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A Web broker buying guide
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March 16, 2000: 5:57 a.m. ET
Picking an online broker can be confusing -- find out who's for you
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - With more than 150 online brokerages vying for your business, the choice is overwhelming. The small print is endless and every brokerage has slightly different features and rates. At one time, five or more brokerages are touting themselves as the "top" online broker.
The right online broker for you depends on what kind of investor you are and what you're looking for. An active, young day trader wants very different service from a buy-and-hold investor coming up on retirement.
Price is an issue, of course. But with commissions heading steadily down, it might be less important to you than it used to be. Investment advisers certainly like to point out that it doesn't matter how cheap the trade was if you pick the wrong stock. Service and reliability would also top many people's wish lists from a broker, and both of those factors are pretty subjective.
Click here to go to a breakdown of the 10-largest online brokerages, with their commissions, hours of trading, and so on.
How to shop around
So here are some points to consider when shopping for an online brokerage.
 First off, don't feel overwhelmed. "There's not a heck of a lot of difference" among online brokers, said Greg Smith, online brokerage analyst with Hambrecht & Quist. Partly that's because when one brokerage adds a feature, many others mimic it. "There isn't one differentiating factor that creates a night-and-day difference between Schwab and Fidelity, though they'll disagree with me."
Investors should weigh issues such as whether access to premium content is important, bearing in mind the research likely means higher costs.
The same applies to a branch network. Some people like the security of being able to visit in person, but someone has to pay for those bricks. And if you're a customer, that someone is you.
As online brokerages develop, Smith thinks the best ones will start offering automated advice services. Those tools will be able to help you balance your portfolio or make sure you're on track with your retirement goals. Think about what tools you're looking for -- some brokers have lots of gadgets for active traders, while others focus almost exclusively on long-term planning.
Another differentiating factor is whether the broker will give you access to vehicles such as options and bonds or whether they offer initial public offerings. With investors complaining they can't get in on deals, the type of IPO access makes a big difference, too -- how many shares does the broker get? How do they distribute them? The best source there is often friends with first-hand experience, since individual situations vary depending on how many and what type of IPOs people try to buy.
Ranking the brokers
For more qualitative information, tracking companies such as Gomez Advisors and Forrester Research post composite rankings of the "best" online brokerages on their Web sites.
Gomez released its spring Broker Scorecard on Wednesday, showing that E*Trade usurped Charles Schwab's spot as the best online broker overall. It's also the easiest site to use, according to Gomez, meaning it rates highly for its demos and tutorials, account forms, and the like.
 Schwab's forte is its online customer service, including its educational content and advice. Gomez ranks it tops in that area.
Fidelity Investments and DLJ Direct also swapped spots in third and fourth place overall. TD Waterhouse showed the biggest gain on the ranking, moving up six spots to fifth.
Gomez notes the different needs different investors have, and also rates brokers for four different types of people: the hyperactive trader, the serious investor, the "life-goal planner" and the one-stop shopper.
Gomez also breaks out brokers by factors that may make an overriding difference to you, such as cost, ease of use, customer confidence and on-site resources. If cost is what gets you, for instance, Trading Direct, Firstrade and Datek top that list.
Get references from your friends, colleagues and family if you're unsure about a brokerage, suggests Dan Burke, online brokerage analyst with Gomez.
There are subtle differences. Do you need Datek's online streamer for quotes, for instance? Or perhaps you value the proprietary research from Donaldson Lufkin & Jenrette analysts that DLJ Direct customers with more than $100,000 in their account get for free.
There may be one particular factor that may sway you. But stick with one of the bigger brokerages and you're unlikely to go wrong. Pick one of the 10 largest brokers, "and I don't think you've made a mistake picking any of them," said Ken Clemmer, an online brokerage analyst with Forrester. "You may not have been completely optimal, but you haven't made a mistake."
The skinny on the 10-biggest brokers
CNNfn.com has broken down the 10 largest brokers, as ranked on fourth-quarter trading volume by Hambrecht & Quist. Here are the basics on each of the biggest brokers, along with a subjective take on what kind of customer they're shooting for.
1. Charles Schwab
Extended-hours trading: 4:15 p.m. to 8 p.m. ET
ECN: REDIBook
Rates: $29.95 for market and limit orders; discount at 31st trade
Minimum deposit: $5,000, $20,000 or four trades a year to avoid fees
Mutual funds: $0 for Schwab OneSource funds, $35 minimum for other no-load funds, $0 extra for load funds
Options: $35 minimum
Bonds: $35 minimum
Branch network: Yes
Web site: www.schwab.com
Target customer: long-term investor looking for broad range of tools and investments, who wants help occasionally.
