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How to Invest in Penny Stocks

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

The opportunity to purchase stock with a minimal initial investment — or to be an early shareholder in a small company with potentially stratospheric growth — can make the idealistic allure of penny stocks hard to resist. Unfortunately, the reality is often much less glamorous. Penny stocks can be extremely volatile, the underlying companies are often unproven and difficult to value, and they often trade so infrequently that shares can be difficult to sell. This makes penny stocks far more risky than the name implies. And that’s before you factor in the outright fraud that sometimes runs through the penny stock market.

Before you jump in, it’s important you understand exactly how to invest in penny stocks, how they work, and what to look out for if you do. Then strongly consider the risks involved to protect your pocket change from turning into significant losses.

What are penny stocks?

Penny stocks are equities that are low in price — although not necessarily as low as the name implies. The SEC defines a penny stock as trading for less than $5 per share, generally issued by small companies with market capitalizations of $300 million or less. Otherwise known as microcaps (or, if they are less than $50 million, nanocaps), these companies don’t tend to have the established track records or history of public information that more significant, publicly traded companies do, nor do they typically file annual financial statements and regulatory documents with the SEC. For these reasons, shareholders in penny stocks don’t always have the same visibility into the companies in which they invest.

Why the low share prices? Because they generally haven’t been good investments. These may be companies with failing business operations, excess debt or even allegations of fraud. And while it may seem more likely for a company’s share price to increase because it’s only $1, keep in mind that share prices are relative to the company’s value or growth.

How penny stocks are traded

Another thing that makes penny stocks different from other stock investments: they don’t generally trade on stock exchanges like the New York Stock Exchange (NYSE), Nasdaq, etc. Those large, central exchanges have minimum requirements for listing a stock, which penny stocks don’t tend to meet.

Instead, penny stocks often trade over-the-counter (OTC) through online marketplaces where dealers can price and quote securities not listed on a major exchange. Penny stocks are sometimes referred to as OTC stocks or OTC securities.

While there are undoubtedly some skilled traders or professional money managers using penny stock trading as an active investment strategy, the odds are not on the side of the average investor. In 2016, an analyst from the Securities Exchange Commission (SEC) looked at 1.8 million trades made by more than 200,000 individual investors and found that the typical OTC or penny stock investment return is severely negative. It showed that investors were twice as likely to lose money investing in penny stocks as they were to gain and that outcomes were worse when the penny stock was part of a promotion, or it was a less-regulated offering.

Explaining OTC Markets

Two of the most well-known over-the-counter markets are the OTC Bulletin Board and OTC Link Alternative Trading System (ATS). From the investor’s perspective, these trading platforms may not seem different from the NYSE or NASDAQ, but they aren’t the same large, closely watched markets. It’s important to understand which markets are regulated and how.

The OTC Bulletin Board, run by the Financial Industry Regulatory Authority (FINRA), is an online quoting platform for thousands of eligible OTC securities. Companies must meet specific requirements to be included, such as maintaining updated financial reports with the SEC and a getting a broker-dealer sponsorship.

The OTC Link is part of the OTC Markets Group, which is an extensive network of dealers providing online quotes for a broad array of exchange-listed and OTC equities, foreign equities and corporate debt. It does this within three marketplaces, each requiring different levels of filings and information from the companies trading on them.

  • QTCQB securities are filed with the SEC or a U.S. bank, thrift or insurance regulator. In other words, they are up-to-date in meeting specific requirements.
  • QTCQX securities are either filed with the SEC, U.S. bank, thrift or insurance regulator, or meet alternative requirements, including audited financial statements and a third-party bank or investment advisor to help them stay on top of financials.
  • OTC Pink (Pink Open Market) securities are everything else, which may include distressed companies, shell companies, foreign companies uninterested in filing domestically, etc. This is a market for companies that don’t want to file with the SEC.

OTC Link is a member of FINRA and registered with the SEC as a broker-dealer, as well as an alternative trading system.

