It may be hard to imagine, but many people just don't follow the exciting world of online brokerages very closely. They may watch every golf tournament they can on TV, getting to know up-and-coming golfers. They may read each gardening catalog they can get their earthy mitts on, to see what new flowers are available. But for some reason, they just ignore brokerages. It's crazy, I know.
It's worth following brokerage developments, though. They may not make you laugh, or swoon, or sit on the edge of your seat, but they can help you save a lot of money. And that money might buy you a round of golf or some Himalayan blue poppy seeds.
One promising development in the brokerage world is falling commission costs. As a June article in Kiplinger's noted, Charles Schwab (NYSE:SCH) used to charge $29.95 per trade, then dropped that to $12.95 (and even less for clients with bigger accounts). E*Trade (NYSE:ET) dropped its fee from $12.99 to $11.99. Fidelity dropped its own from $32.95 to $10.95 (and $8 for some customers), while Harrisdirect went from $19.95 to $7.95. For the latest rates for some reputable brokerages, click over to our Broker Center's comparison chart. You'll see some brokerages charging just $4 or $5 per trade.
If you're new to the world of discount brokerages, these rates might knock your socks off. That's because traditional, full-service brokerages, such as Merrill Lynch (NYSE:MER) and Morgan Stanley (NYSE:MWD), have often charged $100 (or several hundred dollars) to execute a trade.
Keep in mind, though, that you're not always best off with the absolute lowest rate you can find. If you trade a lot, the lower the commission the better. If you trade infrequently, paying a few dollars more a few times a year is not the end of the world, especially if your brokerage is serving you well in other regards. I myself use Ameritrade (NASDAQ:AMTD) and find that the $11 it charges me is good enough for my infrequent trading needs.
Also keep this falling-commission trend in mind if you're considering investing in brokerage companies. A recent Business Week article recommended the sector, pointing to Goldman Sachs (NYSE:GS) and Bear Stearns (NYSE:BSC) as especially promising. Some brokerages may be attractive for a variety of reasons, but remember that falling commissions mean a drop in revenues (and probably profits) for them.
Learn more about the brokerage biz in our Broker Center, on our Discount Brokers discussion board, and in these articles:
- Which Brokerage is Best?
- Brokerage Fees: High or Low?
- You Can Trade Online
- Unify Brokerage Accounts
- The $5 Stock Trade
- Rating the Low-Cost Brokerages
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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.
