brokerage services that most of them don’t need. Here are five brokerage secrets you should know before trading online:

1. Higher prices don’t mean faster or better trades

Richard Drew/AP/File
A pair of Knight Capital specialists work on the floor of the New York Stock Exchange in this December file photo. Deep discount brokerages use Knight (which is being acquired by a rival firm), just as big online brokerages do, even though they charge far less for online trading.

  • By Tim Chen Contributor

The big three discount brokers – Schwab, E-trade, and TD Ameritrade – typically charge $7.99 to $9.99 per trade in addition to other fees. Deep discount brokerages only charge $1.00 to $5.00 per trade. Investors might assume they are receiving superior trade execution for these additional charges accrued. But NerdWallet’s analysis didn’t find that to be the case.

Indeed, the big guys use the same execution service as the cheaper deep-discount brokers. For example, TD Ameritrade and Scottrade use Citadel, Citigroup, and Knight for execution services. (Knight has agreed to a $1.4 billion merger with another trading firm, Getco.)

The deep discount brokerages TradeKing and Cobra Trading use these same execution services.

For the services most investors need on a regular basis, NerdWallet found they could be trading far more affordably with a discount brokerage.

1 of 5
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

You've read  of  free articles. Subscribe to continue.