Buying penny stocks

You can purchase penny stocks through brokers as you would any other type of security, through full-service brokers such as Fidelity and Charles Schwab, as well as online brokers E-Trade, Ally Investments and TD Ameritrade. All have either multiple or extensive trading platforms, reasonably low fees, and provide access to research and education materials.

If you are interested in working with an independent broker, FINRA’s BrokerCheck tool can help you find out if the firm or individual broker is registered.

What to look for in a penny stock

If you are going to purchase penny stocks, research counts; it is arguably more important in the penny stock market, where the companies are small and unfamiliar.

Here are a few key things to look for.

Access to company information

Some companies provide more public information than others, try to favor those that offer the most transparent access to information. Do your research to learn as much as you can about earnings, management, products and services, operations and competition. Analyst research reports are ideal, and a sign of a company worth following. Ask your broker or use their online tools for tracking down any additional information that is available.

You can also search the EDGAR company lookup tool on the SEC website to find the latest company financials. If a company hasn’t registered with the SEC, it might start by filing with state securities regulators in its headquartered state. You can check for those through the company’s Secretary of State or state securities regulator. Any red flags about the company — regulatory actions, past problems with investors, etc. — are likely to surface during this research.

Active trading volume

Trading volume is the number of shares of stock that trade each day. A stock with a higher average daily trading volume and an increasing price may indicate a lot of interest, and the lower the trading volume, the more difficult the stock may be to sell. Low trading volume is also a sign of low liquidity, meaning the stock price may see large swings when investors buy and sell the stock.

Warning signs

The OTC Markets will label certain stocks with a skull and crossbones and as “Caveat Emptor,” or buyer beware. This is to warn investors of shares that may be under suspicion of fraud, a public interest concern or another reason to exercise additional care.

What to avoid when trading penny stocks

You’ve heard of “big fish” stories? Get ready for “big penny” stories, sometimes in newsletters or promotions, sometimes even coming from company leadership.

Beware of claims touting unbelievable returns without risk, and watch out for some of these red flags that the SEC cautions investors about:

Promotions

When a penny stock investment is promoted heavily through spam email, online newsletters, press releases or cold calling by desperate brokers, it’s generally a sign of a “pump and dump.” That means someone is trying to push the price higher so they can sell shares short and make a lot of money. Even when promotions are not an act of fraud, wise investors should investigate before investing in stocks with wild claims of growth.

Insider ownership

If an individual or group within the company owns a majority of the shares, the stock is more at risk for manipulation. According to the SEC, company insiders holding large amounts of the capital can also be a sign of potential “pump and dump” schemes.

Suspensions

The SEC can temporarily suspend trading on the stocks of companies it believes are misleading investors. A stock with a track record of suspensions may be a bad sign.

Big assets, little revenue

Impressive asset numbers may be misleading if the company is including among its assets real estate or other factors not related to the business. Focus on the company’s revenue instead, which will be an important measure of growth.

Funky footnotes

According to the SEC, microcap fraud often involves strange loans or transactions involving people connected to the company. The footnotes are a great place to look for this type of activity. Additionally, if you’re looking through company financials, check to make sure the auditor has signed off. If not, it’s a red flag.

Bottom Line

Penny stocks can be a bit of a roller-coaster ride. The markets are rife with scams, the odds stacked against the average investor — and even if you do get lucky with penny stocks, the investments are generally too risky to build a stable, long-term portfolio.

If you’re still interested in investing in penny stocks, it may be best to get off to a small start and remember not to invest more than you can afford to lose. With a balanced portfolio earning average market returns, a small allocation of penny stocks shouldn’t break the bank.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Phipps
Melissa Phipps |

Melissa Phipps is a writer at MagnifyMoney. You can email Melissa here

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Investing

Personal Capital Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Personal Capital is a hybrid of a traditional brokerage and a robo-advisor. It offers portfolio design via algorithm—like many competing robo-advisors—and also lets you buy individual stocks, design portfolios and access human financial advisors. In fact, the company dislikes the term robo-advisor, and prefers to call itself a “digital wealth manager.”

Be advised that the minimum balance requirement is $100,000, meaning that Personal Capital is only a viable choice for investors who have already accumulated a sizable nest egg. It’s not a product for beginners, although it is a great choice for people who have sufficient funds.

