Discount Stock Brokers

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Aleesha Rosamund Little
8 years ago
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1 Article Text Copyright (c) Technical Analysis Inc. 1 Stocks & Commodities V. 3:3 ( ): Discount Stock Brokers by Richard Maturi Discount Stock Brokers by Richard Maturi If you're a sophisticated investor, willing to make many of your own investment decisions then May 1,1975 marked a milestone for your investment activities. On "May Day" the Securities and Exchange Commission ended fixed commissions, making brokerage commissions fully negotiable. Many discount stock brokers came into existence after May 1, 1975 offering investors exceptional money-saving rates. Discount brokers can offer commission savings on orders for three reasons: 1. Their staff is paid on a salary basis, therefore no large commissions are incurred. 2. They do not provide investment advice, therefore they incur no heavy marketing and research costs. 3. They use specialized clearing agents whose large operations provide economies of scale. A trader must keep his commissions to a minimum if he is to maximize his profits. Discount brokers provide an easy and efficient method of accomplishing this goal. I'm sure many of you reading this article are thinking, "So what else is new, I've been dealing with a discount broker for several years now. ' That is just the point. There has been such turmoil in the discount brokerage business and there is such a wide range of options and prices provided by discount brokers that another look is warranted. You may be satisfied with your present broker but still be missing opportunities for more services at the same price or lower commissions by making a switch in brokers. I have dealt with three different discount brokers, two of them in the past month. Why? Because each has particular strengths depending on the type of trade, number of shares traded, gross amount of trade, type of security, etc. The following is an analysis of discount stock brokers who advertised in The Wall Street Journal and Barron's over a recent one week period. Other discount brokers may have particular strengths and pricing structures but this is assumed to be a representative sample of discount stock brokers. There is no "best" broker. You must analyze the service they provide and their commission rate structure and determine the one or ones that best serve the type of investment trading strategy you pursue. Table 1 illustrates the breadth of services provided by the numerous independent discount brokerage firms and banks offering discount brokerage services. Self-directed IRAs and Keogh plans are almost standard offerings. Margin and option accounts are as readily available as the conventional cash accounts. Many discount brokers have added additional services previously accessible only from full-service firms. Certain investment information, interest on credit balances, and government bond funds are some examples of discount brokerage services. Discount broker commission rate structures vary considerably, both in calculation formulas and commission amounts. For example, Fidelity Brokerage Services, Inc. calculates commission based on a transaction dollar range and charges a fixed dollar amount plus a percentage of the total value. Quick & Reilly, Inc. calculates commission as a percentage of the old NYSE: fixed commission rates based on the number of shares traded. StockCross, Inc. charges a flat $25 per trade plus 8½ cents per share no matter what the price per share or number of shares traded.

1,1975 marked a milestone for your investment activities. On "May Day" the Securities and Exchange Commission ended fixed commissions, making brokerage commissions fully negotiable.

2 DISCOUNT STOCK BROKERS TABLE 2 Copyright (c) Technical Analysis Inc.

3 DISCOUNT STOCK BROKERS Copyright (c) Technical Analysis Inc.

4 Article Text Copyright (c) Technical Analysis Inc. 2 Stocks & Commodities V. 3:3 ( ): Discount Stock Brokers by Richard Maturi Discount brokers can save you anywhere from 30%, to 70% depending on the number of shares, transaction value, and price per share. Chart 1 visually portrays the commission of discount brokers on certain representative trades computed from their commission rate structures. Table 2 lists discount brokers, main office addresses, and toll-free 800 numbers of their main office. Due to space requirements, regional or branch offices are not listed. An analysis of the commission tables indicate that some brokers are low in one price range but high in others. Some of the brokers offer special pricing considerations such as round trip pricing or a 10% reduction on commissions over $350 per month. It may be economical to deal with two or more brokers. a full service broker for investment research and information and several discount brokers for use of their low rates in certain pricing and per share quantity price structures. However, keeping track of which stock is where can be tricky without an efficient tracking system. It could be embarrassing as well as financially costly if you sold shares from one account which were in actuality in street name at another broker. There is one twist to the discount broker rates on bond commissions. The minimum charge is usually in the $35 range. My account with Merrill Lynch only charges $10 per bond with no minimum so all my bond purchases are done through that account. The different methods various discount brokers use to determine their commissions appear complicated at first but learning to master them can be very beneficial to the sophisticated investor. Use the toll free numbers in Table 2, order their literature, and choose the broker right for you and save money in the process. Mention that you read about it in Technical Analysis of Stocks & Commodities magazine.

Chart 1 visually portrays the commission of discount brokers on certain representative trades computed from their commission rate structures.

5 Copyright (c) Technical Analysis Inc.

PFIN 12: Buying and Selling Investments 78

PFIN 12: Buying and Selling Investments 78 12-1 Researching Investments OBJECTIVES Describe the types of financial information found in magazines, newspapers, and newsletters. Describe the type of data