I have been getting a lot of emails recently asking my feeling about certain stock brokers. Lots of people have questions about which broker is the best one for their needs. In order to answer these questions I am going to do a series taking a look at the different stock brokers out there. You can make the decision and decide if a particular broker meets your needs. Let’s start with Scottrade.
Scottrade is one of the brokers that I am very familiar with. It was one of the first brokers that I used when I started stock investing. I was attracted to Scottrade by the low minimum balance that is needed to start investing and the low trading fees. Back when I started investing most brokers required you to start with $1,000. That was not exactly a small sum for a person in college.
Scottrade only required $500 to start investing and the fee per trade was $7. That was a whole lot cheaper than the $12.99 that E*Trade and TD Ameritrade were charging. So, I filled out a couple of papers, submitted my application and enrolled with Scottrade. Here are the things that I like about Scottrade and the things that I do not.
Low Trading Fees
It may be 2011 but Scottrade is still one of the lowest cost brokers on the market. E*TRADE and TD Ameritrade have lowered their prices but they still aren’t competitive with TD Ameritrade. A $7 trade is very attractive when you consider all of the options that Scottrade offers. That is the lowest price of any of the big brokers in the marketplace.
No Inactivity Fees
No inactivity fees are another bonus of having a Scottrade account. Lots of online brokers will stick you with a $50 inactivity fee at the end of the year if you don’t buy or sell enough stock during the year. Scottrade has no inactivity fees ever.
Low Minimum Balance Requirement
Scottrade and E*TRADE are the only two major full service discount brokerages that let you open an account for just $500. This opens up the option of investing to a large segment of the population. Just about anyone can save up $500 and start investing.
Scottrade will send me emails every so often about investor education seminars that are taking place in my area. These are free of charge and can be useful to new investors. I am a fan of the free online resources and research tools that Scottrade provides for free. I wouldn’t rely on them solely to make my investment decision but they are a good starting place.
You can buy common stocks, bonds, mutual funds, and options all from Scottrade. I have written in the past about how I am not a fan of buying mutual funds from brokers. You can normally get them a lot cheaper by buying direct from the fund company. Scottrade is one of the exceptions. You can buy almost 3,000 different mutual funds and do not have to pay any transaction fees.
It can be incredibly aggravating trying to get in touch with a brokerage company. Most of the low cost brokers have terrible customer service which is why they can be so cheap. Scottrade has excellent customer service. I have always been able to reach a representative quickly via email and phone. The company has a lot of branch offices nationwide as well. There is a Scottrade branch less than 5 minutes from my house that I can visit if I have any questions.
The only reason that I do not do all of my investing at Scottrade is the lack of a dividend reinvestment plan. Anyone that reads this blog regularly knows that I am a fan of dividend investing and Scottrade does not offer dividend reinvesting. You can receive your dividends in cash but you cannot use them to buy additional shares for free. That is a major minus in my book because I like to reinvest my dividends to buy more stock shares.
Basic Trading Platform
While the trading platform is easy to use, it is pretty basic in its appearance. TD Ameritrade and E*TRADE have better side designs and screening platforms. The platform is just fine for regular investing but serious traders may want a few more options when it comes to placing a trade.
Scottrade makes my favorite broker’s list. I have used the brokerage for both personal and investment club accounts. I have recommended Scottrade to friends and family members and they have all been pleased. The brokerage firm has a lot of advantages and only one weakness. Scottrade is a great brokerage firm for beginning and intermediate investors because you get a large number of services at a very low cost.