Cheapest Ways You Can Buy Stock Online
Did You Know Average People Can Choose Stocks as Well as Professional Stock Brokers?
Why would people buy stock online? Why not choose a brokerage firm and let the “experts” manage your money for you? Why? Here’s why: The performance of a stock portfolio managed by a professional stock broker performs on average no better than a monkey throwing darts at the stocks section of the wall street journal.
This is not a joke the Wall Street Journal actually sponsored a contest to see if monkeys throwing darts would be as accurate as professionals. Of course they didn’t actually use monkeys … they used ordinary people.
On October 7, 1998 the Journal presented the results of the 100th dartboard contest. So who won the most contests and by how much? The pros won 61 of the 100 contests versus the darts. That’s better than the 50% that would be expected in an efficient market. On the other hand, the pros losing 39% of the time to a bunch of darts certainly could be viewed as somewhat of an embarrassment for the pros. Additionally, the performance of the pros versus the Dow Jones Industrial Average was less impressive. The pros barely edged the DJIA by a margin of 51 to 49 contests. In other words, simply investing passively in the Dow, an investor would have beaten the picks of the pros in roughly half the contests (that is, without even considering transactions costs or taxes for taxable investors).
No joke! The “pros” on average did no better than the
amateurs, ordinary people like you. If
you factor in brokerage fees and commissions the average guy would have come
out ahead. You might come to the conclusion that the stock brokers did better... but if you investigate and read the whole story then consider the taxes and fees you'll find out that an ordinary person picking stocks from the Dow Jones Industrial Average companies would actually come out ahead on average!
With the Internet so embedded into the lifestyle of the ordinary citizen you are posed with a question about the best way to buy stocks. Should you trust the portfolio manager or should you just randomly pick stocks based on what you believe are companies that will return results in the future.
In today’s economic climate should you even buy stocks at all? Well the answer lies totally on you. People who watched the Bank Stocks plummet then bought in at the lowest point have already seen returns as high as 10x their original investment. Seems a big influx of Tax Dollars and promises by the Government to not let the banks fail has been comforting enough to drive the prices back up. Unfortunately the same people who created the problem are the people cashing in on this new “windfall”.
What’s a “safe” investment anymore? I can’t tell you… but what I can say is that people will need food in a down market, people will still need to purchase energy – natural gas, heating oil, electricity. These may not be glamorous markets but I would expect more stability (Reaches for darts while crossing fingers) than more esoteric companies like those producing the latest cell phone gadget that may or may not catch on.
So in my opinion if you are an ordinary person of average or above average intelligence with a little extra cash to invest you will probably be just as successful buying stock online as you would be choosing a portfolio manager to buy it for you. And no I am not going to address the mutual fund scenario, because most online brokerage firms offer mutual funds purchases as well.
Places to Buy Stocks Online for Lower Fees and Commissions
Be sure to read the fine print especially with respect to broker assisted transactions. The bottom line is you want to know how much it is going to cost your per trade. Many online brokerages have less than straight forward calculations. It’s up to you to figure out what is the best deal.
Scottrade – Advertises $7 dollar trades, no account maintenances fees, no fee if your account is inactive. $500 account minimum. No fractional shares investing. Well known established company.
ETrade - $7-$20 per trade, no automatic investing, $40 per quarter inactivity fee, no fractional shares investing.
TradeKing - $4.95 stock trades including broker assisted trades, No inactivity fees.
Zecco - 10 “free” trades per month, $4.50 + .50 contract after that. I’m pretty skeptical of this company because they use 3rd party advertising on their site.
ShareBuilder – No account minimums, $4 trades, no inactivity fees, automatic investing plan available. Well known company.
There are of course many other options like TD Ameritrade, OpitonsXpress, Charles Schwab. Just be sure to read the fine print and know what you are getting yourself into before you get gouged.
Disclaimer: Information in this article is not deemed reliable as the information is compiled for illustrative purposes. The only way to verify for sure is to investigate each company on your own.