As September begins I thought it would be a good idea to scan the landscape of brokerages to see how is charging how much. Rather who is not charging at all. August was a lot of upheavel. Went down and went up and again now back to where it was. September started by another round of downturn. Now for the scope of this discussion, like this site, I will eliminate options, derivatives, forex and the likes. Mutual funds are assumed to be bought from the source directly so are any bonds or some such. Even ETFs. But many people tend to regards ETFs as stocks too and prefer to have them in their brokerage account. TD Ameritrade and many other brokers have it for free - not all but the vanguard ones among others. Focusing on stocks, for long timers, they might have known about Zecco. I was active in that platform and it was good while it lasted before they put on fees. But for many, this firm will be the first which started the $0 brokerage commission. Honestly, the clearing firms being common, it is not out of world idea to offer $0 commissions. There is often Penson clearing firm used by many brokerage firms. The trading technical costs have gone down. Many firms make money on cash that regular people keep after selling. That itself adds to a lot.
So among the current roster of free stocks, there are lot of firms lilke Interactive Brokers and some other firm which I forgot that allows you to buy in smaller quantities per month or so. I would avoid firms like that and percentage based firms. I will focus on firms exactly like TD Ameritrade but that would give us $0 instead of $10.
Firms are in no particular order:
1.Robinhood: Just in March 2015, they opened up their app to all so that anyone with a smartphone can buy any stocks for $0. Dont know how long this will last as this is exactly same as Zecco model. They have kept is super simple though and as far as I know there is no IRA account type here. One can maybe put $1000 or so if so desires and then test it out. But then better with market down or swinging like it does these days. The downside is the ease with which such apps are there in your phone, you are likely to binge trade or trade frequently making you likely to lose your capital.
2. Loyal3: Same as above with a limited basket of stocks. Most big names are there and in a way it is not a bad idea to hold an account here. Like robinhood, I would keep this account for taxable account trading and not for IRA.
3. Merrill Edge: This is an offshoot of erstwhile Merrill Lynch - for those who know this was a big name traditional brokerage which got bought over by Bank of America in recession and since have come with this $0 stocks - 30 limited. As long as you have more than 25 grand lying in their account. This makes it a strategy account. As in at one point, I did not want so much money lying there. Especially given that since 2007, we are having practically nil interest earnings in savings. Simply does not makes sense. One can as well keep this 25 grand in an online savings account at 1% APY and take this interest and trade it in a regular firm. But often times, in life, one comes across a point where one realizes that it is better to put some money aside. No matter what. Maybe a stock comes which is uber promising and a sure shot. Even then I would suggest just keep this in. Maybe it is inheritance or maybe you just banked a good stock profit or maybe you have been playing this game for about 10 to 15 years and you just want to put a 10 grand or 25 grand on the side. I remember reading or watching this billionaire mention that once he made his first million, the first thing he did was take that amount and put it in bonds. Simple safe bonds. He just wanted them to be in treasury or TIPS or something very very basic and rudimentary and ordinary. The point being that this was the first million and no matter what just keep this million in a safe place. Even if the rest of the money goes away in a war, this money will be always there. For hard working and studying people like me, it makes total sense. All in all, I am also sold on this idea and that it is better to keep at least say $25k in a IRA CD. Maybe it wont earn much. But that is fine. That Rollover IRA CD is from my hard earned money. And am sure lots of folks in this world also have similar hard earned money - borne out of years of education and savings and hard work that you just want to keep it savings. This gives you a peace of mind. A certain calm that can be used as a ballast or stepping stone. So I am too going to open a rollover IRA CD that maybe at 80 or 90 years old will always be there to let you know that some time ago you made it. Made a small amount of money by yourself.
I chatted with the Merrill Edge folks and like always they are a delight to speak like the fidelity customer reps.
Here is the highlight:
To qualify for up to 30 online $0 stock and ETF trades per month, you must meet one of these criteria:
1. Maintain $25,000 or more in cash in your Bank of America deposit accounts: checking, savings, and CDs.
B: 2. Maintain $25,000 or more in cash balances in your Merrill Edge self-directed account.
For the purposes of the above two qualifiers: You would need to maintain a cash balance $25,000 either in personal Bank of America checking, savings, CDs, or FDIC insured bank IRA deposit accounts, OR $25,000 in settled cash within the Money Accounts portion of the personal Merrill Edge self-directed brokerage account(s).
Securities (stocks, bonds, mutual funds, etc.) in your Merrill Edge account do not count towards the $25,000 balance. The $25,000 qualifying cash balance would need to be either in Bank of America deposit accounts OR in the Money Accounts portion of the Merrill Edge account(s); it cannot be split between the two firms.
B: 3. Enroll in the Preferred Rewards Program which requires you to maintain a Bank of America personal checking account and maintain at least $50,000 as a combined balance in your Bank of America deposit accounts and/or your Merrill Edge brokerage accounts.
B: 4. To qualify for up to 100 free trades per month- Enroll in the Platinum Honors Preferred Rewards Program which requires you to maintain a Bank of America personal checking account and maintain at least $100,000 as a combined balance in your Bank of America deposit accounts and/or your Merrill Edge brokerage accounts.
Jamie B: For the purpose of the above two qualifiers: This aspect allows you to open a Bank of America account with as little as the minimum account requirements, as long as you maintain at least the minimum amount that the checking account needs to remain open and intact- your securities would count as qualifying for free monthly trades.)
As you can tell it is a pretty nifty account and has good features. They are a very big firm backed by Bank of America and they have the $25,000 cash that is sitting in your account to cover the 30 free stocks. 100 free trades is a bit too much and the balance is a bit too high. But if you are up for it and I am sure many of the readers here have a higher set aside amount and for those, it makes sense to go with this account.
So all in all, I would say Merrill is the way to go for IRAs and taxable followed by Robinhood and Loyal3 for the taxable ones. Thanks!
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