The Beauty of a Bargain

Posted by: Adrienne Carter on January 23, 2006

If I’ve learned nothing else from my mother, it’s how to appreciate a good bargain. Now usually her lessons come in handy for finding a designer handbag for a fraction of the original price or buying toilet paper in bulk. But it turns out the knowledge is just as useful when it comes to investing. After all, keeping your expenses low is the key to building wealth over the long term, since they ultimately come out of returns.

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That’s why I’m intrigued by the new online brokerage, TradeKing. The site, which launched back in December, offers market and limit orders for just $4.95, with no account minimums. That’s a couple bucks cheaper than deep discounter Scottrade—until now the reigning low-cost champ. TradeKing is also a good find for options with $4.95 a trade and only 65 cents per contract. OptionsXpress charges $14.95.

The folks at the site say they still make money on the trades, in part because of a deal they have with their clearinghouse. It also helps that it’s a private company. So they don’t have to worry about pleasing shareholders and maintaining fat profit margins.

Of course, you can’t expect a whole bunch of bells and whistles for $4.95. For example, the site doesn’t have a paper trading feature that allows you to test options strategies without having to risk any cash. But I did find some nice tools for both stock and option investors like a probability calculator that estimates how likely it is a stock will hit a specific price target. TradeKing also has a nice collection of financial blogs—although there was one personal finance blog noticeably missing.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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