2. E*Trade
Extended-hours trading: 4:05 p.m. to 6:30 p.m. ET
ECN: Instinet
Rates: $14.95 listed-stock market orders, $19.95 limit orders and Nasdaq market orders; discount at 30th trade
Minimum deposit: $1,000
Mutual funds: $0 for E*Trade funds, $24.95 for no-load funds with a transaction fee, $0 extra for load funds
Options: $29 minimum
Bonds: $40 for fewer than 20 Treasury bills or 10 agency or municipal bonds, $0 for more than 20 T-bills or 10 agency or muni bonds
Branch network: No
Web site: www.etrade.com
Target customer: self-directed investor who likes being on the cutting edge, wants extras like banking through broker.
3. TD Waterhouse
Extended-hours trading: 4:30 p.m. to 7 p.m. ET
ECN: REDIBook
Rates: $12 for market and limit orders
Minimum deposit: $1,000
Mutual funds: $24 for no-load funds, $0 extra for load funds
Options: $28.13 minimum
Bonds: $35 minimum for corporate bonds, commission varies for other bonds
Branch network: Yes
Web site: www.waterhouse.com
Target customer: long-term investor looking for cheaper discount trades but wants a broad range of services and a branch network.
4. Datek Online
Extended-hours trading: 8 a.m. to 9:30 a.m. and 4 p.m. to 8 p.m. ET
ECN: Island ECN
Rates: $9.99 for market and limit orders
Minimum deposit: $2,000
Mutual funds: $9.99 for no-load funds, $0 extra for load funds
Options: No
Bonds: No
Branch network: No
Web site: www.datek.com
Target customer: active investor who wants fast trades, innovative technology, likes to be cutting-edge.
5. Fidelity
Extended-hours trading: 8 a.m. to 9:15 a.m. (starts April), 4:30 p.m. to 8 p.m. ET
ECN: REDIBook
Rates: $25 market order, $30 limit order, discount at 12th trade
Minimum deposit: $5,000
Mutual funds: $0 for FundsNetwork funds with no transaction fee, $75 for no-load funds with a transaction fee, $0 extra for load funds
Options: $27 minimum
Bonds: $36 and $4 per bond for up to 25 corporate bonds, $3 per bond for 26th or more
Branch network: Yes
Web site: www.fidelity.com
Target customer: long-term investor looking for broad range of tools and investments, particularly mutual funds, and wants a branch network.
6. Ameritrade
Extended-hours trading: 4:15 p.m. to 6:30 p.m. ET
ECN: Island ECN, MarketXT, through Knight/Trimark, Chicago Stock Exchange
Rates: $8 market orders, $13 limit orders
Minimum deposit: $500
Mutual funds: $18 for no-load funds, $0 extra for load funds
Options: $29 minimum
Bonds: By phone only
Branch network: No
Web site: www.ameritrade.com
Target customer: investor looking to move part of portfolio online and wants cheap trades, simple site.
7. Brown & Co. (Chase Manhattan)
Extended-hours trading: No
ECN: NexTrade
Rates: $5 market orders, $10 limit orders
Minimum deposit: $15,000
Mutual funds: $19 for no-load funds, $0 extra for load funds
Options: $25 minimum
Bonds: $30 minimum, $50 minimum for Treasury bills
Branch network: Yes
Web site: www.brownco.com
Target customer: sophisticated, higher-net-worth investor looking for very cheap trades and simple site.
8. DLJ Direct (Donaldson Lufkin & Jenrette)
Extended-hours trading: 8 a.m. to 9:15 a.m. and 4:15 p.m. to 7 p.m. ET
ECN: REDIBook
Rates: $20 market and limit orders
Minimum deposit: No minimum
Mutual funds: $35 for no-load funds, $0 extra for load funds
Options: $35 plus $1.75 per contract
Bonds: $45 minimum
Branch network: No, but parent has 14 offices
Web site: www.dljdirect.com
Target customer: higher net worth investor looking for full-service brokerage, without the broker.
9. ScoTTrade (Scottsdale Securities)
Extended-hours trading: 4:30 p.m. to 6:30 p.m. ET (commission-free)
ECN: through market maker Knight/Trimark
Rates: $7 market orders, $12 limit orders
Minimum deposit: $500
Mutual funds: $17 for no-load funds, $0 extra to buy load funds
Options: $20 and $1.60 per contract
Bonds: No
Branch network: Yes
Web site: www.scottrade.com
Target customer: investor looking for cheap trades, a fast, simple site and a branch network.
10. CyBerBroker (being bought by Schwab)
Extended-hours trading: 8 a.m. to 9:30 a.m. and 4 p.m. to 8 p.m. ET
ECN: All ECNs
Rates: $14.95 for market and limit orders, plus exchange fees
Minimum deposit: $10,000
Mutual funds: No
Options: $19.95 minimum
Bonds: No
Branch network: No
Web site: www.cybercorp.com
Target customer: Active trader, day trader, full-time investor.
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