What’s the best online trading site? That depends on your goals.
By: Jon Steele
What’s the best online trading site? "Best," in this context is subjective. With more than 100 available even more, if you count investment clubs and sites serving particular populations the choice will come down to how the contenders measure up to your needs.
For example, if you want to trade frequently, ease of use will be a top priority. If you plan to invest and hold, you may be more interested in tools available for tracking your portfolio, or the amount and quantity of research available.
To find sites, you could go to Yahoo! and search on "online trading," which will yield upwards of 1,000 responses, many of which will provide information, not actual trading tools. Sorting through all those will take a while especially since the number may change from day to day.
Or you can take the more efficient (some might say, lazy) approach and let the experts sift through them for you. Kiplinger’s, Forbes, Gomez.com and others all rate the sites and set forth reasons for and against the various sites. Be sure to look at more than one set of ratings, since each uses different criteria, thus yielding different "favorites."
For example, Forbes’ most recent "Best of the Web" edition (Winter 2001), lists its 10 favorites as:
Fidelity www.fidelity.com
Charles Schwab www.schwab.com
CFSDirect www.csfbdirect.com
Datek Online http://www.datek.com/
E-Trade www.etrade.com
Merrill Lynch Direct www.mldirect.com
Morgan Stanley Online www.morganstanley.com/online
National Discount Brokers www.ndb.com
* Quick & Reilly www.quickandreilly.com
* R.J. Thompson www.rjt.com
The basis for preferring these is not set out in the list, but a quick peek at the Fidelity review at www.forbesbest.com reveals that the reviewer was impressed by the site’s multigoal financial planning tool, which can look behind mutual funds to the underlying stocks. Very cool, indeed if you have a diversified portfolio.
An indication of the consolidation going on in the industry can be found in the fact that Ameritrade which didn’t make Forbes’ list on its own, had purchased NDB in September. Since then, www.ndb.com has become Ameritrade Plus, and the site has been closed.
In October 2001, Kiplinger’s also ranked Fidelity first among brokers whose average commission is $20 or more despite a caveat that even in that category, "its commissions are relatively high" but its No. 2 choice didn’t even make Forbes’ list. That spot went to Muriel Siebert (http://www.siebertnet.com/), which was rated highly for its research, funds, and cost basis information. Others in Kiplinger’s list $20-plus category (and their rank in Forbes’ list of favorites) included:
Charles Schwab (second)
CSFBdirect (third)
Merrill Lynch Direct (sixth)
Morgan Stanley (seventh)
Among brokers with average commissions under $20, Scottrade (www.scottrade.com), another site overlooked in Forbes’ list, was on top for offering "cheap trades, lots of funds and smart brokers. They were followed by:
National Discount Brokers (eighth)
TD Waterhouse (not ranked) www.tdwaterhouse.com
Brown & Co. (not ranked) http://www.brownco.com/
Datek (fourth)Ameritrade (not ranked under its own name, though NDB was) www.ameritrade.com
E+Trade (fifth)
American Express (not ranked) www.americanexpress.com/trade
Quick & Reilly (ninth)
One of the most useful ratings sites can be found at Gomez.com (www.gomez.com, click "Consumers" then "Discount Brokers"). Although you’ll find ratings of 30 firms, the real value is in the fact that the rankings are done by consumers and used by the brokers to measure and improve on customer satisfaction.
As part of Gomez.com’s focus on the complete customer experience, it doesn’t limit itself to a one-dimensional rating system, but scores results according to a number of criteria: Overall Score, Ease Of Use , Customer Confidence, On-Site Resources, Relationship Services, Overall Cost.
Then it goes even further, breaking down the rankings according to the types of customers. In the brokerage rankings, these are: Hyper-Active Trader , Serious Investor, Life Goal Planner, One-Stop Shopper.
It would be too time-consuming to explore the myriad combinations this makes possible, it’s interesting to see how the two top-ranked firms Schwab and Fidelity achieved their status.
Another useful feature at Gomez.com is the FAQ section, which allows readers to query the data for information they consider important:
Which sites offer an interactive demo of the account interface and trading environment?
Which firms provide a stock-screening tool that allows clients to search for a security based on selected criteria?
Which firms provide a mutual fund screening tool that allows clients to search for a mutual fund based on selected criteria?
Which firms offer 24 x 7 live customer service?
Which firms offer unlimited free real-time quotes?
What is the minimum initial deposit to open a non-retirement account?
Which firms offer Listed market orders for 500 shares under $15 through their basic commission schedule?
Which firms offer Nasdaq market orders for 500 shares under $15 through their basic commission schedule?
Are you guaranteed to find a site to meet all your needs? Of course not but at least you can zero in more quickly on those that meet those that are most important to you.