The following post is another piece in our Online Stock Broker Reviews series designed to help you find the broker that meets all of your investing needs

After 20 years of being one of the leading online stock brokers, ETrade is one of the most recognizable investment brokers in the country. Whether it’s their name recognition or their cute commercials with the talking babies, ETrade has a great reputation from both critics and customers.

Account Setup

Signing up for an online investing account at ETrade is simple and easy. All you need to do is open an account by clicking here and fill out the form for the type of account you want.

Once your account is opened you just need to fund your account either via wire, ACH or by check. If you have an account elsewhere that you would like to transfer in you can also do that instead.

ETrade requires a minimum balance of $500 in cash or securities for your account, which is a fairly low amount but some brand new investors may prefer a no minimum balance account elsewhere.

Fees & Commissions

ETrade charges the following fees and commissions for online trades:

Stocks & ETFs: $9.99 per trade ($7.99 per trade if you place 150+ trades per qtr)

Simple Options: $0.75 per contract plus $9.99

Mutual Funds: No load, no transaction fee funds: $0, Transaction-fee funds: $19.99

Bonds & Treasuries: US Treasury Auction: $0, Online Secondary Trades: $1 per bond (min $10, max $250)

Futures: $2.99 per contract, per side + fees

Types of Accounts

Trading & Investing
- General Investing
- Employee Stock Plans
- Business
- Corporate/LLC
- Trust & Estate
- Investment Club
- Managed Investment Account
- Unified Managed Account

Active Trading
- Power E*TRADE
- Futures Trading

Global Trading
- Global Trading

Retirement
- Rollover IRA
- Traditional IRA
- Roth IRA
- IRA for Minors
- Complete IRA
- Beneficiary IRA

Small Business Retirement Plans
- SEP IRA
- SIMPLE IRA
- Individual 401(k)
- Money Purchase
- Profit Sharing
- Investment-Only Non Custodial

Educational
- Custodial
- Coverdell

Banking
- Complete Savings
- Money Market
- Max-Rate Checking
- E*TRADE Checking

Investments Available

At ETrade you can invest in the following:

• Stocks
• ETF’s
• Options
• Mutual Funds
• Bonds
• Treasuries
• CD’s

Customer Service

ETrade features 24/7 customer support, which I am a big fan of. Although the markets are only open for limited hours throughout the week there are a lot of scenarios where you will need assistance and it’s nice to know ETrade is there.

Unlike many other discount online brokers, ETrade also has physical branch locations so if you live near one you can stop in for assistance. If you don’t live near a local branch, ETRade’s customer service can be reached either by phone, via online chat (which I have personally used and can recommend) or via email.

For the first time since 2004 Apple missed their earnings estimate bringing in $7.05 per share against expectations of $7.39 per share… a huge miss for such an enormous company notorious for blowing away estimates in the past.

The earnings miss comes just weeks after founder and CEO Steve Jobs death, and also shortly after one of their largest competitors, Google, crushed their earnings estimate.

Apple shipped just 17.1 million iPhones against 22 million units which was expected by the street… the news ironically coming shortly after iPhone 4S set a record for one day phone sales. IPad sales on the other hand exceeded expectations by around 10% with 11.1 million units against an expected 10.0 million units.

Shortly after the announcement shares of Apple (ticker: AAPL) dropped about 6.5% to the mid $390’s before bouncing back to the low $400 range.

Analysts are split on whether the drop in the stock represents a buying opportunity or the beginning of a decline in the most profitable company in the world.

Apple will host an earnings conference call at 5:00 on Tuesday (10/17) to explain what happened.

ShareBuilder offers automatic investment plans that are inexpensive to purchase. For investors who do not believe in timing the market, or who simply don’t have time to follow it and prefer to dollar-cost-average their investments with monthly, biweekly, weekly or daily set amounts, ShareBuilder’s investment strategy is the ideal way to go. The downside of automatic investment plans is that investors have no say as to the price at which they are purchasing the investments.

At $9.99, ShareBuilder is a comparatively high cost real-time commission for stocks and ETFs. As with E*Trade there are no account maintenance fees or inactivity fees and there are no surcharges on either extended hours orders or large-sized orders. There is also a $0.007 charge for each share of penny stock trades.

