Scottrade Review 4.5-star brokerage firm rating

Best Online Broker Account for Small Investors


Best brokerage firm for small investor. 2014 top discount online broker for small account balance for low cost investing (trading) in stocks, mutual funds, ETFs, options, and bonds.



Best Online Broker for Small Investor in 2014


Scottrade is one of the largest brokerage houses in the United States, and the best discount online brokerage firm for small investors (small account balance). Prospective customers can open cash account with just $500. The firm offers the lowest commissions among largest brokerage houses: $7 per stock or ETF trade. Compare it to other big brokerages: $10 per trade at Etrade and TD Ameritrade, $9 at Charles Schwab, $8 at Fidelity Investments.

It's extremely important to get the best pricing for small account balance since high commissions will take a huge bite out of your account. For example, let's say account balance is $1,000 and an investor decides to buy a mutual fund. If the cost of transaction is $76 (as it is at Fidelity) it means that investors will spend 7.6% of their portfolio just on that one transaction! It's a huge expense! But with Scottrade customers could invest in over 3,000 commission-free, NTF (no-transaction fee) mutual funds, and buy non-NTF funds for just $17 per transaction.

Some online brokers charge inactivity fees: the fee is imposed when a customer does not make a specified amount of trades during a month (Interactive Brokers), or a year (TradeKing). If you are a small investor, it is likely that you will not be making a lot of trades, because active trading will just eat away your money. Thankfully, Scottrade doesn't charge inactivity fees.

There are also companies that impose special fees that could destroy a small account investor - Low Balance Fees. These fees are charged if client has account balance lower than required by a brokerage house (Interactive Brokers), or it could be charged if the amount invested in a mutual fund is too low (Fidelity Investments, Vanguard). Scottrade does not charge Low Balance fees.

Because there are no IRA setup, termination, or maintenance (also called "annual IRA") fees, Scottrade is also one of the Best Brokers for IRA.

Read full Scottrade Review.


Best Brokerage for Small Investor: Commissions


InvestmentsCommissions
Stocks and ETFs $7
Stocks and ETFs broker assisted $32
Stocks and ETFs interactive voice response (IVR) telephone system $32
Options $7 + $1.25 per contract
Mutual funds 3,000+ commission-free NTF funds, $17 for others
CDs, OTC Secondary Corporates, OTC Secondary Municipals,
U.S. Treasury Bills, Notes, Bonds and STRIPS, New Corporate Offerings
subject to a markup or markdown
Listed Corporate Bonds $35 + $3 per bond (minimum investment $1,000)
Unit Investment Trusts (UIT) $50 liquidation fee
Foreign Stocks Transferring In or Out $60 per transaction

Investments stocks, options, mutual funds, CDs, munis, U.S. Treasury, Canadian and foreign stocks, ETFs
Scottrade minimum deposit to open account $500 for a cash account, $2,000 for a margin account
FeesScottrade fees


Advantages of the Best Online Broker for Small Account

  • No inactivity, account maintenance or hidden fees
  • No-fee IRAs
  • #1 in customer satisfaction according to JD Power and Associates
  • 500+ local branches for in-person assistance
  • Great support for beginner investors with a massive number of educational resources
  • Online user community
  • Good banking services: savings, CDs, money market and free checking accounts (free ATM withdrawals, VISA check card, and first order of checks free)
  • Only $500 minimum to open account
  • Free real-time streaming quotes and charts
  • Free dividend reinvestment for mutual funds (but not for stocks)
  • Largest number of mutual funds - over 14,500


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This article was updated on 3/1/2014.


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