Wednesday, March 5, 2008

Picking a Discount Broker

I've been a TD customer since I was a child, and have had a discount brokerage account with TD Waterhouse since I first bought mutual funds 7 years ago. Until now, I'd only ever used that account to trade in TD mutual funds, and saw no commission. Now that I'm branching out, I've quickly realised that for investors with less than $50k, and fewer than 30 trades last quarter, it costs a wopping $29 per trade. Since I'm starting out small with trades around $2000, that means my stocks have to go up 3% just for me to break even, clearly not an acceptable situation.

So I'm in the market for a new broker. As it turns out, picking a broker is like picking a long distance plan - everyone has a completely different fee structure, so you have to guess at your useage in order to pick the cheapest. I've laid out the prices I expect to pay as a beginner in the spreadsheet below. For other types of investors, there's also a summary over at the Stingy Investor.

If you find the spreadsheet confusing, you're not the only one. It's my attempt to present the complicated fee structures as consistently as possible. Basically, unless you meet the discount threshold, you will never pay less than the minimum trade cost.

Price isn't everything, research tools are also important, so I'm going to have to give some thought to that as well, before making a decision

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