Founded in 2009 by a former CEO of PayPal and Intuit, the company claims that it offers “full financial planning at no additional cost.” It charges an asset management fee of 0.89%, which is on the low side for personal financial planning, but it’s on the high side for robo-advisors, most of whom charge less than 0.50% per year. The fee drops as low as 0.49% for high-balance investors, but need a balance of more than $10 million to qualify for the lower rate.

Personal Capital
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The Bottom Line: Personal Capital offers automated and active investing features, as well as in-depth financial planning advice, all of which should appeal to users who can swing the minimum balance requirement of $100,000.

  • Access to financial advisors at all asset levels
  • Individual stock investing and customized portfolios
  • Useful financial dashboard tools

Who should consider Personal Capital

Personal Capital is best suited to high-balance investors looking for a less expensive and more hands-off strategy than working with a full-service investment firm. The initial phone consultation with an advisor can help users evaluate their financial position and what they need to do to hit their goals.

The minimum balance required to begin investing with Personal Capital is $100,000, and you need at least $200,000 in investable assets to unlock the ability to customize a portfolio with individual stocks. This level also earns you recommendations and support from two dedicated financial advisors.

Note that anyone can take advantage of the site’s free account aggregation and monitoring tools, which let you test retirement and savings assumptions and make sure your plan will help you achieve your goals.

If you are a socially conscious investor, Personal Capital offers an investment strategy that restricts certain businesses or industries based on their ESG rankings.

Personal Capital fees and features

Amount minimum to open account
  • $100,000
Management fees
  • 0.89% for accounts of $100k - $1M
  • 0.79% for accounts of $1M - $3M
  • 0.69% for accounts between $3M and $5M; lower fees for accounts over $5M
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • SEP IRA
  • Trust
Portfolio
  • Personal Capital offers 6 high-level asset classes.
Automatic rebalancing
Tax loss harvesting
Tax loss harvesting detailPersonal Capital's tax optimization process focuses on three key areas: tax allocation, tax loss harvesting and tax efficiency.
Offers fractional shares
Ease of use
Mobile appiOS, Android
Customer supportPhone, 24/7 live support, Email, 5 branch locations

Fee tiers and wealth management options

Personal Capital charges variable annual management fees depending on your total account balance:

  • Up to $1 million: 0.89%
  • First $3 million: 0.79%
  • Next $2 million: 0.69%
  • Next $5 million: 0.59%
  • Over $10 million: 0.49%

It offers three levels of wealth management services, depending on your total account balance:

  • Investment Service: Balances of $100,000 to $200,000 get access to a team of financial advisors and an actively managed portfolio of ETFs.
  • Wealth Management: Account balances of $200,000 to $1 million unlock access to two dedicated financial advisors, specialists in real estate and stock options and a customized portfolio with regular reviews, as well as enhanced tax optimization.
  • Private Client: When your account balance includes more than $1 million, you get two dedicated financial advisors; priority access to specialists and the firm’s investment committee; in-depth support for retirement, wealth and estate planning; and private equity investment options.

If your balance is below $200,000, you can invest in ETFs but you cannot customize your portfolio. Personal Capital will recommend a target allocation that’s based on the profile questions you answered during the sign-up process, plus other financial information you’ve provided. While you can choose from among different target allocations, you won’t be able to create a custom allocation.

That said, Personal Capital does offer an ESG-optimized portfolio for users interested in socially responsible investing. In addition to limiting exposure to fossil fuels, the company’s ESG basket filters out companies with material exposure to things like adult entertainment, gambling, tobacco, military contracting and guns.

Tax optimization is available at all portfolio levels. Personal Capital “tax optimizes” by making sure people put the right investments in the right accounts (i.e. taxable accounts versus retirement accounts) and by tax loss harvesting, which means realizing losses to offset gains. All levels of service also offer portfolio rebalancing. Accounts are reviewed daily for tax-efficient rebalancing opportunities.

All accounts above $200,000 can invest in individual stocks and customize portfolios. Certain accounts with assets over $1 million may be able to invest in individual bonds. With assets over $5 million invested with Personal Capital, users may gain access to private equity investments.

