Scottrade Review: Top Brokerage For Small Investors

by Silicon Valley Blogger on 2009-08-1013

Here’s why Scottrade is a top broker that many investors highly recommend.

Having reviewed many online brokers, I’ve noticed how many of them tend to cater to active traders and more sophisticated investors. Well stock brokerage firms are not all alike: some are really much more suitable for those people who trade frequently (see Zecco, OptionsHouse or OptionsXpress), while others are a better fit for the small (retail) investor who prefers to invest for the long term. Some, of course, try to cover all the bases.

Scottrade Review: Top Brokerage For Small Investors

One of those brokers who finds themselves comfortably in that “middle ground” is Scottrade, which is actually quite a popular and well respected company in the industry. They’re pretty well established: they are a leader in the brokerage industry and have been around longer than many discount brokers (having been founded in 1980), with 422 local branch offices around the nation. One thing I know about them, I’ve gotten many positive comments about them on this site, with many happy customers telling me they’d recommend them as a broker. So what makes them such a great choice for many?

1. They’ve won top awards.

It’s not just the word of mouth compliments that have helped out Scottrade’s reputation, it’s also the series of top awards they’ve received from the media. Here is a list of achievements they’ve managed to score well on lately:

  • Fortune’s “Top 100 Best Companies To Work For”: #60 in 2009 and #58 in 2008. They snagged this award because they prevailed during the Wall Street debacle last year, and have shown strong growth over the last several years.
  • J.D. Power and Associates’ Online Investor Satisfaction Survey: #1 from 2001 through 2008 for overall investor satisfaction.
  • SmartMoney Broker Survey for 2009: 4 stars for investment products, trading tools and customer service.

2. Their pricing is extremely affordable.

Stock and Option Trades. The base commission fee at Scottrade is $7 a trade, which applies to stocks and options. However, for options, they do tag on $1.25 per contract to the $7 that is charged. But these great prices are only good for online trades — if you decide to use their phone system you’ll pay $17 while broker assisted calls will set you back $27 (ouch!). So it’s best to keep to online transactions!

Mutual Fund Trades. They also have over 1,150 mutual funds that qualify as “no load and no transaction fee” (or NTF funds); these funds are free for you to buy, sell or exchange online at completely no cost. But be wary that they’ve got no load funds without the NTF designation that will cost you $17 to trade. Load funds can be purchased at no charge, but there’s a fee for selling or exchanging them (subject to some conditions). Once more, if you decide to use a broker to place mutual fund orders, you’ll be hit with an extra $20!

Other things to note: It’s easy to get started with Scottrade since you only need $500 to open an account, plus they have no maintenance fees and no account closing and transfer out fees.

That’s their pricing in a nutshell. If you’re interested, here’s where you can open an account with Scottrade. They’ll reimburse any transfer fees up to $100.

3. Scottrade’s features are top notch.

Scottrade review, top brokerage for retail, small investors

We already know that Scottrade is tops for customer service and investor satisfaction. So let’s delve into some more details:

Trade Execution Quality. I’m impressed by their dedication to trade execution quality, which they’ve demonstrated by creating a proprietary algorithm called the SBI (Scottrade Best Execution Index) that measures execution speed, effective spread, and certain quote and pricing components. Scottrade utilizes this index to address those market centers that under-perform.

Stock Market Research. They provide an educational center and screeners for stocks, mutual funds and ETFs. And if you become an account holder, they promise you access to more advanced screening tools that rate stocks, funds and ETFs, and that show you dividend history along with price, industry and short interest information.

Products and Services. Their offerings run the gamut of investment products including equities, funds, options and ETFs, as well as fixed income products, CDs and bonds. As I’ve mentioned before, they’re one of those brokerages that provides great support for the average small investor, so you can also open a no fee retirement account or a Coverdell education savings account with them.

Trading Tools and Knowledge Center. For the more active traders, they have an advanced trading platform, streaming quotes and a professional options trading platform. They also have mobile support for those people who want the flexibility of checking their investments anywhere. On top of this, they’ve got a great library of investment resources which include content, reading material and webcasts for your perusal. Note that they were given 4 stars by SmartMoney for their tools and products!

