7/26/2006

Best Broker- Interactive Brokers

Business Week has an article on Best Brokers on the web site. For active investors by far the best broker is Interactive Brokers. I have tried most of the brokers in their list but my favorite is IB. It has the best execution. The application is easy to use and very stable. It is very technology focused company and the founder himself is a successful trader.

Talk about cheap: At Interactive Brokers, a stock trade costs 0.5 cents a share, with a minimum of $1 a trade. That's below what most institutional investors pay. The catch is that the firm charges a $10 monthly maintenance fee if you don't spend at least $10 trading. But for many investors, the $120 minimum annual cost is well worth it. According to the J.D. Power survey, the average online investor made 36 trades in 2005, up from 23 in 2003. Even at Scottrade, 36 trades amounts to $252 a year, more than double Interactive Brokers' $120.

For active investors, the margin rate -- what it costs to borrow from the broker to leverage your holdings or sell stocks short -- may also be an important factor. Every broker has a tiered pricing system for margin loans, with larger amounts getting the best rates. Here again, Interactive Brokers has the best deal: just 7% for borrowings of $100,000 or less and as low as 5.5% for $3 million or more.

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