Personal Capital Cash

Personal Capital recently launched a cash management account, Personal Capital Cash. The account earns 1.55% APY for people without a Personal Capital advisory account, and 1.60% APY for customers with an advisory account. Personal Capital Cash pays slightly less than other similar high-yield savings accounts, but there’s also no minimum balance and there are no fees associated with it.

Personal Capital partners with UMB Bank, which holds Personal Capital Cash deposits in a network of different banks. The account offers up to $1,500,000 in FDIC insurance coverage, well above the standard limit of $250,000 per deposit account. That’s because Personal Capital works with UMB bank to distribute your money among accounts at different partner banks. When one account reaches the FDIC limit, another account with a different bank will be opened for you. This is done up to six times, providing a FDIC deposit insurance total of up to $1,500,000.

Financial dashboard tools

One of Personal Capital’s strengths is that it offers financial tools to help you understand and track your entire financial life. These tools are free and available to anyone who downloads the app. You may register and link all your financial accounts to Personal Capital, such as bank accounts, brokerage accounts, loans and credit cards. Once they are linked to the app, your personalized financial dashboard gives you a view of your:

  • Net worth: You can see your current net worth for the past 30 days, including the change in this measure over the last 30 days and today’s change.
  • Cash flow: The dashboard offers a graphic representation of your cash inflows and outflows for the past 30 days, arranged by category (paychecks and deposits on the inflow side, mortgage and other expenses on the outflow side). Click on any category to dive into the detailed transactions there, or click the whole category to compare this month’s spending to last month’s spending and see transactions by category.
  • Portfolio balances: You’ll see the value of your investment accounts for the past 30 days, along with change values over the past month and today’s value.
  • Portfolio allocation: This is a top-down view of your investments across all asset classes—although only if your assets are invested with Personal Capital. If you’ve linked outside investment accounts, their value will be included in your portfolio balance, but the site doesn’t include those assets among your allocation.
  • Gainers and losers: If you’ve got individual stocks in your portfolio — which would make you a higher-level investor—you’ll see how they’re performing versus the S&P 500.
  • Retirement savings: The dashboard recommends how much you should be saving toward retirement each year and how much you’ve saved to date this year. It can also predict whether your retirement portfolio will support your retirement spending.
  • Emergency fund: You’ll see how much cash you’ve got stashed away. If the dashboard feels you could be investing part of that for greater return, it will recommend moving some money around.

Strengths of Personal Capital

  • Access to financial advisors. At all levels of investing, users have access to financial planners who can answer questions and offer advice on saving and investing. In fact, the company requires you to schedule a (free) chat with a financial advisor in order to set up your financial dashboard.
  • Big picture planning. Because Personal Capital advisors will professionally review your whole financial picture, you’ll receive recommendations based not only on your answers to questions about risk and goals, or what you have invested at Personal Capital, but also what you have in your 401(k) and other retirement accounts. They’ll also offer advice on college savings plans and estate planning strategies, although estate planning is only available with investable assets of $1 million or more.
  • Free financial tools. Even if you don’t invest with Personal Capital, you can still access a wealth of free financial tools that will analyze your net worth, cash flow, retirement and savings situation and make recommendations. You also get one free phone call with a Personal Capital advisor.

Drawbacks of Personal Capital

  • High minimum balance. To open an account with Personal Capital, you’ll need at least $100,000 in invested assets, which is the highest of most robo-advisors on the market. Compare this to Vanguard Personal Advisor Services, which requires a $50,000 account minimum, and to Charles Schwab Intelligent Portfolios Premium, which requires a $25,000 buy-in. And some robo-advisors, such as Wealthfront, require as little as $500.
  • High management fees. Personal Capital charges an asset management fee of 0.89% for portfolios between $100,000 and $1 million, which is also among the highest fees charged by robo-advisors. By comparison, Vanguard charges just 0.30% and Wealthfront charges 0.25%. When you top $1 million in assets, the management fee goes down, but just to 0.79% for $1 million to $3 million, and 0.69% for $3 million to $5 million, and so on. Once you get over $10 million, you’ll pay 0.49% in asset management fees, which is still higher than most competitors.
  • Non-customizable portfolios for beginners. Until you reach an asset level of $200,000 and up, you can’t alter your investment mix, and you’re limited to ETF investing only.

