TradeKing Review

While I don’t buy individual stocks very often, I do occasionally and TradeKing has been my discount brokerage of choice for the last year and a half or so. Previously, I had used Scottrade but was seduced by TradeKing’s $4.95 online stock trades and Scottrade’s refusal to allow free dividend reinvestment. Thus far, TradeKing is my favorite online discount brokerage but like most brokerages, it’s not perfect. Overall, however, I have had a very positive experience with TradeKing and would recommend it to anybody. Following is my full Tradeking review. I’ll start with what I like.

What I Like About TradeKing

• Low Commissions – TradeKing is one of the least expensive discount brokerages around that still has decent execution and customer service. Some investors will prefer Zecco, which offers 10 free trades per month(ed. Zecco now charges $4.50 per trade if you have an account balance of less than $25,000), but you should realize you really do get what you pay for. Zecco has a poor interface and poor customer service. Some investors are willing to put up with that to save $4.95 per trade. I am not. I trade so infrequently as it is that $4.95 is a small price to pay for an interface that doesn’t make me want to pull my hair out and customer service that actually answers when I call (which was only once, but still).
• Free Dividend Reinvestment- This was one of the primary reasons that prompted me to switch from Scottrade. Other discount brokerages like Firsttrade offer this as well, but TradeKing is the cheapest of the bunch.
• Low Margin Rates- I’ve never traded on margin before, but it’s something I’ve long considered. With rates low enough, you could make a decent case for buying dividend-paying stocks such as REITs on margin on a cash-carry basis. TradeKing’s margin rates are a stunning 3.75% no matter how much you borrow, from $1 to $1 million. With rates this low, buying on margin just might be a viable strategy in this market.
• Decent Education Center- My opinion is that if you need a how-to tutorial, you probably shouldn’t be trading stocks. That said, TradeKing’s education center has some good information for beginners. Just don’t get carried away.
• Decent-Paying Cash Sweeps Account- Many brokerage’s cash sweeps accounts pay peanuts. TradeKing pays a reasonable if not spectacular rate; however, you have to call customer support and ask them specifically. The default sweeps account pays less than peanuts (but you get this at most brokerages).
• Adequate Gain/Loss Tax Manager -TradeKing’s Tax Manager gets the job done without too much fuss, which is good, because trading without an adequate tax manager is a veritable nightmare. It’s also free, unlike with some discount brokerages out there.

Nice Features I Don’t Use

There are a few features of TradeKing that, while nice, I’ve yet to use. I’ve decided to list them here anyway in case they are of interest to you.

• Same Commission For Market And Limit Orders – I rarely use limit orders, but it’s nice to know I won’t pay extra if I decide to.
• Online $0.65 Per Options Contract – Options trading can be a high-leverage game, so every penny matters. In the past, I have stuck to selling puts so this doesn’t affect me so much. But if you’re in the habit of buying call or put options one or two contracts at a time, this may be important to you.

What I Don’t Like About TradeKing

• Purchasing No-Load Mutual Funds Isn’t Free – I hold all my mutual funds with Vanguard so this doesn’t affect me, but I think it’s a rip-off to charge $14.95 to purchase (and sell) a no-load mutual fund. At almost $30 round-trip, investors with modest portfolios will take it on the chin. Do yourself a favor and buy your mutual funds directly from the mutual fund company. For the record, they don’t charge to purchase loaded funds, but that’s small consolation.
• Not Everything Is Online- There are some things you simply can’t do through their website. Switching from the default to the high-paying sweeps account requires a call to customer support as does reinvesting dividends. While this isn’t a huge inconvenience, it would be nice to be able to do that online. I can’t really think of a valid reason why you can’t outside of them wanting to save a few bucks. It’s 2008. Get with it, TradeKing.
• The Stock Screeners Suck – I suppose their screens would be fine for beginners, but once you’ve been spoiled on MSN’s excellent stock screener it’s difficult to use anything else.

The Verdict

Despite its drawbacks, I can honestly recommend TradeKing as the best discount brokerage I’ve used yet. Its combination of inexpensive commissions, good margin rates, good execution, easy-to-use interface, and decent customer service is hard to beat. For investors who don’t need a lot of hand-holding, TradeKing is one of the best. If you need personal attention or personalized investment advice, you should probably go with one of the more expensive, full-service brokerages. But for independent small investors who just want their orders fulfilled inexpensively and efficiently, TradeKing is hard to beat.

Sign up now for $4.95 Trades + $.65 per Contract – Market or Limit, No Minimums. www.TradeKing.com