In contrast, E*Trade has a reputation for being one of the best online brokerage firms and offers efficient trading tools, independent research, banking services and good customer service. E*Trade commissions are identical to its competitor at $9.99 per stock or ETF trade. However with E*Trade, stocks and ETFs are $9.99 when you have 0-149 trades within the quarter and $7.99 for more than 150 trades per quarter. As for options, there is a fee of $9.99, plus seventy five cents for each contract if there are 0-149 trades in each quarter. Anything over 150 trades per quarter will cost $7.99 and seventy cents for each contract. Mutual fund transactions are $19.99 and future contracts are $2.99 per contract plus additional fees. The minimum amount of money required to open an ETrade account is $1,000.

At ShareBuilder the basic plan is $4 per investment. The standard plan costs $12 a month and for this amount you get 6 automatic investments, after which each additional investment is $2. There is also an advantage plan that costs $20 a month and offers 20 automatic investments with each additional investment costing just $1. Real-time stock and ETF trades are $9.99. When it comes to options there are two choices; the Early Exercise and the Automatic Express. The first costs $30 per early exercise and there is no trade commission, while the second is $20 per automatic exercise and also has no trade commission. ShareBuilder has 70 free funds from premier, no-load mutual fund families. Unlike E*Trade, which charges $1000 to open an account, there is no minimum amount required to open an account with ShareBuilder.

For investors who are just starting out, brokers that offer a more vibrant online community than either E*Trade or ShareBuilder may allow users to ask important questions and learn about different investment ideas from more experienced traders. In addition, beginners should look for a virtual trading environment that allows investors to simulate trades without actually risking any money.

ShareBuilder is generally best recommended as the go-to place for automatic investment plans. On the other hand, E*Trade is considered to be a decent choice for IRA accounts and for “buy-and-hold” investing. When it comes to other needs, be sure to also check out other online brokerage companies that allow customers to pay considerably lower commissions, thereby potentially saving thousands of dollars throughout the years in unnecessary investment costs.

Zecco and TradeKing both have attractive features that can be appreciated on a variety of different levels. As far as pricing goes, Zecco originally offered $0 stock trade commissions, but has recently shifted from their free offer to a pay commission model which invalidates the very essence of their name “Zero Cost Commissions.” Still if you can keep $25,000 in your account at all times you are entitled to 10 free trades each month. It also offers ten free trades if you make at least 25 trades every month. Otherwise, each trade will cost you $4.50.

TradeKing on the other hand charges $4.95 per trade, this being half the amount of some other discount brokers. It is true that this is forty five cents more expensive than Zecco, but TradeKing has other features that, depending on your needs, might easily make up for this. TradeKing will also pay up to $150 in transfer fees if you are transitioning from another broker, whereas Zecco doesn’t offer anything. TradeKing charges $4.95 for option trades and sixty-five cents for each contract, which is a bit more expensive than Zecco, which charges $4.50 per trade and 50 cents for each contract.

The entire concept of creating a community for investors to discuss their stocks and investments originated with TradeKing, so it isn’t surprising that they outshine Zecco in this aspect. While Zecco does offer their own version of a community, the tools and interaction do not compare to those of TradeKing’s.

Zecco has also had some poor customer service reviews. In the beginning when they offered zero cost trading this might have been understandable, but now that their prices have gone up this might be more of a concern for some new clients. On the other hand, TradeKing is well-known for amazing customer service. In both 2006 and 2007 TradeKing was ranked number one on Smart Money’s Broker Survey for having unparalleled customer service, inexpensive trade commissions and quick execution.

Zecco also charges a $50 yearly fee for a tool called GainsKeeper, which allows you to track realized and unrealized gains in addition to helping maximize your tax strategy along the way. Along the same lines TradeKing offers Maxit Tax Manager, which provides the same service at no charge. While Zecco offers a multitude of other premium features, many of them require a subscription but can be found for free at TradeKing.

When it comes to account minimums, TradeKing and Zecco are very comparable-both have a $0 minimum account balance for cash accounts and require at least $2000 for margin accounts. There are no inactivity fees for either broker.

Zecco’s new pricing strategy has really helped to level the playing field, so there is no longer a great advantage to trading with Zecco because their trade commissions are no longer free. In the end, it appears that TradeKing offers almost everything that Zecco does without charging extra for the services. At TradeKing you will also find a robust trading platform, an excellent community and some of the best training resources available to investors on the web.

