Evaluating Scottrade as a Stock and Options Broker

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NOTE: This article was originally published in 2009 and is now out of date. We keep it for a historical reference only.

Before we get started, we feel it is important to note that we were not asked by Scottrade to conduct this review nor were we compensated in any way for doing so. This review is part of a series of reviews of many different stock and options brokers we are conducting for the benefit of our readers. I also feel I should disclose that I have used Scottrade as one of my brokers for a few years now. I say “one” of my brokers because I have my portfolio diversified across a few different brokers, but my evaluation of Scottrade is based on first-hand knowledge and experience.

[VIDEO] Evaluating Scottrade as a Stock and Options Broker

Scottrade is a privately held company that was founded in 1980 by Rodger Riney—you may have seen him flying through his commercials in a helicopter.

Scottrade consitently ranks highly in broker comparisons. However, we are not too concerned with other outside ratings. We are more concerned with how Scottrade may or may not fit with your trading objectives and style.

Let’s take a look at who may benefit the most from opening a Scottrade account and who may find better luck elsewhere.

Target Audience for Scottrade

The target audience for Scottrade seems to be experienced semi-active stock traders and those who are branching out from buy-and-hold investing strategies in mutual funds and exchange-traded funds (ETFs) and into individual stock trading for the first time.

Of course, Scottrade, or any other broker for that matter, will say that they would love to work with any investor, regardless of their holdings, but the product offering and commission and fee structure seem to benefit semi-active stock investors who are looking to trade anywhere from a couple of times per month to a couple of times per year.

Products Available at Scottrade

The product lineup at Scottrade is quite similar to what you will see at most other discount brokers. You have access to all of the following products at Scottrade:

– Stocks
– Options
– Bonds
–¬†Exchange-traded funds (ETFs)
–¬†Mutual funds
– CDs

While you do have access to all of these products at Scottrade, you will find most of the benefits Scottrade provides come when trading mutual funds and stocks.

Commissions and Fees at Scottrade

Scottrade has an extremely competitve commission and fee structure for small mutual fund and stock investors. Commission per stock trade are at the low end of the discount broker spectrum, but most importantly, Scottrade doesn’t charge inactivity fees or account fees. Some discount brokers provide low commission rates if you trade all the time but ding you if you stop trading. Scottrade, on the other hand, gives you the flexibility to stop trading if you don’t see any good trades without paying additional fees.

While Scottrade doesn’t have the cheapest options commissions out there, if you are concerned with having all of your investments—mutual funds, stocks, options, etc.—under one roof, however, and you aren’t an extremely active stock and option trader, the commissions and fees aren’t so high as to be a huge deterent.

Ease of Use with Scottrade

Perhaps one of the greatest advantages of having a Scottrade account is the ability you have to walk into any one of Scottrade’s local branches, sit down with a live person and get your questions answered. If you are just getting started as a stock trader, the ability to sit down and talk with a person can be quite helpful.

Scottrade also has a simple intuitive online trading platform that makes it easy to enter, monitor and exit your stock trades. Scottrade also offers an advanced client-based stock-trading platform with more bells and whisltes, but we think the added features are drawbacks, not benefits.

Pros and Cons of Scottrade

To summarize what we’ve discussed above, the following are the pros of working with Scottrade:

– Access to live, in-person support at hundreds of local offices
– Low-cost mutual fund and stock investing
– No inactivity or account fees
– Simple, intuitive online trading platform

The following are the cons of working with Scottrade:

– Difficult to implement advanced option trading strategies