Is Personal Capital safe?

Most fintech users are comfortable linking their financial accounts to an investment platform, and Personal Capital’s safeguards are in line with standards. They partner with financial tech industry veteran Yodlee to facilitate account aggregation, and user bank and brokerage credentials are only stored at Yodlee.

The site uses two-factor authentication when you sign in and encrypts your credentials and personal data with military-grade encryption algorithms. The company protects its data centers with various systems designed to prevent hacking and monitor for suspicious activity, and the data centers follow stringent financial and international security standards protocol.

Personal Capital also helps you keep an eye on things by sending an (optional) daily email with every transaction that occurred during the previous 24 hours in all your linked accounts, including your bank, broker and credit cards. Keep an eye on the activity and make sure you recognize all the transactions.

As far as insurance, all investment securities are held by an SIPC member broker custodian, protecting your securities up to $500,000, and Personal Capital Cash is FDIC insured up to $1,500,000.

Final thoughts on Personal Capital

Personal Capital is worth considering if you have $100,000 or more to invest on this platform. Though lower-level users can’t customize their portfolios, asset allocation models seem to outperform comparative benchmarks much of the time.

Investors should carefully consider whether they’d like more control over their investments or whether they’re willing to pay higher-than-average fees for the services Personal Capital offers. In the meantime, the financial planning tools and initial consultation will give the average investor some insight into how they’re doing and where they’d like to go.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford
Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate here

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Investing

Zacks Trade Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Zacks Trade is an online broker oriented to self-directed investors who want to trade U.S. and foreign stocks, bonds and funds. The platform provides robust trading tools and a bundle of no-fee (and paid) research. However, unlike many competing brokers, you still pay per-trade commission fees.

The main selling points of Zacks Trade are that it offers sophisticated, feature-rich trading software; broker-assisted trades for no additional fee; and easy trading of foreign assets. Clients in more than 200 countries can trade on this platform, and traders can buy and sell assets on more than 90 international exchanges. Zacks Trade allows investors to open individual or joint taxable accounts, as well as retirement accounts.

The downside to Zacks Trade is the $3-per-trade minimum commission fee ($1 during the first year). If you want expert help developing a portfolio or no-fee trades, Zacks Trade isn’t the best fit for you.

Zacks Trade
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The Bottom Line: Zacks Trade provides access to dozens of international exchanges and fee-free broker-assisted trades—all on a feature-rich platform—but it still charges trading fees when many competitors don’t.

  • Trade fees are per share and cost clients one penny per share for stocks and ETFs, with a $3 minimum fee.
  • There’s a $2,500 minimum balance requirement, which earns you a $1-per-trade promotion, but there are no inactivity fees, and margin rates started at just 5.06% as of November 2019.
  • Investors get a choice of three trading platforms and can trade on the web and on mobile devices.

Who should consider Zacks Trade ?

If you want a choice of full-featured trading platforms, you’re interested in trading on international exchanges or you prefer broker-assisted trades, Zacks Trade might be the right fit.

Zacks Trade’s per-share pricing is low, but it isn’t $0, as it is with competitors. Plus, after the first promotional year, trades go back up to a $3 minimum from the $1 introductory fee. That said, the margin rates are lower than are competitors’ rates, and foreign trading is easy and relatively affordable. Commissions when trading foreign stocks are steeper at Charles Schwab and Fidelity.

Zacks Trade clients also benefit from a massive amount of market insight: Clients have access to more than 20 subscription services for free. But if you’re hands off and won’t use the research and tools available—or you seek more guidance, as with a robo-advisor, or zero-commission stock trading—Zacks Trade probably isn’t what you want.

Zacks Trade fees and features

Current promotions

New clients can trade stocks, options, and ETFs for as low as $1 per order for their first year after depositing at least $2,500 within 60 days of account opening.

