Online Stock Investing: Manage and Trade Stocks

For years the price of cheap stock trades was skimpy service — you basically made the trade and got a monthly statement. But online brokers have been working to fill those gaps. These days everyone from TD Ameritrade to Scottrade is launching a slew of bells and whistles, the kind you might expect from pricier full-service firms.

Some are even getting into social networking. TradeKing CEO Don Montanaro has his own blog, where — using the handle "BigDog" — he dishes out personal tidbits, like his decision to tie the knot with "my girl Courtney," and welcomes new investors like "Market Killer," a grad student who says he wants to trade options "to beat the market."

Discount brokers made their name with bare-bones service and cheap prices. Commissions, though, have pretty much reached rock bottom in this category: Trades now average $7 to $10, down from $15 a few years ago and $25 in 2000. So what's left to offer? Gizmos, and lots of them.

At TradeKing, a technical analysis center uses pattern-recognition technology to look for 60 different patterns in 22,000 publicly traded stocks. TD Ameritrade's StrategyDesk program allows investors to test trading strategies without making the trade and to set up programmed trades. Not to be outdone, brokers including Fidelity and Charles Schwab offer high-tech enhancements of their own, such as online videos to teach customers about investing. "The group pushes each other forward," says E*Trade President Jarrett Lilien.

This game of one-upmanship has been fueled by fear — fear of losing customers. For starters, analysts say brokers are on edge because it's easier than ever for consumers to transfer an account from one firm to another without encountering long delays or paying hefty fees. That has these competitors paying more attention to something else: customer service. Last year E*Trade plowed an extra $40 million into serving customers, beefing up its call centers and opening more retail branches. The firm is also offering more hand-holding: financial planning and other personal advice for customers with assets of $50,000 or more.

Still, online brokers have work to do. While overall satisfaction rose slightly in an annual survey by J.D. Power and Associates, 41% of investors at online brokers said they encountered a problem last year, up from 37% in 2005 and just 27% in 2004. The problem? While the merger frenzy among online brokers in recent years boosted the bottom line for acquirers, customers experienced snafus while trying to access their accounts and make trades.

For our 15th annual survey, we searched for the best combination of 21st-century features with old-fashioned service. As we usually do, we set up our own accounts, and bought and sold both big and small stocks. We also scrutinized how easy it was to fill out and make a trade. To gauge how brokers fared with their customer service, we checked to see if they offered help via live chat, we sent out dozens of emails, and we pestered customer-service phone reps with questions. Finally, we graded web sites not only on the ease of use and efficiency, but also on the breadth and quality of research and tools.

Our rankings are based on the needs of a hypothetical buy-and-hold customer who has an account balance of $50,000 and invests in stocks, bonds and funds.

See the tables below: Premium Brokers | Full-Service Brokers | Discount Brokers