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From: eder@ssc-vax.UUCP (Dani Eder)
Newsgroups: net.invest
Subject: Re: Discount vs Full Svc Brokers
Message-ID: <374@ssc-vax.UUCP>
Date: Wed, 23-Jan-85 21:41:54 EST
Article-I.D.: ssc-vax.374
Posted: Wed Jan 23 21:41:54 1985
Date-Received: Fri, 25-Jan-85 05:42:30 EST
References: <1900@inmet.UUCP> <306@enmasse.UUCP>
Organization: Boeing Aerospace Co., Seattle, WA
Lines: 54

[23 january 1984]

     After ten years of investing in stocks, I have these comments
on brokerage choices:

Small investors ( <$1000 per transaction)

     Merrill Lynch has a 'Sharebuilder'SM program for the small investor.
It's purpose for ML is to get customers while they are just starting out,
in the hopes that they will graduate to the regular account when they
have more money.  They do not operate in real time (i.e. execute orders
immediately), and cannot handle limit orders.  Basically, they are for
the person who will buy in small increments and hold for years.  If you
are concerned about day-to-day price fluctuations, they are not for you.
The advantage they have is the very low commissions on small transactions:

$0-300		6%
300-600		2%+$12
600-2500	1.5%+$15
2500-5000	1%+$27.50

     They will automatically reinvest dividends, and keep track of shares
to four decimal places (i.e. .5768 shares IBM), although you will get
annual reports only if you hold more than one share of stock.  

Middling investors ($1000-5000 per transaction)

     Charles Schwab is less expensive than Merril Lynch for transactions
over $1000, and they will execute orders immediately over the phone.
They are owned by Bank of America, and are the largest of the 'discount
brokers'.  I do not know of any complaints about their service.

Large investors (>$5000 per transaction)

     If you want the best of both worlds, you can maintain accounts
with both a full service and discount house.  Keep most of your money
in the discount house.  Shop around the full service houses until
you find a broker you like, then stick with that broker as a source
of advice.  Then use that advice plus whatever other information
you have to make your investment decisions, and then trade in your
discount account.  Never give a broker discretion to trade for your
account.  While most brokers are ethical, and will not 'churn', or
trade frequently for the sake of commissions, you may get unlucky.

Very large investors (>25000 per transaction)

     When you get into the stratospheric heights where you are
trading over $25000 at a time, you can start to negotiate brokerage
fees, rather than accepting what their posted rates are.  This is
a technique that mutual funds use to keep costs down.  Frequently
they will maintain several brokerage accounts, and ask for competitive
bids on transactions.

Dani Eder / Boeing Aerospace Company / ssc-vax!eder