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.
I point them to our listing of recommended investment accounts for young investors 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.
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 many competitors, although they are no longer the cheapest, a title that belongs to Ally Invest. Another differentiator from other discount brokers is Scottrade’s 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. Alternatively, 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 stock trades: $32
- Transfer out of entire account: $75
Scottrade does NOT change any annual or inactivity fees.
In my opinion, here’s what’s good about Scottrade for beginning investors:
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.
Although not the absolute cheapest, Scottrade’s $7 trades are $3 cheaper than some other big competitors. 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.
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, Ally Invest 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.)
$2,500 minimum for non-retirement accounts
If you want to open a taxable brokerage account (meaning you’ll use it to invest for mid-term goals like buying a home or funding education), Scottrade has a $2,500 to open an account, steeper than most competitors who have $500 or even $0 minimums.
In sum, Scottrade is a good choice for investors who want a balance of service and competitive pricing. Scottrade isn’t as cheap as some other recommended investment accounts but provides the peace of mind that there’s a branch filled with real-live people not too far away.
Recommended Investing Partners
- Recommended M1 Finance gives you the benefits of a robo-advisor with the control of a traditional brokerage. M1 charges no commissions or management fees, and their minimum starting balance is just $100. Visit Site
- No Minimum Low-fee robo-advisor with no minimum investment. Creates fully-automated portfolios based upon your desired allocation. Visit Site
- $500 Minimum Wealthfront requires a $500 minimum investment and charges a very competitive fee of 0.25% per year on portfolios over $10,000. Visit Site