Discount Online Brokerages

[Gina23]

Hi all, I know there are plenty of threads out there about discount online brokerages (i.e. Charles Schwab, Fidelity, etc...) If there is existing information on this board that I am just not seeing, please let me know. I have been with a full service brokerage for about 10 years and I am 32 years old. I started working for the said brokerage's home office out of college and was not subject to the hefty commissions for the first 5 years of my investing. Since then I have moved to Colorado and got a job outside of the financial industry and am now paying commissions. After reading lots of information on this board (great information, by the way - thank you!) I'm starting to question whether or not I want to pay these commissions any longer. I see that a lot of you are with online discount brokerages for your investing outside of your company 401k, etc... My question for you is - did any of you start with a full service brokerage when you were just starting out with your investing to gain knowledge and then shifted over to a discount brokerage once you got older and are nearing retirement age? I guess I'm trying to justify the pros of staying with a full service brokerage. I do invest lightly in stocks, most of it is just with mutual funds within a traditional-IRA and roth-IRA, however. Can you offer up any advice for me and further explain when and why you went to a discount brokerage?

Edit: Typo

[Gina23]

Duplicate Post

[MonkeyMama]

My personal experience is that my dad used some high priced brokerages and some discount brokerages - he didn't give me much advice in my 20s.

BUT, my spouse's family is way into a very high priced broker. Once I became involved in formums like this and got an understanding of fees, commissions, etc., we ditched the brokerage where my dh had an IRA and some taxable investments. This guy did NOTHING for us. We lost money in good years because of the endless fees. If he was picking good funds, they weren't getting ahead of all the expenses. (To this day, my dh's entire family - Grandma, parents, cousins, etc. sing this guy's praises and rely on him and his company 100%. It makes me cringe. Both my dad and I have had talks with them - they won't change, so I give up).

Around the same time my dad had some major issues with his dad's accounts at his high priced brokerage. He got really irritated and moved all his money elsewhere. He told me looking back he wish he had never paid a higher priced brokerage. My boss told me just about as much. They are both my biggest financial mentors, though they'd admit it took them 40 years each to wake up.

We moved all our money to Vanguard, when we ditched the full-service broker. I have a Fidelity IRA (From an old 401k) and have since opened a T Rowe price account. I am starting to dabble in stocks again and Fidelity fits all my needs. I will never be a big stock seller or need a more full-service brokerage.

The most recent tidbit I have come across is the idea that if you are paying a commission of 1% on your investments, and your withdrawl rate is 4% in retirement. Well, 20% - 25% of your withdrawals are going to fees?!? I think that is an interesting perspective. I don't remember where I read that, but it makes you think.

I know nothing about nothing when it comes to stocks and finances - except what I have mostly read on the internet, etc. Our performance blows paid advisor out of the water. He hasn't been hard at all to beat. No fees makes ALL the difference. It isn't that are returns are that much better - it's that we have eliminated the expenses that were seriously dragging down our returns.

[disneysteve]

If you are making your own investment decisions, why pay someone else to execute them for you? It just doesn't make any sense. If you want someone else to make your investment decisions, that's when you want to explore the options - broker, CFP, etc.

I'm with Scottrade myself.

[Gina23]

OK thanks...

I pay a $100 dollar charge per year to maintain my Trad-IRA and my Roth-IRA, which includes beneficiary services and other services that I'm sure I'm not using.

I read through Vanguard that there is a $20 per year fee per fund that doesn't have 10k in it or more... I'm getting to the point where I finally have enough in my accounts that I could still diversify to an extent and get around charges of that nature.

More questions:

1) Those of you that are with a full service brokerage (if you even exist around here, LOL!) - have you ever asked your investor about no-load mutual funds and what was their reaction?

2) Upon reinvestment of dividends within your online account, is there a charge?

3) Are you aware of any unloading fees I might face if I roll everything over into an online brokerage account?

[disneysteve]

1) Those of you that are with a full service brokerage (if you even exist around here, LOL!) - have you ever asked your investor about no-load mutual funds and what was their reaction?

2) Upon reinvestment of dividends within your online account, is there a charge?

3) Are you aware of any unloading fees I might face if I roll everything over into an online brokerage account?

They will say everything they can to talk you out of no load funds because if you go that route, they earn nothing.

Reinvesting counts as a new purchase so you probably will pay a commission.

There will most likely be transfer fees when you move your money so check with your broker.

[Gina23]

Reinvesting counts as a new purchase so you probably will pay a commission.

