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Scottrade Review: A Friendly Online Broker for New Investors

Want to open a brokerage account or IRA but are unsure where to turn? Scottrade offers a solid choice with $7 trades, no minimum opening deposit for retirement accounts, and over 460 branches around the U.S.


Scottrade is one of our recommended brokers for young investors.One of the most common questions I get here on Money Under 30 is: “I want to start investing but I don’t know where. How do I go about opening a brokerage account or IRA account?”

Fortunately, the answer is fairly easy.

Just invest!

I point them to our listing of recommended online stock brokerages and say “you really can’t go wrong with any of these.”

Technology has made investing totally accessible to anybody with a few hundred dollars and an internet connection. That — along with healthy competition among brokerage houses — keeps trading commissions (as well as the minimum requirements to open an account) low.

Still, among the available options, some brokers stand out among the pack as especially friendly to new investors. Scottrade is one of those brokers.

ABOUT SCOTTRADE

Founded in 1980, Scottrade was one of the original “discount” stock brokers. The term “discount” simply meant that, in the beginning,  they charged less per-trade than “traditional” stockbrokers, who were the well-dressed, fast-talking guys you met at your uncle’s country club.

These days any brokerage house worth their salt has a website allowing you to trade online but then can put you in touch with a real live broker to assist your trades and provide investing advice — for an additional fee.

Scottrade’s claim-to-fame is their flat $7 trading commissions which undercuts most of the competition by between $1 and $8. But what I think really distinguishes Scottrade from the many other discount broker options is their large network of physical branch offices across the United States. So you get “online-only” pricing with the available service of a local branch office. That branch office is something you probably won’t need in the beginning but can come in extremely handy if and when you need to liquidate assets from your account or make other changes.

SCOTTRADE FEES AND COMMISSIONS

Scottrade prices online stock and ETF trades at just $7. Alternately, you can make automated telephone trades or get the help of a broker for $32 per trade.

Here are Scottrade’s fees for some of the more common transactions:

  • Option trades: $7 plus $1.25 for each contract
  • No-load, no-transaction fee mutual fund trades: Free
  • Other mutual fund trades: $17
  • Broker-assisted mutual fund trades: $25
  • Transfer out of entire account: $75

Scottrade does NOT change any annual or inactivity fees.

SCOTTRADE PROS

In my opinion, here’s what’s good about Scottrade for beginning investors:

Branch access

Perhaps the best thing about Scottrade that many competing brokers do NOT offer is that you can visit one of their more than 460 branches across the United States while still enjoying “online-only” pricing. In addition, Scottrade continually receives high marks from J.D. Power & Associates and others for their excellent in-person and telephone customer service.

Free real-time quotes and Dow Jones news feeds

Most brokers charge you extra to get real-time pricing; not Scottrade.

Pricing

Although not the absolute cheapest, Scottrade’s $7 trades are pretty close. Plus, Scottrade has no account maintenance or inactivity fees.

Mutual fund choices

Scottrade offers an impressive number of investment options from stocks to bonds to ETFs, but they really shine when it comes to mutual funds. With Scottrade you can access over 15,000 funds, more than on Fidelity, TDAmeritrade or E*Trade. (Granted, more isn’t always better, but sometimes it’s nice to have a lot of choices).

No minimums for retirement accounts

Scottrade has no minimum balance to open a retirement account like an IRA or Roth IRA. For other accounts, there is a $2,500 minimum.

CONS

Not the absolute cheapest

It’s hard to have a beef with Scottrade’s $7 fees, but if it’s purely low-cost trades you’re after, TradeKing has a lower commission rate.

No automatic dividend reinvestment on stocks

Ideally, when you earn dividends from an investment, you should reinvest them (reinvested dividends are like giving your compounding returns a shot of adrenaline). A very few brokers will do this for you automatically at no charge, but like most, Scottrade distributes your dividends as cash, meaning you’ll need to pay another trade commission to buy more shares with your dividends. (Note that this applies to stocks only — Scottrade does provide free dividend reinvestments on mutual funds.)

In sum, Scottrade is a great choice for investors who want a balance of service and competitive pricing. Scottrade isn’t as cheap as some other recommended online brokers but provides the peace of mind that there’s a branch filled with real-live people not too far away.

Learn more about Scottrade or open an account now

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Their customer service leaves something to be desired. Apparently there’s a big problem with respect for their customers. The online service itself is mediocre. It can be down, it’s slow, and yes kind of cheesy looking. But the prices aren’t bad and if you are not a big time stock trader it will be fine. But I hope you never have to deal with the people at their office.

  2. Sorry to hear the service you received wasn’t what you expected.

    I have been with Scottrade for 7 yrs and always have had nothing but courtious service from them, either on the phone or in person at their office.