These are brokerage firms for the do-it yourself investor. Unlike full service firms, they don’t employ commission-based brokers and do not offer investment advice. Discount brokers or discount stock brokers offer substantial discounts on transaction costs when you buy and sell stocks and bonds compared to full service firms. In fact, most discount brokers now offer commission-free trading when buying stocks or ETFs.
The good: You have a much bigger selection of investment choices when you have your 401k rollover IRA account held at a discount brokerage firm. You can invest in a large number of Mutual Funds offered by many different Mutual Fund companies. Furthermore, you can buy stocks, bonds, and Exchange Traded Funds (ETFs) in your 401k rollover IRA if you wanted to.
The bad: You will need to have a good understanding of investing and the different investing asset classes. You also will probably have to pay a commission charge when you buy and sell Mutual Funds even the “No load” ones. The commission will vary between different companies but it will most likely be in the range of $10 to $50 per transaction. There are few exceptions to this rule as many discount brokerage firms have formed distribution alliances with many Mutual Fund companies that let investors buy and sell certain Mutual Funds at no cost. Those Mutual Funds are referred to as “No Transaction Fee” funds when purchased from a discount brokerage firm.