Even within a Fideltiy/Vanguard/ScottTrade type account?

Thanks again.

[disneysteve]

Even within a Fideltiy/Vanguard/ScottTrade type account?

Thanks again.

Sorry, I thought your question was regarding a full service broker.

With a no load mutual fund company like Fidelity or Vanguard, there is no fee for reinvesting dividends. With Scottrade, I'm honestly not quite sure. If there is a fee, of course, it is a much smaller fee ($7) than with a full service broker.

[Gina23]

Great advice... forgive me for using this thread as a personal journey at this point, if I can be better redirected please let me know.

1) I have stocks and cash and another mutual fund in addition to my Traditional-IRA and my Roth-IRA. Do you keep cash in your Online Discount Account?

2) Do you have a separate account for stocks - such as eTrade - outside of your Vanguard/Fidelity type account or do you do it all in one place?

[Gina23]

OK guys, I'm taking the plunge... called Vanguard today and am extremely happy with the information they've provided so far... wish me luck

[kv968]

With a no load mutual fund company like Fidelity or Vanguard, there is no fee for reinvesting dividends. With Scottrade, I'm honestly not quite sure. If there is a fee, of course, it is a much smaller fee ($7) than with a full service broker.

As far as stocks go, Scottrade doesn't reinvest dividends. I've been on them for years about that and they said they're getting around to it but that was over 4 years ago. Of course you could reinvest them yourself, but if you don't have a substantial amount of money in the stock it wouldn't be worth it even with the low $7 commission.

[disneysteve]

Great advice... forgive me for using this thread as a personal journey at this point, if I can be better redirected please let me know.

1) I have stocks and cash and another mutual fund in addition to my Traditional-IRA and my Roth-IRA. Do you keep cash in your Online Discount Account?

2) Do you have a separate account for stocks - such as eTrade - outside of your Vanguard/Fidelity type account or do you do it all in one place?

Sorry for not responding to this earlier.

1. Yes, I keep cash in my brokerage account. Cash accumulates when I sell a stock or when any of my holdings pay dividends. When it builds up, and I identify something I'd like to own, I reinvest it.

2. My brokerage account (Scottrade) is different than my other investments (Vanguard and other mutual funds).

[snafu]

I suggest looking at TD Ameritrade to see if they offer what you're looking for. I've used their services since they opened, never had a problem, never had an error, I action transactions on-line.

[orenwach]

OK thanks...

I pay a $100 dollar charge per year to maintain my Trad-IRA and my Roth-IRA, which includes beneficiary services and other services that I'm sure I'm not using.

I read through Vanguard that there is a $20 per year fee per fund that doesn't have 10k in it or more... I'm getting to the point where I finally have enough in my accounts that I could still diversify to an extent and get around charges of that nature.

More questions:

1) Those of you that are with a full service brokerage (if you even exist around here, LOL!) - have you ever asked your investor about no-load mutual funds and what was their reaction?

2) Upon reinvestment of dividends within your online account, is there a charge?

3) Are you aware of any unloading fees I might face if I roll everything over into an online brokerage account?

Question #2
For most larger online brokerages (Etrade, Schwab, Merrill Lynch, etc.) you can sign up for their DRIP (dividend reinvestment program) which automatically reinvest any dividends for free. If you don't have enough for a full share, they will give you fractional shares, which will automatically be sold for you when you sell the rest of your full shares.

[Gina23]

I suggest looking at TD Ameritrade to see if they offer what you're looking for. I've used their services since they opened, never had a problem, never had an error, I action transactions on-line.

I did look into them initially... Vanguard seems to be the type of company of where I'm going with my investments at this point... I'm looking for low cost and no fees. With Vanguard I can get around most, if not all of the fees. I'm not exactly interested in trading stock going forward or day-trading. This is something that I feel my Edward Jones rep pushed me into to "balance my portfolio." I do like my stocks, but I don't anticipate actively trading inside of them for the time being. Essentially, the next few years I plan on maximizing my Roth contribution, and that's about it... which is why I don't need a full service brokerage anymore. Breaking up with my EJ rep wasn't easy, she's pissed... and I'm still waiting on the funds to drop... it's been 4 business days already and I'm getting a bit antsy. According to the Vanguard rep, there are no fees for reinvesting dividends across the board including my stocks. I'm not sure if that's considered to be a DRIP plan or not, but I guess I'll find out. EJ charged $95 per account to transfer. Only $5 less than their yearly "maintenance charge"... so hopefully the low fees will make up for that in just a year or so.