Best Discount Stock Broker for Small Portfolios

Portfolio below 10,000$

Stock Basket membership fee is too high so traditional account with pay per trade is best.

Discount Broker Maintenance Fee Free Window Trades /month Buy Window Trade Sell Window Trade Market Order Limit Order
Sharebuilder 0$ 0 4$ 15.95$ 15.95$ 19.95$
Foliofn 14.95$/quarter (*)
(59.8$/year)		 0 3.95$ 3.95$ 14.95$ 14.95$
BuyAndHold 6.99$/month
(83.88$/year)		 2 2.99$ 2.99$ 15$ No

(*) waived if ≥4 transactions in previous quarter.




All 3 Deep Discount Stock Brokers have no minimum to open an account.

Now, this is where problems can arise. You open an account with a very small amount misled by the “No minimum Investment” requirement. Then, you get smashed by the monthly account fee that is seldom advertised. Always convert a monthly fee into an annual fee.

For instance, BuyAndHold's $6.99 monthly fee becomes 6.99*12=$83.88 per year. If you put 1000$ at BuyAndHold, that 6.99$ fee may seems little but 83.99$ is 8.4% of 1000$. This is an insurmountable percentage fee to deal with.


In this category, Sharebuilder is best because it is the only Deep Discount Broker not to charge a monthly fee for its traditional account. This is probably the reason why Sharebuilder is popular.

But do not jump opening a Sharebuilder account with just 100$. At 4$ per trade, that is 4% to buy a stock which is pretty high. In addition, Sharebuilder charges 15.95$ for Sell orders. Strive to keep Buy/Sell transaction cost below 1% of your Portfolio. Therefore, despite the “No Minimum Investment” requirement, avoid opening an Investment Account with less than 1,000$.

Pay great care to Regular Investments: do not Dollar Cost Average small amounts. It is best to wait till you have 500$ and then invest, otherwise the 4$ trade fee will eat up a big chunk of your savings. Now, a good thing is that Sharebuilder does not offer Dollar Cost Averaging with its traditional account.

Do not be misled by the 2 free monthly trades with BuyAndHold that can be used for Dollar Cost Averaging. The annual fee is too high for small portfolios.

Finally it is best to invest in low number of stocks such 1 or 2 ETFs. Direct Holding of company stocks is not recommended for portfolios <10,000$.

For instance, if you were to use a mechanical strategy with 5 stocks and annual rebalancing (5 Buys + 5 Sells per year), the costs will be around 100$/year. For portfolios below 10,000$, that would exceed 1%/year. ETFs have expense ratios below 0.2%/year... although you'll still have to pay transaction fees to buy/sell them.

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