Jamie Heller, editor-at-large, and Mark Ingebretsen, special commentator to TheStreet.com, chatted on TSC, Tuesday, Feb. 13 at 5 p.m. EST.

TSC_Jamie: Hello, thanks to all for joining us in this chat about online brokers. There's lots to cover.

TSC_Mark: Hello, my name's Mark Ingebretsen. My Tools of the Trade column on TSC is geared toward acquainting active traders with tools on the Web they can use, including brokers. Glad to be here!

chat-guest536: I'm interested in trading online but I'm concerned about how frequently I have to be on top of my account, how often does one have to be to be an active online trader?

TSC_Jamie: Trading online or offline does not determine how often you should monitor your account. It's just a different way to place your trades; if you are a buy-and-hold investor you should do significant research beforehand and then can keep up with less rigor than say, if you're a daytrader. Either way, however, if you are a "do it yourselfer" or even if you're working with a broker, you should at least follow news and major earnings releases on your companies to make sure the "story" hasn't changed in any significant way.

TSC_Mark: Jamie hit on the crux of what online trading's all about. It's not about how actively you trade; it's about making investment decisions on your own. My recommendation would be to bone up on the fundamentals of investing and then start shopping for a broker. You'll avoid mistakes and save plenty in the long run.

TSC_Jamie: Pardon the promotion, but TheStreet.com just came out with a book about investing, and it's a good way to bone up on the fundamentals before you open an online trading account.

chat-guest360: What are the best brokers & tools for active traders? Are direct access firms better than online brokerage firms?

TSC_Mark: My advice would be to check out two sites, besides TSC that is. The first is finance.yahoo.com and the second is quicken.com. Both are loaded with tools and information about companies. You could spend several months literally at either of these two sites and then go on from there. At that point you can go shopping for a broker. Direct access brokers are mainly for more experienced traders since they let you the customer decide where in the market to send your order. That said, they can be a bit intimidating and even dangerous to those who aren't experienced.

chat-guest523: What are your opinions on Ameritrade?

TSC_Jamie: Ameritrade's biggest selling point is low commissions, $8 market orders, but it has its drawbacks. First, it's an extra $5 for limit and stop orders plus Ameritrade doesn't have some of the features that other brokers offer like "no transaction fee" mutual funds or a streaming quote service or even fancy features like Wall Street research and IPO access. It's making improvements, for example it recently added real-time portfolio updating, but there's room for more.

TSC_Mark: My gripe and maybe it's just me is that their phone number is buried on the site.

TSC_Jamie: Good point!

chat-guest77: Is it better to trade online than to go thru a broker? Why or Why not?

TSC_Jamie: My problem with using a broker is that while brokers supposedly give you "advice" it is often conflicted. Many brokers can only recommend stocks on their firm's approved list and the ones on that list are often companies that the investment banking arm of the firm does business with so it's not all "pure" advice. Plus, live brokers charge more than online brokerages. That said, if you do find a broker whom you trust, the advice he/she provides may be worth the extra money.

TSC_Mark: Brokers also won't give you a lot of attention if you have an account that's -- say under 50k. If that's your position, it's probably better to invest online. Some full service brokers such as Schwab and Fidelity give you plenty of tools to work with that'll help you make investment decisions on your own. Both Schwab and Fidelity are so-called full-service online brokers.

They don't offer counseling to investors. Instead they provide online tools. Fidelity in particular has an investment planning tool that's worth checking out.

chat-guest13: Are you going to be biased because your site is plastered with CSFB ads?

TSC_Jamie: Our site is plastered with ads from many online brokers. If I held my tongue for every advertiser, I'd never write a thing. I've blasted about every major online broker for one reason or another in my column.

chat-guest635: Do on-line brokers always offer all the funds in a family of funds?

TSC_Jamie: Great question. In fact, brokers often advertise that they carry a family when in fact they only carry a sampling of that family's funds. That's why I like brokers that list on their site the exact funds they offer and not just the family; brokers who do this include Fidelity, Schwab and E*Trade; TD Waterhouse doesn't. If you are interested in a specific fund I urge you to call the broker and make sure they offer that fund.

chat-guest456: If there was one thing that you could change about the fund industry to make it better for small investors, is that what it would be -- better disclosure of fees?