Stock trading fees
  • $0.01 per share ($3 minimum) for stocks over $1 per share
  • 1% of trade value ($3 minimum) for stocks under $1 per share
Amount minimum to open account
  • $2,500
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Trust
Ease of use
Mobile appiOS, Android
Customer supportPhone, Chat, Email
Research resources
  • A variety of free and paid research subscriptions

Zacks Trade commissions and fees

Most of Zacks Trade’s fees are related to trades. Zacks Trade has no inactivity fee, no fee for automated customer account transfer and no fee for order cancellations. Clients also get one free withdrawal per month. (All withdrawals after the first one cost $1 for an ACH, $4 for a check and $10 for a wire.)

The fees for trading are low—a penny per share for stocks and exchange traded funds (ETFs) worth $1 or more per share and 1% of trade value for those worth less than a dollar, with a $3 minimum. Also, Zacks Trade will allow new clients to trade for $1 for the first year, with a minimum balance of $2,500. These aren’t the lowest fees, however. Charles Schwab and E*TRADE have $0 trades.

Zacks Trade also has steep charges for mutual fund trades: $12.55 per trade for those valued at $1 or more per share. You can trade certain mutual funds for $0 at E*TRADE and Fidelity.

It’s notable that Zacks Trade provides broker-assisted trades for no extra charge, including for foreign stocks. Compare that with E*TRADE, which charges an additional $25 for broker-assisted trades, as does Charles Schwab. If you believe that you’ll require a broker’s assistance on a regular basis, Zacks Trade would be a good place for you.

Margin trading also is a good deal at Zacks Trade, with margin rates starting at 5.06% as of November 2019. The site even has a Margin Rate calculator, so clients can see how much they’ll save compared with other firms. Charles Schwab charges 9.325% for debit balances under $25,000, although Interactive Brokers charges just 3.06% for loans under $25,000. (Nevertheless, Interactive Brokers also charges a $10 monthly fee if you don’t pay at least $10 in commissions each month or if your account falls under $100,000. So you’ll pay at least $10 a month there in fees regardless.)

Real-time quotes cost money. Regular clients of Zacks Trade see data on their platforms on a 15-minute delay. If you want live, streaming data, you’ll have to pay at least $9.95 per month plus $3 per month to cover all exchange fees for Zacks Real Time Quotes Gold. Schwab provides real-time data for free.

Foreign Stock Commissions:

  • Broker-assisted trades: no extra charge
  • Canada ($1 or more CAD per share): $0.02 CAD per share ($4.50 CAD minimum)
  • Canada (less than $1 CAD per share): 1% of trade value CAD ($4.50 CAD minimum)
  • Mexico: 0.3% of trade value MXN (180 MXN minimum)
  • Austria, Belgium, France, Germany, Italy, Netherlands, Portugal and Spain: 0.3% of trade value EUR (12 EUR minimum)
  • Norway: 0.1% of trade value NOK (150 NOK minimum)
  • Sweden: 1% of trade value SEK (100 SEK minimum)
  • United Kingdom: 0.3% of trade value GPB (12 GPB minimum)
  • Currency conversion from USD: $2 to $2.50 estimate

Commissions for Asian and Australian transactions are here.

Trading platforms and tools

At Zacks Trade, clients can trade stocks (including penny stocks and OTC stocks), options, bonds, ETFs and mutual funds. The platform doesn’t support futures, commodities or Forex for purposes besides currency exchange.

Zacks Trade has three trading platforms, plus their mobile platform:

  • Zacks Trade Pro: This is the company’s flagship trading platform and meant for active, high-volume traders. The layout is customizable, and clients can trade stocks, options, bonds and funds in 19 countries. Charting and technical analysis is available, and useful tools include SpreadTrader to handle complex option orders or Basket Trader to import baskets of stock orders and execute them quickly. This platform must be downloaded and installed on your computer.
  • Client Portal: This is a console meant for placing and managing simple trades, reviewing your statements and adjusting account settings.
  • Zacks Trader: This operates like a light version of Zacks Trade Pro, providing a simpler interface along with trading features and tools. If you work behind a firewall, you still can access this platform, which provides order execution, market data, charts and customization.
  • Handy Trader: This mobile app, available for iOS and Android, allows users to trade stocks, options, bonds and mutual funds from their devices. You can route orders using the company’s SmartRouting technology, and you can access trade reports, and portfolio and account information.

