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Best brokerage firms for trading stocks under $1 (penny stocks) at no extra charge.
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Conventional wisdom says that buying stocks under $1 dollar is extremely risky and it’s a bad investment.
In most cases I agree. But like in every rule, there are exceptions.
CitiBank was basically a penny stock in March of 2009. Now it’s price fluctuates between $4-$5 per share
and some analysts believe it will triple within next 2 years. It would have been silly not to buy or, even worse,
sell Citibank in March of 2009 ONLY because of "I won’t allow penny stocks in my portfolio" rule.
So, in rare occasions, we want to be able to trade stocks under $1. There is one problem with this though:
many stock brokerage firms are trying to overcharge investors buying penny stocks.
The most common way brokerage companies do this is by putting a $0.01 surcharge on
each share of stock below $1. So if you buy 5,000 shares of penny stock and regular stock commission is $5,
this trade will cost you $5 + 5000*$0.01=$55! It’s a bit high, to say the least. Other brokerage houses
came up with less strict rule: surcharge (usually $0.01) on all shares above certain limit (2,000 or 5,000 shares
are common numbers). It’s not as predatory as the first rule, but it still makes trading penny stocks very expensive.
Fortunately, there are very highly rated brokerage houses that don’t overcharge
their customers for trading stocks under a dollar or for large-size orders.
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OptionsHouse
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- 10 free trades each month with $25,000 minimum account balance requirement or 25 stock trades per month.
- $4.50 stock trade commission if does not meet $25,000 account balance requirement or 25 stock trades per month.
- Options commission: $4.50 plus $0.50 per contract.
- Mutual funds: $10 for no load funds.
- Investment products: stocks, options, no-load mutual funds, ETFs.
Zecco
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- $7 per stock trade
- Options: $7 plus $1.25 per contract
- Mutual Funds: 2,800+ free. $17 for all other mutual funds
- Investment products: stocks, options, mutual funds, CDs, munis, Canadian stocks, ETFs
Scottrade
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- $7.50 per stock trade
- Options: $0.50 per contract, minimum $12.50 for single leg orders and $7.50/leg for multi-leg orders
- Mutual Funds: $15 to buy, $0 to sell
- Bonds: $15
- Investments: stocks, options, mutual funds, bonds, ETFs
tradeMONSTER™
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