Discount brokerages are companies that charge lower fees than traditional brokers while typically offering fewer services. These brokers make it easier for the average person to have the opportunity to invest. We will take an in-depth look at a popular discount broker called TradeKing.
So, what is TradeKing? TradeKing is an online discount brokerage firm started in 2005 that allows investors to buy and sell securities for a minimal fee.
Investors can buy stocks, bonds, and mutual funds on the TradeKing website. Discount brokers are perfect for self-directed investors that would like to manage their own portfolios.
How TradeKing Works
- Open an account at TradeKing.
- Answer all questions on the application.
- Fund your account via ACH, check, account transfer or wire transfer.
- Build your account portfolio
Advantages of TradeKing
TradeKing offers a flat $4.95 pricing structure for stocks, options, and exchange traded funds. Their fees are extremely cheap when compared to other discount brokers. E*Trade charges $12.99 to buy and sell stock. TD Ameritrade charges $10.99 for stock transactions. Charles Schwab’s commission is $8.95 per trade. Even Scottrade, which trumpets itself as the cheapest broker, costs $7.00 per trade. Sharebuilder charges just $4 for buy orders, but they charge $15.95 for sell orders. TradeKing charges just $4.95 for broker assisted trades as well. Broker assisted trades at other discount brokers can range from $20 to $100.
No Account Minimums
Exorbitant account minimum requirements can make it difficult for investors to open accounts at discount brokerage firms. TradeKing customers have the advantage of being able to open their accounts with no minimum funding requirement. Many discount brokers require you to open an account with amounts ranging from $1,000 to $25,000. While Zecco and Interactive Brokers have lower fees, they require $2,500 and $10,000 to open an account. By not having an account minimum, TradeKing makes it possible for the small investor to benefit from their low commission charges.
Customer service is TradeKing’s bread and butter, and they offer some of the best customer service in the discount brokerage industry. TradeKing was voted #1 in customer service in 2008 by both Smart Money and Kiplinger’s magazine. TradeKing has a live chat feature which lets you speak with a customer service rep from 8am to 6pm Monday through Friday. The email address is readily identifiable unlike many other brokers that hide their email addresses to make it as difficult as possible to contact them. TradeKing’s email and phone response times are fantastic. Phone calls and emails are responded to within a matter of minutes.
TradeKing has a great online traders network which allows you to interact with other traders. Very few broker sites give you the ability to exchange ideas with other traders. You can view a trader’s portfolio, discuss ideas, and find out the reasoning behind specific investments.
Disadvantages of TradeKing
TradeKing is lacking in the research tools that some of the larger sites have. Fidelity, Scottrade, TD Ameritrade and E*Trade have more comprehensive analyst reports from different investment houses. TradeKing doesn’t have portfolio planning tools that are useful in helping to build your portfolio.
Fees on Mutual Funds and Penny Stock
The fees on TradeKing’s mutual fund products are not as low as their other products. It costs $14.95 to purchase a mutual fund. This fee can be beaten by purchasing directly from the fund family. Penny stocks cost .01 per share to purchase. This can become rather costly if you are buying thousands of shares. Other sites charge a flat fee for penny stock purchases.
So, is TradeKing right for you? It all depends on what you are looking for from your broker. TradeKing seems like a real bargain based on the low fees and high level of customer service provided. As you know, fees can eat up the value of your investment portfolio and TradeKing will help you keep more of your money with their low-fee pricing. If you are looking for a low-cost, high-service broker, TradeKing is worth giving a try.