1. Brokers and Online Trading: Introduction
  2. Brokers and Online Trading: What Does A Broker Do?
  3. Brokers and Online Trading: The Costs
  4. Brokers and Online Trading: Full Service Or Discount?
  5. Brokers and Online Trading: Choosing A Broker
  6. Brokers and Online Trading: Accounts And Orders
  7. Brokers and Online Trading: Conclusion


Opening an Account
Every brokerage has different terms and conditions for opening an account. There is a wide range of minimum deposits, varying anywhere from $500 to $2,500. Make sure you read the fine print beforehand. There is nothing more irritating than spending the time to fill out application forms only to discover you don't have enough money to open an account.

So, you're not loaded? Don't worry, more and more online brokerages don't require a minimum deposit at all.

Another option for those with small bank accounts is a dividend reinvestment plan (DRIP). A DRIP allows you to circumvent brokers by buying stocks directly from the companies that offer them.

Commissions and Fees
Every brokerage charges a different price (called the commission) to trade. The price is usually indicative of the service, so cheaper isn't always better.

  • The dirt-cheap brokers who charge $5 to $15 per trade get the job done. Prices are going down all the time and quality is getting better, but don't expect great support or perks.
  • The mid-priced discount brokers typically charge anywhere from $15 to $30 per trade. These brokers generally offer better customer support and additional services.
  • Expensive brokers come with high costs. In some cases you can expect to spend upwards of $100 to $200 per trade. These brokers are known as full-service, and we'll discuss them in greater detail in the next section.
The prices above are a very rough guide. Commissions on trades vary based on things like the type of trade (e.g. market order versus limit order). Even the method used to do the trade affects the price; commissions are different for online orders, touch-tone phone trades and broker-assisted trades.

The Hidden Fees
In general, the financial industry is excellent at hiding fees and charges under a layer of jargon. Beyond the commissions per trade, look for the following:

  • Fees for transferring assets both into and out of an account
  • Account maintenance fees
  • Inactivity fees
  • Fees for not maintaining a minimum balance
  • Interest on margin loans
  • Sales charges on certain securities (e.g. loads on mutual funds)
Make sure you shop around, but bear in mind that many of these fees are standard across the board.
Brokers and Online Trading: Full Service Or Discount?

Related Articles
  1. Trading

    10 Tips For Choosing An Online Broker

    This important investment decision happens before you pick your first stock. Find out how to get it right.
  2. Trading

    The Most Expensive Brokerage Accounts For Traders

    A peek into the brokers whose brokerage charges are higher than average in the stock market world.
  3. Managing Wealth

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  4. Managing Wealth

    Start Investing With Only $1,000

    Find out what fees and restrictions need to be considered before investing $1,000.
  5. Managing Wealth

    Understanding Brokerage Fees

    Agents charge brokerage fees for facilitating transactions between buyers and sellers.
  6. Retirement

    Are Fees Depleting Your Retirement Savings?  

    Each retirement account will have a fee associated with it. The key is to lower these fees as much as possible to maximize your return.
  7. Financial Advisor

    Full-Service Brokerage Or DIY?

    Determine what you are getting for your fees and commissions and how to get your money's worth.
  8. Trading

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  9. Trading

    How To Choose The Right Online Trading Broker

    The online broker market is becoming more competitive, but differences exist in services that can help traders choose the broker that’s right for them.
  10. Financial Advisor

    How To Optimize Your Portfolio and Reduce Fees

    Investment fees aren't avoidable altogether, but there are strategies investors can employ to keep those fees at bay and reduce the impact on returns.
Trading Center