When routing orders on any Zacks Trade platform, you can use either SmartRouting, which searches for the best price and dynamically routes and reroutes all or part of your order for maximum benefit, or you can choose the exchange you want your order to be sent to.

Trading options is easiest on Zacks Trade Pro, where you can click on the bid, or ask of an option chain. You can use Zacks Trade’s Strategy Builder feature to create spread orders or option orders that have multiple legs. Options tools, including Options Trader, Rollover Options and SpreadTrader, help you analyze and manage options orders.

Research is one area in which Zacks Trade shines. The company gives users free access to more than 20 sources, including 24/7 Wall Street, StreetInsider.com and The Motley Fool. For an additional cost, dozens of other research subscription products are available, including international ones, such as the Euronext All Indices Real-Time Data (EUR $17 per month).

Strengths of Zacks Trade

  • Broker-assisted trades: One of the things that sets Zacks Trade apart is that it provides broker-assisted trades at no additional cost. If you have to have help with your trading, such as when you don’t have access to the internet or you’re trying to execute a specialty trade, this should be useful for you.
  • Powerful research tools. You have access to more than 20 no-fee research providers, and other sources are available for an additional cost. For example, $1 per month gets you the Dow Jones Global Indices, and $5.50 per month gets you the Cboe BZX Depth of Book. A variety of international research publications are available.
  • Sophisticated, feature-rich trading platforms: Zacks Trade provides a choice of trading platforms for the desktop, web or mobile. You can choose a simpler interface or one that has lots of widgets and advanced features for more-active investors. You can trade from your tablet or phone, fully customize your layout and create multiple watchlists for different types of securities. You also can set up real-time alerts and place, modify or cancel orders right from your orders screen.

Drawbacks of Zacks Trade

  • Charges trading commissions for stocks and ETFs. Although Zacks Trade commissions are low at just a penny per share, some competitors have moved to a $0-per-trade model for stocks and ETFs. Mutual fund trades still cost $12.55 per trade, while competitors have lots of no-fee mutual fund options.
  • Zacks Trade requires a $2,500 account minimum. This minimum is well above what other brokers require, and if you fund an account for less, you’ll pay at least $3 for each trade. TradeStation requires just $500 to fund an account, and Fidelity has no account minimum for its brokerage accounts.
  • No free real-time data. Clients must pay at least $9.95 per month for real-time stock data. (A $19.95-per-month option also is available.) Fidelity and Schwab provide this information for free.

Is Zacks Trade safe?

Zacks Trade requires clients to log in using two-factor authentication—the username and password on the account plus a unique code that’s generated to a free device that clients receive or to their Handy Trader app. The site also uses industry-standard 128-bit SSL encryption and has a dedicated security team monitoring for suspicious activity. Zacks Trade Pro customers also can restrict account access to specific IP addresses.

In terms of insurance, Zacks Trade is a division of LBMZ Securities, which is a member of the Securities Investment Protection Corporation (SIPC) and carries insurance on investments up to $500,000. Under Zacks Trade’s clearing firm’s excess SIPC policy, investments are insured up to an additional $30 million (with a cash sublimit of $900,000).

Final thoughts about Zacks Trade

Zacks Trade is something to consider for investors who have at least $2,500, want to trade foreign stocks and believe that they might require access to broker-assisted trades. The available research and choice of trading platforms give you flexibility and a wide pool of investments to choose from. Zacks Trade’s margin rates also are extremely competitive.

However, Zacks Trade doesn’t provide any guidance (this isn’t a robo-advisor), and you can execute nonbroker-assisted trades for $0 at other companies. Also, if you want to invest in mutual funds, other companies allow investments in no-load funds for much less.

Rates & Fees mentioned in this article are accurate as of the date of publishing.

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Kate Ashford
Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate here