The Best And Worst Places To Invest Online

by Alan Lavine and Gail Liberman

Low cost isn't the only reason to go with an online brokerage firm to invest in mutual funds.

Doug Fabian, a Mutual Funds Interactive® columnist and publisher of Maverick Advisor, Potomac, Md., says there are other important things to consider, such as the number of funds offered, customer service and integrity. 

A recent report by the U.S. General Accounting Office, warned that online brokerage firms should be required to warn investors about the risk of computer failures that could cost them a fortune. The report said that online brokerage firms "neither consistently monitored computer failures and delays, nor disclosed that disruptions could occur."

Fabian's newsletter recommendations are based on market timing decisions. So he gets a lot of feedback from subscribers about what's good and what's not in the world of online brokerage accounts. 

There are 200 online brokerages to pick from. Here are the few that Fabian uses and recommends.

Ameritrade has the most offerings. There are 4,000 funds to pick from. Fabian says 800, or 20 percent of the funds, are top-performing funds, according to Morningstar Mutual Funds, Chicago. 

Fabian says National Discount Brokerage has the best customer service if you need to call about your online trades. Service reps, he says, answer questions inside of a minute. If you e-mail them, they get back to you within a day's time.

DLJ Direct, he says, "wins praise for honesty in advertising and product representation. It offers a wide range of investments, attractive pricing. It also has comprehensive research."

Here are he worst deals, according to Fabian. 

Datek focuses on $9.99 stock trades. It doesn't provide a list of funds to investors. You need to type in the fund's ticker symbol to see if it sells it.

E*Trade, says Fabian, can put you on hold for 20 minutes before you speak of a live person. In addition, the online broker is looking to send wealthy customers to full-service financial advisers to manage their money.

Alan Lavine and Gail Liberman are husband-wife personal finance columnists, journalists and authors. They are the authors of "The Complete Idiot's Guide to Making Money with Mutual Funds," published by Alpha Books. Their columns appear in newspapers throughout New England and the Southeast, as well as online. Their commentary on mutual funds and personal finance is carried by 200 radio stations nationwide every Sunday over Business News Network's Charles DeRose Financial Advisor Show.

More articles by Al and Gail can be found here.