One popular, albeit risky, method of working with the stock market is known as day trading, which simply indicates that the investor is buying and selling stocks on the same day. If an investor maneuvers stocks in this way four or more times within a five day period, then the Financial Industry Regulatory Authority (FINRA) considers that person a ‘pattern day trader.’ Day trading is not allowed in cash accounts, it is only allowed in margin accounts. IRAs, however, although cash accounts, are not accepted accounts for day trading. Pattern day traders must have a minimum of $25,000 trader capital in their account, otherwise trading will be restricted until the sufficient amount of money is reached in the account.

For a day trader to maximize profits, there are a few rules that should be observed that will help to maximize their chances of success:

First, don’t be greedy. If your recently purchased stock, let’s say a $5 stock, goes up by two or three dollars, go ahead and take the profit. That stock is performing exactly as you would wish it to and you have achieved your goal by making money. Although greed can sometimes make you a lot of money, sooner or later that strategy will hurt you. Make it a rule to go ahead and sell rising stocks.

Next, avoid the temptation to hold stocks overnight. This is a huge risk. Start every day fresh and place your confidence in the knowledge that plenty of hot stocks will be available the next day as well. Also, it goes without saying, don’t buy stocks that are on their way down. A stock that is going up is already doing what you want it to, so that is where you need to place your energies.

Finally, perhaps one of the best strategies is to buy stocks that are breaking out past their established daily maximum high. Just be cautious of false breakouts. The ideal time for these breakouts is typically between 10 AM EST and 11 AM EST, as this is when they attract the most buyers, or shorts covering rising stock.

With day trading accounts, it is only possible to buy securities with a 25 percent margin requirement. This will allow the day trader to keep as much as four times the account equity in security value throughout the market trading day. This basically means that the buying power is twice as much as that of a regular margin account. In the case that a day trading account should surpass the four times margin level, the account will be tagged to add additional cash and the account will also be limited to two times the buying power until a deposit is made. When a day trader does not act in accordance with this policy, their day trading account will be restricted to cash trading for a period of 90 days.

In addition, cash or equity that is being utilized to augment the buying power in a day trading account is not allowed to be withdrawn from the account for two days after it has been used in support of margin trading. For example, let’s say a trader has $50,000 and is trading the four times limit of $200,000 each day and then wants to take out $10,000. If withdrawn, for the next two days the trader must limit their trading level to $160,000, or four times the amount taken out. Then, after two days of this lower level trading, the $10,000 may be taken out.

Photo Credit: walter_rw

Unfortunately the TradeKing $100 Signup Bonus has expired. Please see our TradeKing promotional code page for more TradeKing promotions.

Those of you who follow Before You Invest may know already, either from our promotional code page or via Twitter, but if you have been considering signing up for TradeKing there has never been a better time because they are offering a $100 signup bonus for all new accounts opened in August of 2011.

The Details

As with everything there are always terms and conditions so I will save you the leg work of finding them. If you would like to read it for yourself you can always click here, but I will try to sum it all up below.

First, you must open a new account and fund it with $2,500 or more. (Note: TradeKing has no minimum balance to open an account, but you need $2,500 to qualify for the $100 signup bonus. See more in our TradeKing review.) and that amount or greater must remain in your account for the first six months.

You also need to execute three trades within the first 180 days of the account opening. This should be no problem for most of you who want to diversify your portfolio, but anyone who was thinking about signing up just for the bonus without making trades, it wont work.

That’s pretty much it, the standard boilerplate terms and conditions also apply so be sure to read through the T’s and C’s on your own before you sign up.

Most of you know that I’m a customer of TradeKing and I like their setup and trading interface quite a bit. Opening an account was relatively painless and funding it was a piece of cake once I linked my bank account, and we all like simple and painless don’t we?

The following is part of our online stock broker reviews series, helping you find a better broker for your investments.

