Kiplinger Online Brokers Review

Low commissions are great. Free trades are even better. But most investors want more: a Web site that’s easy to use, tools that clarify the markets, access to stocks across the globe and some guidance when they need it.

With this in mind, Kiplinger examined 12 firms in a quest to find the best all-around online broker. The idea was to pick a firm that not only charges reasonable commissions and fees but also makes it easy for clients to conduct business and find a variety of investment choices.

To put the brokers to the test, Kiplinger opened accounts at all the firms surveyed, pestered customer-service representatives with questions and e-mails, and used many of each Web site’s tools.

Kiplinger scored everything from how easy it was to calculate an account’s cost basis to interest earned on cash to how market orders are handled. It judged Web sites on their design, and reviewed the fines and settlements brokers paid to regulators and customers.

Fidelity, one of the nation’s biggest fund companies and now also a powerhouse in the brokerage business, topped Kiplinger’s rankings. Charles Schwab, which has cut its commissions in recent years to become more competitive in that area, came in second. Muriel Siebert, which came in second in Kiplinger’s most recent survey of online brokers, took the third spot this time.

Among discounters, Fidelity is second to none when it comes to research, and the firm offers useful tools and features a large selection of funds, bonds and foreign stocks. But no broker aced all of the tests, and Fidelity is no exception.

You can find lower commissions elsewhere, and if you want to buy a fund outside Fidelity’s extensive no-load, no-transaction-fee program, it will cost a stiff $75 per trade.

Anointing the best broker is tricky because much depends on the needs and wants of customers. Investors who prefer a lot of hand-holding may gravitate toward Fidelity and Charles Schwab, which try to provide customers with all the advantages of a full-service broker at a discounter’s price.

Investors willing to settle for fewer bells and whistles will appreciate Muriel Siebert, a small firm that stands out for its selection of mutual funds and third-party research. Price-conscious customers might favor TradeKing and newcomer OptionsHouse, which charge low commissions - $4.95 per stock trade, regardless of the account size - and provide good customer service.

Kiplinger excluded T. Rowe Price and Vanguard because the firms’ online-brokerage operations mainly support their fund businesses. It also did not include Thinkorswim and TradeStation because the firms are geared more toward active traders than long-term investors.

Kiplinger attempted to survey, but it declined to answer questions.


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