Updated March 20, 2016

Study: Best Discount Broker - TradeKing vs Scottrade vs OptionsHouse

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When you're ready to invest, it's not wise to choose a broker just because it has the lowest per-trade fee. Discount brokers have others pros and cons (including other fees) that are worth assessing before making a choice.

While your first inclination might be to go with the one who saves you the most money, is that necessarily the one that will help you make the most money? If you're a novice investor, maybe not. So it's prudent to assess everything the broker has to offer, including cost, trading platform, and research. Investing is risky in and of itself, so why risk making the wrong brokerage choice?

CreditDonkey hopes to make that task easier by comparing three popular discount brokerages, TradeKing (now Ally Invest), Scottrade, and OptionsHouse, that you might consider before plunking down your hard earned cash.

Study Methodology

New York Stock Exchange
New York Stock Exchange © FaceMePLS (CC BY 2.0) via Flickr

The factors we used in determining the best discount broker are:

  1. Fees
  2. Investment Choices
  3. Research/Tools

The privilege of utilizing the trading platform, research, and tools, doesn't come without a price. You end up paying for those services via the per-trade fee that each broker charges. You'll want to look for a broker that doesn't have hidden fees, has low broker-assisted trades (especially if you're an investment newbie), and doesn't charge an inactivity fee.

Most discount brokerages will give you the means to trade stocks, ETFs (electronically traded funds), mutual funds, and IRAs, but not all of them offer trading of other popular investments such as options, futures, and forex (foreign exchange). Even if you’re interested only in stocks at the moment, you may want to consider other possibilities for when you’re ready to branch out into riskier investments.

You also need to be able to get around the site. It’s a good idea to test out ease-of-use or else you using the trading platform could cost you in terms of time and frustration.

It's also important to have research, tools, and charts at your fingertips that will help you make the best investment choices possible. Each discount broker has its own offerings, so consider what will suit your needs.

BEST OVERALL DISCOUNT BROKER

SCOTTRADE

  • Fees: $6.95 for stocks $ ETFS; $6.95 + $0.70 per options contract; $32 broker-assisted trades 4/5
  • Investment Choices: Wide selection, including over 14,500 mutual funds; no futures trading 4/5
  • Research/Tools: Intuitive platform with a multitude of charting options; ability to customize your own pages 5/5
  • CreditDonkey Score: 4.3/5

Why We Like It
It's a trusted name and the brokerage has been around for more than 30 years. The trading platform allows you to create up to 3 customizable homepages, and as Joyce Hanson of Investment News reports, Scottrade is in the process of upgrading its platform even further to keep up with the ever-changing technology. It's also a full-service bank offering free checking, with over 500 branches throughout the US, which makes it a one-stop-shop for your money. For new qualifying customers, Scottrade also has free trade promotional offers.

The Downsides
You'll need a hefty $2,500 just to open a Scottrade account. While this might not seem like a lot of money when you're looking to invest, compared with other brokerages, such as E-Trade ($500 to open an account), and Ally Invest ($0), Scottrade requires a lot more upfront capital.

Who It Works Best For
New investors who feel more comfortable going with a name they recognize with a long track record. Seasoned investors who want the low-trade fee, a great platform, and access to a lot of research and charting. See Scottrade Special Offers.

BEST DISCOUNT BROKER FOR FEES

Ally Invest

  • Fees: $4.95 for stocks & ETFs; $4.95 plus 65 cents per options; $20 broker-assisted trades 5/5
  • Investment Choices: Good selection; no futures trading; 8,000+ mutual funds 3/5
  • Research/Tools: Platform, good research broken out by investment type; mobile app 4/5
  • CreditDonkey Score: 4/5

Why We Like It
Well, the low price-per trade, for starters. Ally Invest also offers Autotrade, which will automatically place your trades per the parameters you set so you're not a prisoner to your computer during trading hours. And it provides Extra Hours Trading in case you want to execute a trade before the market opens or after it closes. Ally Invest also provides Trader Network, which allows you to ask questions and share strategies with other traders — a social network for investors, if you will. And recently, as Theresa W. Carey of Barrons reports, TradeKing (now Ally Invest) has launched a financial-advisor service aimed at self-directed investors who need some extra guidance and ways of diversifying.

The Downsides
If you transfer your account out of Ally Invest, you'll get hit with the $50 transfer fee.

Who It Works Best For
Frequent traders who know what they're doing and have a clear understanding of the market, who want to capitalize on the Autotrade feature. Novices with a fair amount of cash to invest who are new to trading but don't want to pay a fortune in trade fees or broker-assisted trades.

 

Scottrade

Ally Invest

 

Benefits and Features

Stock Trading
$6.95 per trade
$4.95 per trade ($3.95 per equity trade special pricing for high-volume/high-balance traders)
Options Trading
$6.95 + $0.70 per contract
$4.95 base + $0.65 per contract (50 cents per options contract special pricing for high-volume/high-balance traders)
Mutual Fund TradingNo Fee to Buy/Sell/Exchange No-Load, No-Transaction Fee Funds
$17 to Buy/Sell/Exchange No-Load Funds
$0 to Buy Load Funds and $17 to Sell/Exchange Load Funds
$0 to buy/sell load mutual funds
$9.95 to buy/sell no load mutual funds
Penny Stocks$6.95 per trade + 0.5% principal for any stock trading under $1$0.01 per share on the entire order for stocks priced less than $2.00. Maximum commission per order not to exceed 5% of the trade value, with minimum commission of $4.95.
Broker Assisted Trades
$32
$20 + Regular Commission
Customer Service(800) 619-7283 (Monday to Friday 6am to 1am Eastern; Saturday and Sunday 9am to 7pm Eastern)
(855) 880-2559 (Open 24/7)
Inactivity Fee
$0
 