Two of the heavy hitters when it comes to low cost online trades are OptionsHouse and TradeKing. As I write this OptionsHouse’s trade commissions are only $3.95 against TradeKing’s $4.95 per trade, so if you are looking for every discount you can get OptionsHouse wins this round, but as we all know cheapest trade commissions don’t always win the battle! (Also, new for August 2011 you can get a $100 TradeKing bonus when you sign up for a new account)

As for options trades, OptionsHouse has a flat-rate of $9.95, which is competitive compared to many other discount brokers and surpasses all of the full service brokers. For example, OptionsXpress has a $12.95 fee and TradeKing charges $4.95 in addition to sixty five cents per contract. The greatest difference is that with OptionsHouse there is only a one-time flat-rate, whereas other discount brokers will charge the base fee as well as an additional fee per contract.

As mentioned, TradeKing charges $4.95 per trade plus an additional sixty five cents per contract for up to eight contracts. After eight, the price goes down to fifteen cents per contract. Short options which are valued at 5 cents or less can be purchased to close at no charge. As for multiple legs, they will only be charged a one-time base price depending on the amount of contracts involved and the price is either $4.95 or $8.95. Mutual funds are available via TradeKing for $14.95 and bonds are charged just $4.95 per bond, but there is also a $14.95 minimum. Treasuries are $24.95 per transaction and Certificates of Deposit (CDs) are also $24.95.

OptionsHouse pricing is somewhat different. With their trade commission being only $3.95, they also have two plans for contracts. With the first plan you can get five contracts for $5, after which each contract is $1. The second plan offers a deal if you are trading over 10 contracts, wherein each contract is $8.50 plus fifteen cents a contract. Mutual fund trades are only $9.95 at OptionsHouse. In addition, it won’t cost you anything to open an account with TradeKing, but with OptionsHouse there is a $1000.00 fee for cash accounts and a $2000.00 fee for margin accounts.

When it comes to trading tools, OptionsHouse offers volatility charts, streaming charts and news, along with a probability calculator, an options hotlist, a risk viewer, a stock screener, a call spread investigator and the covered call investigator, just to name a few. Many of these tools were developed by the pros at PEAK6 who are still using the prototypes to generate and examine test option trading concepts.

OptionsHouse has been awarded four and a half stars by Barrons and is generally highly ranked as a great resource for options traders. As the name suggests, OptionsHouse has a wide variety of excellent tools designed specifically for options traders. Backed by the impressive, market maker PEAK6, this broker allows its customers to have access to many professional-level tools and information. Building a spread is very intuitive with the OptionsHouse system, as is rolling a call or put from one strike to another. It is no accident that the site’s motto is ‘Fast matters,’ because they have made sure that this goes for everything from finding possible trades to populating an order ticket, to actually executing the trade itself.

Reviews from online discussion boards look promising for OptionsHouse, with many people saying that they have had overall experiences with customer service. Another promising feature of OptionsHouse is that they are a member of SIPC, which means that all investments are protected by SIPC insurance for up to $500,000, of which $100,000 can be cash. They also have excess SIPC Insurance of $200,000 in aggregate for all of their customer’s accounts.

The simplest explanation of dollar cost averaging is the technique of buying the same amount of an investment on a scheduled basis, no matter what the price of the share may be.

If prices are low, more shares can be bought and if prices are high, less shares are bought. For example, let’s say you want to invest $100 a month in XYZ stock or mutual fund.

The first month that you invest, the stock is $25 a share, so you are able to buy four shares. For the second month, the shares have fallen to $10 a share, so your $100 buys 10 shares of the same stock.

The idea is that the average cost per share will eventually keep falling and this technique reduces the risk of buying too much of a single investment when the timing is not optimal. This method of investing is also referred to as the “constant dollar plan.”

Let’s look at another example to see how dollar cost averaging can protect your portfolio in times of economic upheaval.

Pretend you wanted to invest $15,000 in Sprint FON common stock on January 1, 2000. Your options were 1) To invest all of the money at once and just forget about it, or 2) To ease your way into the stock through a dollar cost averaging plan. You decided on the second choice and for three straight years you invested $1,250 each quarter.

Now, had you invested all $15,000 on January 1, 2000, you could have afforded to buy around 264.46 shares at their current cost of $56.72 each. In December 2002, however, the stock closed at $13.69, which means it would have been worth a mere $3,620.00.

Had you opted to dollar cost average, you instead would own 746.21 shares, which would have given you $10,216.00 at the closing price in December of 2002.