TSC_Mark: Certainly changing both would be nice. However, if you're dissatisfied with the way funds are run, you may want to look at the so-called exchange traded funds that can be found on www.nasdaq.com. These function like index funds, but they can be bought and sold all day long just like stocks. The advantage for investors is that you can get out of them at a moment's notice, whereas with a regular mutual fund, you have to wait till the end of the day.

TSC_Jamie: Also, traditional mutual funds can have killer taxes many of us are surely seeing right now; with exchange traded funds you have more control over that.

chat-guest804: Are there any good online brokerages in Europe or Asia? How accessible are they here in the States?

TSC_Mark: If you're looking for a brokerage that gives access to the market in Europe and Asia check out Interactivebrokers.com. They are primarily a futures brokerage and they don't give a lot of handholding, but they seem to have a large and loyal following.

chat-guest566: What kind of effect will Reg FD have [for] online brokerages?

TSC_Jamie: This regulation is about disclosure -- it requires companies to distribute information equally to the marketplace. To a great extent this cuts into the traditional advantage that investment pros have had over the individual. This regulation helps "level the playing field" which makes it that much more feasible to be a successful "do it yourself" investor with an online brokerage.

chat-guest436: Which on-line brokers are best for Tax Season?

TSC_Jamie: Gosh, that's exactly what I'm trying to find out right now; I asked readers that question in a recent column and I've received some terrific responses about which brokers provide helpful tax info at this time of year, which make it easy to download info into a tax program. But I'm still researching the subject. I urge anyone with any thoughts please to email me separately at whatworks@thestreet.com with what you're finding.

TSC_Mark: If you're really interested in managing the tax consequences of your trades check out www.gainskeeper.com. The site records your trades and then gives you a Sched D at the end of the year.

chat-guest356: What is decimalization and will it be of benefit to the average online investor?

TSC_Mark: With decimalization, stock prices will be recorded as decimals like, 0.1345 instead of fractions. This may have the effect of narrowing spreads. However, it sure makes reading prices more difficult. Instead of coping with a fraction, you're looking at a 6 digit number in some case. I suspect it'll take active traders time to get used to the change.

TSC_Jamie: This weekend I did an interview with a former SEC commissioner, Steven Wallman, who was very "bullish" about how good decimalization would be for small investors because of the narrowing of the spreads (pennies as opposed to 1/16 or 1/8).

chat-guest360: What broker has the best real-time quote service and features?

TSC_Mark: Of all the mainstream brokers out there, that is those suited to average or moderately active investors, my guess is that Datek is the best for real-time quote delivery. I've also heard good things about MyTrack and RJT Trading. More and more brokers are offering real-time streaming quotes, among them Scottrade. There are also so called daytrading brokers such as CyBerCorp.com, that in addition to offering streaming quotes, give you many other advanced features suited to daytraders. However, these should only be used by experienced traders/investors.

TSC_Jamie: Also, E*Trade recently added a streaming real-time quote services for its account holders; with streaming real-time quotes you don't have to hit "refresh". On the flip side, Datek announced today that as of the end of March it would no longer be offering streaming real-time quotes for free to non-Datek customers, only to its own customers.

chat-guest647: Can you explain Dollar Cost Averaging to me?

TSC_Mark: With dollar cost averaging, you decide to put a certain amount each month, year, or whatever into a specific stock, fund, or other group of investments. The theory is that when markets are down your dollars will purchase more shares and those shares will increase in price when the market rises. Therefore, your average cost basis is always lower than the current price of the stock. Dollar cost averaging is the chief tool used by financial planners; however, it doesn't always work in prolonged down markets such as what the Nasdaq has experienced recently.

TSC_Jamie: Dollar cost averaging is a popular reason to invest in funds "systematically"; that is, you inject a set amount, say $100, into your funds each month or each quarter. Major fund families offer this option; however, not all brokers do; CSFB Direct, E*Trade and Datek, for example, do not have an automatic investing service for folks who buy their funds through them.

chat-guest13: When will I be able to trade UK stocks through an online broker? How come there is a Waterhouse UK and I can't trade UK stocks with my Waterhouse account?

TSC_Mark: Theoretically you can trade foreign stocks. But you must do it through your broker. That is you must call a broker and request that the stocks be purchased. You have many other ways to purchase foreign stocks, however. American Depository Receipts cover some of the larger foreign companies, and they trade just like U.S. stocks on the major U.S. exchanges. If you want to purchase a foreign stock that doesn't trade on a U.S. exchange, you'd better do a lot of research, since accounting rules differ across the globe, and thinly traded foreign stocks can crash worse than dot-coms.

chat-guest13: What do you guys think of Sharebuilder?

