Most of these firms only execute your orders; they don’t recommend stocks or do research. Discount Brokers:
- Do business over the phone or on the Internet.
- Since they do not have to support a research department nor spend time with clients, they can charge less.
- You will pay less than a full service broker.
- In order to be more competitive some are now offering limited amounts of research, online investment libraries and some services provided by traditional full-service brokers, but these are for an additional service fees.
- Discount brokers also offer no-load mutual funds Mutual Funds with no transaction fee.
- Discount brokers charge a minimum commission of at least $20 and a higher rate of $45 for a broker assisted trade.
- For small trades these might even be higher than a full service brokerage.
- If you are willing to complete the trade yourself without assistance using the Internet or touch-tone phone, you may save even more.
Make sure you know all the charges upfront. Discount Brokers may also require a minimum level of activity for an account or charge a minimum fee. Also see if they charge you a maintenance fee and if so what it is. If you are an active independent investor, you could save a lot. But again, the lines are being blurred between discount brokers, full service and online brokers since all offer “online” services. These are excellent resources for individuals who are comfortable doing their own research and making their own decisions; do at least 15-20 trades a year, want to save money on trades and keep their costs; and are willing to pay for additional services if needed.