The point here is that even at a loss, the Sprint FON stock only had to go up to $20.10 in order for you to break even during a rough period in the market by using dollar cost averaging. Without it, in order to break even the stock would have had to close at the price for which it was bought – $56.72. By choosing dollar cost averaging, you would actually make $27,326 of the stock went back up to that price!

In setting up your own dollar cost averaging plan, take three main points into consideration: For maximum effectiveness, choose a set amount of money that you would like to invest each month and make sure that you are financially capable of investing that amount consistently.

Next, choose a long term investment (five to ten years) that appeals to you, keeping in mind that index funds are highly suitable for this strategy. Then, choose the interval in which you would like to invest that money (weekly, monthly or quarterly are highly recommended) and make it happen. Some brokers even offer automatic withdrawals to make this process even smoother.

The reason that index funds are excellent choices for dollar cost averaging is largely because they are passively managed funds. This basically means that over time their management fees are going to be one-tenth or less, as compared to actively managed funds. This means that over a decade, the investor is paying more money towards his or her own benefit instead of to the mutual fund company.

Even in a bad economy, investing is still an important aspect of personal finance. With the convenience of online brokers it has never been easier to open an account. For new investors however, the number of online options can be very confusing.

So what is the best way to choose an online broker to invest with? Here are a few things that I would use to help evaluate an online broker. This is by no means an all encompassing list, but if you’re new to investing it’s a good place to start.

1. Determine Your Investment Objectives

Investing without a plan is like placing bets on a game you don’t understand. Sure you may come away with a few wins every once in a while but in the end the odds are stacked against you and most of us will come away with a loss.

If you aren’t sure what your investment objectives should be here are some good questions to ask yourself:

• Are you investing for retirement or to supplement your income?
• Are you investing money you can’t afford to lose or is it discretionary income?
• What is your risk tolerance?
• Are you investing for the short or long term?

These are just some examples of questions that will help you to determine your investment objectives, and ultimately to help figure out what types of securities you should be investing in. The answers will be different for all of us so it’s important for you to figure them out based on your current financial situation. If you still aren’t sure, this would be a great time to consult a financial planner or accountant to guide you in the right direction.

2. Understand Account Requirements

Not every brokerage is an ideal fit for every investor. Some people have been investing for years and have millions of dollars in their accounts. Others are completely new to investing and are just trying to scrape up a few hundred dollars to buy a share or two of Apple because they love their new IPad.

Whatever boat you fall in to be sure you understand all of the account requirements at the brokerage you sign up with so you don’t find yourself socked with unnecessary fees or penalties.

• Does the broker have a minimum account balance?
• Do they charge an annual maintenance fee?
• Do they charge inactivity fees if you don’t make a trade every so often?

These are all questions to ask yourself before you open an account. Many brokerages will answer these questions in their online FAQ section, but if you don’t see them you could always call and ask their customer support department. Which brings us to the next tip…

3. Evaluate Customer Support & Resources

When it comes to choosing a broker, one of the most overlooked aspects of opening a new account is customer support.

No matter how careful you are and no matter how much you plan, we all make mistakes, have computer freezes (looking at you Windows!) or lose internet service. So what happens if you are in the middle of making a deposit or placing a limit order? Will your brokerage be there for you when you actually need them?

Barrons and SmartMoney provide great ratings for customer support and I would highly recommend starting there for your evaluation. Don’t forget to consider the broker’s customer support hours either. If you work a full time day job then a broker with customer support that is only open from 8AM to 6PM Monday through Friday isn’t much help to you, no matter how many stars Barrons or SmartMoney give them.

4. Compare Trade Commissions and Fees

Admit it, you thought this would be step number one didn’t you? After all we see commercial after commercial from brokers offering the “lowest commissions” on trades only to have their competition undercut them by a few cents a couple of weeks later. Seeing all of this brainwashes us in to thinking that a $4.95 trade will make us rich, while a $7 trade will force us to invest for ten more years to make up the loss! Fortunately that’s not really the case.

Unless you are an active trader the difference between a $4.95 per trade broker and a $7 per trade broker really isn’t going to amount to much at all. The typical “buy and hold” investor (though I support Jim Cramer’s “buy and homework” strategy personally) is not going to make enough trades to make a significant dent in their return on investment.