TSC_Jamie: Sharebuilder let's you buy a set dollar amount of stock shares in regular intervals; it can help you establish a position in a stock that you might not be able to build directly on your own. You don't need to have the full amount to buy a share.

chat-guest77: Is online trading safe? Giving out such personal information online bothers me.

TSC_Mark: Brokers realize that their survival depends on offering their clients a safe environment in which to trade. Therefore they go to great lengths to protect your accounts. Correct me if I'm wrong Jamie, but I'm not aware of a single instance where hackers were able to penetrate customer accounts. Certainly if this occurred, there would be a major uproar.

TSC_Jamie: Yes, I've heard complaints about poor executions, mistakes in accounts, bad customer service, poor reliability; but up until now, privacy has not been a front-burner issue

chat-guest13: But how do you sell uneven amounts of shares via Sharebuilder?

TSC_Jamie: As I understand it, Sharebuilder pools the investments of many of its clients together, enabling it to buy and sell stocks in volume that no single individual would be able to do.

TSC_Mark: I believe Sharebuilder sets aside one or two times each day to liquidate accounts. Since they only let you trade a finite list of stocks, they bank the fractions of shares that aren't sold, waiting for someone else to buy them.

chat-guest254: Do people tend to use more than one online brokerage when making trades? If so, what kind of strategy would you suggest in doing that?

TSC_Jamie: Some people do this because brokers offer different types of features. For example, some folks like a Schwab or Fidelity for their mutual funds; these are expensive brokers, but with buy-and-hold funds you're not trading a lot so it doesn't matter; and these brokers have a good selection of funds. Then they might have an account at a place like Ameritrade or Datek or even a direct access broker for stocks they trade more often. Also, some folks have full-service "human" brokers to get a bit of advice but use their online account for their own ideas; why pay several hundred dollars for an idea that you did the research on?

TSC_Mark: Let me give myself [as] an example of how people can pile up brokerage accounts. When I wanted to transfer mutual funds from my high-fee full service brokerage, I chose Morgan Stanley since it allowed me to transfer those funds -- saved me from selling them. I chose another broker for my active trading. I'm looking for yet another broker now that offers better options commissions.

chat-guest536: Why haven't software companies like Microsoft (MSFT:Nasdaq - news - boards) set up their own online brokerages or at least some kind of software to augment the existing ones?

TSC_Mark: I'm guessing that Microsoft has its irons in enough fires right now. They do have an excellent financial Web site, MoneyCentral.com.

TSC_Jamie: Being a broker carries all sorts of regulatory requirements and restrictions. It's a different animal than a financial information site, so it's understandable that places like Microsoft, Quicken and Yahoo (YHOO:Nasdaq - news - boards) have not stepped into that business; rather, they increasingly enabling brokerage customers to download their portfolio information into the portfolios of these portal sites.

chat-guest77: With live brokers you can get a feel for what they can deliver with their sales pitch, how do we know which online broker is good for us since we can't "see" them?

TSC_Jamie: A good online broker will make its products and service very visible and accessible, right from the Web site; they'll augment this with quality customer service by phone; you won't get a sales pitch, but that might be even better because you'll get the straight facts, and you can compare to what you find from online brokers at other sites; it's apples to apples on the facts, not based on a schmooze factor. Also, you can read the columns that Mark and I write comparing the brokers!

chat-guest77: Where can we buy that book out by TheStreet.com on investing? Can I get it at my local bookstore?

TSC_Jamie: It should be available there (it was on The New York Times bestseller list this weekend); you can also get it on Amazon.com [ The Street.Com Guide to Smart Investing in the Internet Era ]. There's also a link from the TSC home page, bottom right hand corner. Also, Mark Ingebretsen just wrote a book about daytrading that's just out now too! [ The Guts and Glory of Day Trading ] He's too shy to plug it himself!

chat-guest13: You guys are great but could you do a conference with Bigfish?

TSC_Jamie: A conference -- we'd love to; we'll pass your suggestion to the powers that be at TSC!

TSC_Mark: Thanks for joining us. Let me conclude with a final point about choosing an online broker. First, decide the kind of investor or trader you want to be and then find a brokerage that fits that mold. There are huge differences in what brokers charge in commissions and in the services they offer. So it certainly pays to shop around. Good luck!