When I first started investing way back in the late 1990’s, there weren’t many options for me to choose from when it came to brokers. The world of online brokers was still in its infancy. I had to resort to a brick-and-mortar discount broker that charged me about $30 to place a trade. We have come a very long way. Now the internet is full of various online broker options for you to choose from. The question becomes, which one do you pick? Below is my review of Scottrade, one of the best online brokers you can choose to do business with. With that said, let’s get started with my Scottrade Review.
My Scottrade Review
Scottrade History & Background
You are probably most familiar with Scottrade because of their interesting commercials and that their corporate color is purple. What you probably didn’t know though is that Scottrade began way back in 1980! Back then, the Securities and Exchange Commission (SEC) had just deregulated fixed trading fees for brokers.
Since the internet was still a pipe dream, Scottrade began building up a network of branch locations throughout the country. Then in 1998, they launched their website to trade online for an unheard of $7. The rest they say is history.
Today, Scottrade has over 500 branches throughout the country, still offers $7 trades, has its own bank and is still ahead of the game technology-wise.
OK, now on to the features that makes Scottrade so great for investors. I’ll highlight these in bullet points and then go into more detail:
- $7 online trades (this includes market and limit orders) for stocks priced $1 or more.
- Streaming quotes are free for investors. Most other brokers give you free delayed quotes (they are delayed up to 15 minutes). If you want streaming quotes from these brokers, it will cost you.
- Tons of investment options for investors. Choose from stocks, bonds, exchange traded funds, mutual funds, options and CDs. You can invest in non-retirement, retirement and educational accounts as well.
- Scottrade Elite service for some investors. If you open an account with $25,000 or more, you have access to more tools and features for trading.
- Options First for those looking to trade options. The fee for option trading with Scottrade is $7.25 plus $1.25 per contract. The features of the Options First platform allow you to trade complex option strategies like spreads, straddles, strangles, collars and butterflies.
- Easy to use website. There is a lot to be said when you find a website that is easy to navigate and find what you are looking for. I found this to be the case with Scottrade. I had no issues finding what I was looking for.
Overall, Scottrade has positioned itself perfectly in the online broker world. They appeal to both types of investors, active and passive. (Learn more about these types here). You have tons of free trading tools and features for the active investor and many of the same for passive investors. In fact, Scottrade offers over 14,500 mutual funds to invest in and over 3,000 of them are no fee. (If you have no idea what fees you pay on mutual funds, check out Personal Capital.)
With the opening of their own bank, you can now simplify your accounts by dealing with just Scottrade if you like. You get free checks, free ATM transactions and a free debit card. This is great for those who don’t want the hassle of transferring money back and forth between banks.
Other benefits include:
Low account opening fee. You need $500 to open an account. This is a great thing for those looking to invest with a little bit of money. While I love Vanguard, it takes time to save up $3,000 to invest in one of their funds. With Scottrade, getting started investing is easy and they allow you to start investing now as opposed to later.
Low Fees. There is no inactivity fee, no fee if you don’t trade within a calendar year, etc. The only fees you will encounter are the typical fees that most places charge – wires, returned checks, etc.
Amazing Customer Service. You can email, call or chat with representatives or walk into one of their branches. Scottrade wins the JD Power Award for customer service all of the time and is constantly recognized as one of the best online brokers. You can check out all of the awards and recognition they receive by visiting their website.
Downsides To Scottrade
There are a few downsides to Scottrade to list. Luckily, there are just three and in reality, for most investors, I feel that they are non-factors, meaning they won’t sway you one way or the other.
- Dividend Reinvestment Plan: up until 2013, there was no dividend reinvestment plan offered at Scottrade. Now there is, but it is still something that lacks. With most dividend reinvestment plans, when you get a dividend, you can take that money and use it to simply buy more shares of the stock or ETF. In most cases, this leads to owning fractional shares (4.3874 for example). Scottrade’s plan works differently. It “pools” all of your dividends into one place and you can then buy up to 5 securities at a time, but you cannot own fractional shares. The good news is that there is no fee for this. The bad news is that it isn’t a true dividend reinvestment plan.
- Zero No-Fee ETFs: Scottrade currently does not offer any ETFs without any trading fees. This means that when you buy ETFs, you are going to pay the $7 trading fee. This isn’t the end of the world, but many other online brokers are partnering up with ETF providers and offering commission fee ETF trades.
- Lack of Option Trading Abilities: If you plan on trading the complex option strategies I mentioned above, you are going to have to open up an Options First account. There is no fee for this, but it is separate from your standard Scottrade account.
Who Is Scottrade For?
So who is Scottrade for? As I mentioned above, if you are an active trader, someone that likes to chart and trade frequently, then Scottrade is a perfect match for you. You get tons of free tools and functions that most other online brokers charge for or don’t provide.
If on the other hand, you are a buy and hold type investor, Scottrade is also perfect for you. When you do trade stocks or ETFs, the trading fee is low, so you aren’t spending a ton of money when you add positions to your portfolio. Additionally, there are over 3,000 mutual funds that have no fee at all, meaning you can trade these without charge.
Scottrade is great for beginning investors too. The website has tons of educational information, including webinars, seminars, and videos. Plus, you can visit a branch if you have questions or need help setting up your account.
If on the other hand, you want to read more reviews or do more research, check out my online broker comparison chart. It’s an in-depth guide of the top online brokers to help you find the best fit for you.Alternatively, you can check out my individual reviews of other online brokers:
If you have any questions, be sure to reach out to me and I’ll do my best to help you in any way I can.
Scottrade Review Summary
- Overall Rating For Scottrade
Scottrade is well known for their $7 trades. They are an excellent fit for all investors - new and experienced, active and passive. With all of the research, investment options and educational resources, Scottrade is near the top in most online broker reviews. Make sure you don't make the mistake of overlooking all they have to offer.