This is not to say that finding the lowest commission broker isn’t a good thing, every little bit counts these days, but it shouldn’t be the most important aspect of finding a new broker either. Personally I would rather have good customer service and an array of trading tools than save a couple bucks a few times a year.

5. Take Advantage of Broker Promotions

I almost didn’t include this part because signing up for a service based only on a promotion can be dangerous. That said, many online brokers are offering excellent promotions for new investors who open an account with them.

Typically these benefits include either free trades or a cash bonus if you maintain your account for a certain period of time. Other brokers offer special gifts for new accounts (at the time I write this one broker is offering a free computer monitor).

Free trades, cash back and gifts for opening a new account are great, and you should definitely take advantage of them, but only open an account if you’re sure the broker is right for your investment needs first.

6. Find Reviews From Actual Customers

So you’ve found your perfect online broker… no minimum, low commission, great customer service and tools and you even get a handful of free trades… so now you should sign up right?

Just one more thing… see what other investors are saying before you open your account.

One of the things that works great for me whether I’m buying a pair of shoes or a new TV is to read user reviews. The reason I do this is because if a large group of people doing anything, some will have problems… it’s inevitable. With social media tools like Facebook and Twitter (and now Google +) all of these problems rise to the surface very quickly.

The same goes for online brokers. Look around the web for user experiences for each broker and/or ask friends, family or co-workers who may have had experience with the broker as well. This may uncover some issues or concerns that you may have not yet considered but could save you down the line.

What Happens After You Sign Up?

When you finally do settle on a broker and open an account, don’t worry you still have options if you don’t like your broker, or prefer to switch to another. Bear in mind however that transferring accounts between brokers often can result in fees, which is why it is important to do some investigating before opening a brokerage account.

The following is part of our online stock broker reviews series, helping you find a better broker for your investments.

E*Trade and Scottrade are two leaders among online brokers, each offering practical ways to buy and sell stocks. If you are new to online investing but would like to dabble in or even master the stock market, it is essential to do your due diligence and research the various options and benefits that each broker offers.

Investment Options

Depending on the amount of activity present in your account each period, there are different types of accounts and fees. Some brokers even charge inactivity fees, as well as minimum balance requirements and variable commission rates. Pinpointing the best place to invest is the first step in building a strategic portfolio. Here is a quick comparison of E*Trade and Scottrade so that you can make the investment decision that is best for you.

E*Trade has a diverse line of trading and investment services that cover many options in mutual funds, stocks, bonds, Futures, Options and IPOs. Their robust offering of online resources may be initially overwhelming for the novice investor, but thankfully there is a user-friendly help center that will take you on an informative tour of news, rates and different account options.

Commissions and Trading Fees

With E*Trade a flat commission of $6.99-$9.99 is charged depending on how many stock and/or options trades you make and fees of up to $12.99 are in place for purchases below $50,000. Transactions for mutual funds are $19.99. There is an amazing ‘no load, no transaction fee fund’ available with each account, but do not forget that there are early redemption fees involved.

E*trade also offers online asset allocation tools and access to advisors who can help you with all of your asset allocations. The overall consensus seems to be that E*Trade offers a diverse spread of options for seasoned investors, complete with premium services for clients who trade actively.

On the other hand, beginning investors may find that the rates are not competitive enough to hang around for the long term.

For inexperienced investors, Scottrade is ideal in that it offers competitive initial rates and low monthly fees. The main features of Scottrade start with a minimum account balance of $500. There is a $7 flat rate fee for both market and limit orders, which means that there are no extra fees to calculate and worry about.

If your account lies inactive, there are also no inactivity fees, which means you can leave it untouched for periods of time and not be concerned about racking up fees.

Scottrade has three platforms available to choose from: Scottrader, Scottrade.com and ScottradeElite. Basically, Scottrade is an ideal online discount broker for beginners who are just learning how to invest and can allow you to easily create a nice portfolio in a reasonable amount of time.

Minimum Investment and Balance

At Scottrade you can open an account for $500, whereas at E*Trade it will cost $1,000 for cash accounts and $2,000 for margin accounts. Scottrade is also free of hidden account maintenance fees and has one of the highest customer satisfaction ratings according to JD Power and Associates. At E*trade there are no IRA account fees and no minimums required with electronic statements and trade confirmations.