Best Discount Brokers!

I took a look around and found a few brokers worth checking out. The trading fees are cheap and even free in the case of Zecco who gives 10 free stock trades per month with a minimun $2500 balance. MB Trading is also astonishing with trades for $0.01 per share and Trade King is worth a look with trades for $4.95/share and free dividend reinvestment (great for long-term investors).

A long term strategy with well established companies and dividend reinvestment is probably one of the safest ways that you can make money in the stock market. This is especially true when you apply dollar cost averaging .

A Word of Advice

If you’re an average joe, I would suggest subscribing to an investment service for a few hundred bucks a year. It is better to do your own research than to listen to the guy at the bank. He probably does not have your best interest in mind.

There are plenty of reputable companies around like Zacks, The Motley Fool, Morning Star, etc. Magazine companies like Smart Money also put together model portfolios and there are many free resources such as MSN Money and Yahoo Finance. We’re not big Microsoft fans, but their investment center is one of the best free resources on the web for tracking your trades!

Trading on your own without a planned entry and exit strategy is simply grounds for disaster. Your emotions will be the key factor in your demise and you will rue the day you chose stock trading over that easy 5% certificate of deposit . Find a balanced portfolio that you like and stick to a simple investment plan or stick with the less risky investments like bonds and certificates of deposit.

Don’t Play With Money You Can’t Lose

2008 has been a horrible year unless your into shorting stocks. In just a matter of weeks entire fortunes have been wiped out, retirement plans are decimated, and fear is running rampant through the entire world. Losing money is part of the learning process that not even big corporate execs are immune from. Just check out this article in Business Week about CEOs that have lost billions!

Use a stop loss! Use a stop loss! Use a stop loss! Got it?

What’s Dollar Cost Averaging?

Simply put, dollar cost averaging is just an scheduled investment plan where you invest a certain amount of money at a certain interval (Example: $100/month). Because stocks are at lower prices more than they are at higher prices, when you invest on a monthly basis you are buying at a average lower price.

• Month 1 = $30/share
• Month 2 = $40/share
• Month 3 = $50/share
• Month 4 = $40/share
• Month 5 = $30/share
• Month 6 = $40/share

In this simplified situation, you invest $100/month for 6 months. After the 6 month period you have 16.16 shares of stock purchased at an average price of $38.33/share. Your $600 investment is now worth $619.41. On an annual basis this is a 6.6% interest rate; higher than a CD, savings, or checking account. It may not seem like much but there is more to this than meets the eye.

Assuming that you pick a good company that pays an average 3% dividend (a stock form of interest). Your annual interest rate would essentially be 9.6%! Keep in mind that this is an investment approach for the long haul and your dividends can be reinvested to buy more stock. Considering that you can get 10 free trades/month with Zecco it would be feasable to do your own research, pick your own stocks, and avoid all trading fees (:

Want More Tips?

To learn more about stocks and open a free practice trading account you can visit our friends over at How The Market Works . They have some great trading competitions, a friendly community forum, and it’s all completely free!

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MB Trading may not have been on your radar, but it is probably the best discount broker for the money. From 2004 to 2006 MB Trading was rated #1 by Barron’s for “trade technology” and “trade executions.” The cost of trading with them is also phenomenal! Stocks - $0.01/share 1st 500, then $0.005/share thereafter Options - $1.00/contract You can also trade futures and buy bonds or mutual funds through them. You can do better on mutual funds elsewhere and I know zilch about futures. Consider buying Exchange Traded Funds (ETFs) instead of mutual funds as they are cheaper to purchase and more flexible investments. Aside from cheap stock trades, the best feature here is the free trading software which gives you the ability to place complex combination orders. Trade King has a very simple system for placing a few combination orders, but MB Trading has software that both beginners and professionals can take advantage of.

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Trade King is highly rated by third parties such as Smart Money Magazine, offers great technical analysis, free dividend reinvestment, a high yield sweep account, and very inexpensive trading. They also offer traders a more complex trading system than Zecco which allows you to set stop and sell limit orders simultaneously without expensive software. You could not ask for much more from a broker with all trades costing only $4.95. Trade King is a nice option for frequent traders of just for the use of their free dividend program is you like the long-term approach. This one of the best discount brokers for the money. Comapre them with Zecco and MB Trading. This will ensure you of the best brokerage for your needs.

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Zecco offers 10 free stock trades per month with a minimun balance of $2,500 and some excellent community features. After that trades are just $4.50 and low-cost options contracts are available. Zecco makes most of their money off of margin accounts, which also have reasonable interest rates. This allows room for your free trades. You can also be assured that competent people are running the company considering that they hired the former COO of BrownCo (one of the first online brokerages bought by Etrade). Their website has recently been revamped to include a more user friendly dashboard and Gains Keeper makes record keeping easy for a small bi-annual fee.