From what I’ve seen, I can consider Scottrade as one of my top choices for online brokers. Their pricing may not be as cheap as TradeKing, Zecco or OptionsHouse, but they more than make up for it by being so well attuned to the needs of the average investor. The icing on the cake is their investor community, where you can learn from and connect with other investors.

To sign up with Scottrade, here’s where to go!

Copyright © 2009 The Digerati Life. All Rights Reserved.

{ 13 comments… read them below or add one }

Frugal Local August 10, 2009 at 7:03 pm

Thanks for the good breakdown of Scottrade services. I think often the term trader and investor are mixed up in most people’s minds. They are very different.

Jim August 11, 2009 at 1:00 pm

I’ve had a Scottrade account for a few years now. I’ve been very happy with them overall. The service is excellent especially considering how low their prices are.

jason August 11, 2009 at 5:12 pm

I also have been with Scottrade for a few years now, and don’t plan on switching. One of the reasons is there is an office down the street from where I live.

Willem Hagen September 8, 2009 at 7:31 am

I am also very happy with Scottrade…Why should I switch then?

jason w November 11, 2009 at 10:20 pm

I’ve been seeing scottrade for a while now and it seems like a good deal if you have the money to chance. I like that they have onsite locations.

david January 21, 2010 at 5:48 pm

Do you have training or classes for somebody who has never done any trading.

Silicon Valley Blogger January 21, 2010 at 6:12 pm

@David,
Yes, you can review Scottrade’s site and check out their online tutorials and educational materials. If you want to learn and test drive trading platforms, you can check this article on this topic. In this article, I explain how you can actually paper trade with any one of a variety of brokers without having to risk your own money. That’s one way of gaining some education in this process.

However, my best advice for new investors is to set up a long term portfolio of good index funds and mutual funds. Follow a diversification and asset allocation strategy. If you want to trade stocks, do it with only a small percentage of your portfolio. That’s the best approach if you want to be fairly successful with investing without having to spend all your time managing your investments.

Bruce March 30, 2010 at 6:37 am

I have both Scottrade and Sharebuilder. I appreciate advantages with Scottrade like lower transaction price, trailing stops, the ability to put a sell order and stop loss order on the same stocks, mobile trading and the research tools – all of these superior to Sharebuilder. However, since I’m not really a ‘trader’, I think that Sharebuilder’s dividend reinvestment option probably makes them a better choice for an intermediate to longer term investor. I really would like to see Scottrade offer dividend reinvestment. Any thoughts?

Simeon July 27, 2010 at 12:31 pm

I hope you don’t have the troubles with Scottrade that I have had. Their customer service can be improved, IMO.

I’ve been a customer of Scottrade for a few years now. They make several thousand dollars a year off of me. But whenever I have to deal with an actual person, it can sometimes be problematic.

Klav October 12, 2010 at 1:31 pm

I have been with Scottrade for almost a year now and I love their platform and customer service. Recently though I began trading options through them and didn’t quite understand their pricing of $1.25 per contract with no lowering of price even if you buy 300 contracts. Talk about a big “ouch” when I realized I was going to get whacked for $375 on the open and close of that transaction. I really love Scottrade but they need to seriously reconsider charging sooooooo much for options trading especially for people who trade in larger quantities. Like maybe have a limit that if you buy over 20 contracts you only have to pay $.25 a contract from then on or something like that. They can trade regular stocks at $7 but can’t find a way to do options cheaper? Thanks for the review.

Australia B2B November 12, 2010 at 9:20 am

Scottrade really work like a charm! And it give us peace of mind.

Matt December 4, 2010 at 8:28 pm

I’ve been using Scottrade for almost a year and have had a pleasant experience do far. (Even in a crappy market) Low commission and no fees always make the experience better. They also have some great tools. If you’re a beginner when it comes to investing, you should definitely open an account. Its also great if you’re an advanced trader as well.

Dedicated Broker November 16, 2011 at 4:30 am

Scottrade is a fantastic company. They are very dedicated to trade execution quality and have low charges.

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