Online brokers

[chipy]

i'm looking for online brokers for the purpose of starting an IRA (this is not a Traditional vs Roth IRA question).

i want to be able to contribute money from my bank/paycheck on a monthly basis w/o getting charged every month for doing that. i also want to fund my IRA with ETFs. Are there any online brokers that meet those requirements?

thanks
chipy

 

[sandmanwake]

Start out with Scottrade because they're cheap and have no maintanance fees. Then, once you have enough money to do more than just buy bonds or mutual funds, go over to Fidelity. Both have no maintanance fees, but Fidelity's commissions are much higher than Scottrade. If you're an active trader, this is bad. However, Fidelity offers free automatic dividend reinvestment, which Scottrade don't do. If you like investing in a company for the long term, the automatic dividend reinvestment is more valuable, I think, than the lower commission since you shouldn't be doing that many trades anyway.

Oh, it won't cost you anything to transfer out of Scottrade, by the way. Plus, your account will be active in case you ever want to go back to them for whatever reason.

 

[chipy]

thanks sandmanwake

i actually opened up a scottrade ira account recently but haven't funded it yet. for some reason i thought automatic monthly investments would be free after you paid for the intial $7 per trade to buy the funds. i guess i was misunderstood.

either way, it looks like scottrade is the best place for me now.

thanks
chipy

 

[DaveSimmons]

If you don't mind VFINX or other index mutual funds instead of an ETF you might consider vanguard.com, they don't charge a transaction fee to buy shares of their own funds.

They do have a monthly contribution plan though I haven't looked at it in years so no idea whether it's allowed for IRAs as well as a non-retirement account.

 

[chipy]

thanks Dave

i'll look into it.

chipy

 

[Al Neri]

Vanguard.

 

[Torghn]

Originally posted by: Don Rodriguez
Vanguard.

That's who I use and I love them.

 

[vi edit]

I personally wouldn't use Vanguard if I was doing ETF's. If you are looking to do that use your discount broker of choice and get lower commissions.

Vanguard is much more expensive for ETF's. The other thing to consider with ETF's is that you can not dollar cost average as well with them like you can with mutual funds. With ETF's you can not buy partial shares. You have to buy full amounts. And depending on the fund, the price can be very high ($120-$150). It may impact your ability to purchase a set amount each month.

With a mutual fund you can specify a certain amount you want to use each month and buy partial shares of individual mutual funds.

Just something to think about.

 

[vi edit]

Also keep this in mind - ETF's aren't the best choice for low dollar investors.

The $333 a month that you can invest in an IRA each month is considered low dollar.

Say you bought three shares of an ETF's each month worth a value of $100 each. At Vanguard you pay a $30 commission to pick those up if they aren't one that Vanguard operates.

You just took an automatic 10% loss on those funds.

ETF's aren't for that type of investor. If I was looking to buy $50,000 worth of ETF's and it cost me $100 in commissions, that's a much smaller effect on my cost basis.

ETF's are really for "bulk" purchases. For example, I've got $25,000 in a 401k account that I'm looking to roll into a traditional IRA. I would consider ETF's for that. If I was only looking to do $1,000 it wouldn't be as good of an option.

 

[DaveSimmons]

Originally posted by: vi_edit
Also keep this in mind - ETF's aren't the best choice for low dollar investors.

The $333 a month that you can invest in an IRA each month is considered low dollar.

Say you bought three shares of an ETF's each month worth a value of $100 each. At Vanguard you pay a $30 commission to pick those up if they aren't one that Vanguard operates.

You just took an automatic 10% loss on those funds.

ETF's aren't for that type of investor. If I was looking to buy $50,000 worth of ETF's and it cost me $100 in commissions, that's a much smaller effect on my cost basis.

ETF's are really for "bulk" purchases. For example, I've got $25,000 in a 401k account that I'm looking to roll into a traditional IRA. I would consider ETF's for that. If I was only looking to do $1,000 it wouldn't be as good of an option.

Good advice, that's why I said:

If you don't mind VFINX or other index mutual funds instead of an ETF you might consider vanguard.com, they don't charge a transaction fee to buy shares of their own funds.