Maintenance Fee
$0
 
Minimum Deposit$2,500 for brokerage accounts
No account minimum for retirement accounts
$0
BankingScottrade Bank has no monthly maintenance fees, ATM reimbursement program, online bill pay, and mobile banking.Integrated with banking on ally.com. Manage your Ally banking and investment accounts in one place.
Mobile App
Desktop AppScottradeELITE (requires you execute 9 or more stock or option trades during the past 3 months, have $25,000 in your primary account, or have $15,000 in your primary account and combined linked assets of $25,000 or more) 
Forex Trading 
Futures Trading 
Locations
More than 500 branch locations
 
Online Community Trader Network to connect with other investors
SeminarsIn-person branch seminars, online events and live webinars 
Virtual TradingScottradeELITE offers virtual trading 
Stock Trading
Options Trading
Customer Service
Banking
Mobile App
Commissions and Fees
Ease of Use
Research
Trading Platform
Online Community

Blank fields may indicate the information is not available, not applicable, or not known to CreditDonkey. Please visit the product website for details.

Scottrade: Pricing information from published website as of 03/27/2017

Ally Invest: Pricing information from published website as of 09/18/2017

BEST FOR OPTIONS TRADING

OPTIONSHOUSE

  • Fees: $4.95 for stocks, ETFs; $4.95 base + $0.50 per contract for options; +$25 broker-assisted trade fees 5/5
  • Investment Choices: Limited; no forex or futures trading; geared towards options 3/5
  • Research/Tools: Strong trade platform with proprietary tools; webinars, but scarce research 3/5
  • CreditDonkey Score: 3.7/5

Why We Like It
One of the lowest per-trade fees on the market for both stocks and options. Fast platform with real-time streaming data and customizable pages. The OptionsHouse website is uncluttered and well-laid out for new investors to find what they need. It offers virtual trading so you can test your strategies and play around with fake money before you actually dive in with the real stuff.

The Downsides
If you're looking for a full-service brokerage to suit all your trading needs, OptionsHouse probably isn't it. There's no forex or futures trading, and mutual funds are limited, at best. Research tools leave something to be desired, and are hard to find on the website without doing some digging. However, Options House recently merged with TradeMonster, another discount online brokerage, in an effort to expand its reach and provide more sophisticated tools for self-directed investors.

Who It Works Best For
Active options traders who want an optimal trading experience with all the tools, charting, and risk management necessary to execute trades. Options novices who want to be hand-held through the account opening process, and want low trade fees.

 

Ally Invest

OptionsHouse

 

Benefits and Features

Stock Trading$4.95 per trade ($3.95 per equity trade special pricing for high-volume/high-balance traders)
$4.95 per trade
Options Trading$4.95 base + $0.65 per contract (50 cents per options contract special pricing for high-volume/high-balance traders)$4.95 + $0.50 per contract (only one base charge per spread, straddle, or combo)
Mutual Fund Trading$0 to buy/sell load mutual funds
$9.95 to buy/sell no load mutual funds
$20
Commission Free ETFs 
5 from O'Shares
Penny Stocks$0.01 per share on the entire order for stocks priced less than $2.00. Maximum commission per order not to exceed 5% of the trade value, with minimum commission of $4.95.Additional fee of $0.005 per share of stock traded for stocks priced $2.00 or less that are not options eligible.
Broker Assisted Trades
$20 + Regular Commission
$25 + Regular Commissions
Customer Service
(855) 880-2559 (Open 24/7)
(877) 598-3190
Inactivity Fee 
$0
Maintenance Fee 
$0
Minimum Deposit
$0
$0 minimum funding level to open a new account.
$2,000 minimum funding for a margin account
$2,000 account minimum to establish checking writing privileges and $10,000 account minimum to establish debit card privileges
BankingIntegrated with banking on ally.com. Manage your Ally banking and investment accounts in one place. 
Mobile App
Forex Trading
 
Futures Trading
Online CommunityTrader Network to connect with other investors 
Seminars 
Trading webinars
Virtual Trading 
Stock Trading
Options Trading
Banking
Mobile App
Commissions and Fees
Ease of Use
Online Community
Research
Trading Platform

Blank fields may indicate the information is not available, not applicable, or not known to CreditDonkey. Please visit the product website for details.

Ally Invest: Pricing information from published website as of 09/18/2017

OptionsHouse: Pricing information from published website as of 01/26/2015

OTHER BROKERS TO CONSIDER

Amongst the other discount online brokerages out there, E-Trade and OptionsXpress are good alternatives. E-Trade offers a fantastic platform with an enviable amount of research and tools at your disposal — but its trade fee is high at $6.95 per stock trade. OptionsXpress does not have any broker assistance fees. It also has a great video library of tutorials and research, and an extensive amount of charting for options trading.

BOTTOM LINE

In terms of getting started, you can't go wrong with any of these discount brokerages, though some will cost you more to trade than others, and some will provide a better trading platform for execution. Take a look for yourself to see which one fits your needs. Do you need access to easy-to-make charts or will you want to someday? Which ones feel like a good fit for how you like to use a site and work your way around its features? Do a comparison check and test drive before choosing the one that’s right for you.

Cynthia Cohen is a retail analyst at CreditDonkey, a stock broker comparison and financial education website. Write to Cynthia Cohen at cynthia@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped families make savvy financial and lifestyle decisions. (read more)

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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