Take Advantage of Free Trades?
Online brokers cut commissions. But watch out for other fees.
No free lunch? No one told online discount brokers. Wells Fargo recently began offering 100 free trades a year -- on stocks, exchange-traded funds and no-load mutual funds -- through its WellsTrade online brokerage. To qualify, you need $25,000 in a Wells Fargo account or loan balance -- and that can include 10% of your mortgage. Last fall, Bank of America started offering 360 free online stock trades a year for qualifying customers. Zecco.com offers 40 freebies a month.
Commissions should never be the deciding factor, though, when you're choosing a broker. Some may nickel-and-dime you elsewhere -- by charging account-inactivity fees, for example. Others might stand out in ways that are more important to you.
Qualifying mutual fund investors will find Wells Fargo's offer attractive because it extends to the more than 2,000 no-load funds it offers. Transaction fees can run $75 at Fidelity.
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If you're not a big trader and tend to stow cash in your account, you'd do better with a more generous rate than with free trades. Zecco pays about 1% on default cash accounts, while Fidelity pays up to 3.6% on balances less than $100,000. (Some brokers will transfer cash to a higher-yielding money-market account if you ask.)
If the market's recent turmoil convinced you that speed and reliability are paramount, stick with E*Trade, whose Web site remained lightning-fast when stocks tanked, while Wells Fargo and others slowed significantly. Says analyst Chris Musto, of site-tracker Keynote: "It doesn't matter if you're not charged commission if you can't complete the trade."
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Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.
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