If you invest regularly, you have to pay the piper one way or the other.  In other words, the brokerage that you purchase your investments from will dig deep into your cookie jar and deduct fees such as commissions, annual fees, IRA fees, mutual fund fees and custodial fees.

So, should you try to make some money off those same fee-loving companies? With all the financial scrap heap from the sub-prime mortgage debacle, online brokerage stocks are certainly not for the faint of heart. However, some savvy investing and timing might just make your roll of the dice worthwhile.

E*Trade Financial Corp. (ETFC)

Snapshot: E*TRADE Financial Corp. offers financial solutions (of all things) to retail and institutional customers worldwide. In addition to investments and banking products, the company offers mortgage products and other financial necessities such as credit cards.

PRICE: $15.00

Pros:

• If you are looking for deep value, then this could be your lucky day as E*Trade's stock is trading at a mere nine times earnings. This looks remarkably cheap when you consider that back in December the price-to-earnings ratio stood at 16 -- and the P/E had stood at 12.7 or higher since 2002.

• While the stock has dropped a numbing $10 a share from $25 to $15, it has formed a nice technical base that might be worth a go for the investor who isn't afraid of downside risk - which certainly still remains (see below).
  
  
• There are persistent rumors that Ameritrade may come in and scoop up E*Trade in a merger of apparent equals. It's a gamble to play on the rumor, but if the news pays off, you could have a nice windfall - providing that the sell price is significantly higher than your purchase price - and that is a big "if" considering the amount of exposure E*Trade has to the mortgage industry.
  
  

Cons:

• E*Trade is in risk of encountering the mother-of-all-financial-write-downs due to a $28 billion mortgage and $3 billion mortgage asset-backed securities portfolio. If you are wondering why, just take a quick look at the size of the cracks in the housing market's foundation lately.

• E*Trade missed Q2 expectations in June by 7.5% or 3 cents a share shy side of what would have made Wall Street happy.  While analysts have raised Q3 expectations a couple of cents per share lately, any miss on earnings could prove to be a financial sinkhole to investors.

• One analyst forecasts that E*Trade will need to set aside $269 million to cover bad loans - $93 million more than it had to cover last year.  Should the mortgage crisis worsen, this number would almost certainly rise.  No wonder shares have in a sense "defaulted" nearly one-third since the beginning of the year. 

TD AMERITRADE Holding Company (AMTD)

Snapshot: Following a merger with TD Waterhouse, AMERITRADE has morphed into TD AMERITRADE. The company provides brokerage and technology-based financial services to consumers and businesses.

PRICE: $18.15

Pros:

• The stock appears to have formed a very solid base since dropping from a high of $26 a share. This means that anytime the stock has come into the $15-$16 neighborhood, it's been pushed back higher by traders. If you can stomach the risk, it might be worth a look-see if you happen to find AMERITRADE dabbling around in the mid-teens again.
  
  
• It depends on who you talk to for these things (see below), but TD AMERITRADE was rated the No. 1 online brokerage by Barron's. That's a pretty sweet reference for sure.
  
  
• The company hired actor Sam Waterston as its spokesperson. He is popular with men and also very much appeals to women, so TD AMERITRADE's investment in Waterston as a spokesperson may eventually roll out some red carpet treatment for investors that don't mind the hefty sum they likely paid for him to pitch product.

Cons:

• In the "wait just a second" category, many analysts have deemed TD AMERITRADE as in stronger financial footing than rival E*Trade. So, what happens if the worst-kept secret of a potential merger with E*Trade is consummated? I guess the company might just do something wacky like change its name to E*TD AMERITRADE and take on enough debt to cause a game-changing fumble.

• Hard to grow your business with a less than spectacular reputation for customer service and satisfaction. TD AMERITRADE and potential marriage partner E*Trade both ranked near the basement of last year's J.D. Power Customer Satisfaction Survey of the eight largest online brokers.

• Bank of America just cut earnings forecasts for 2007 and 2008, as well as Q3 of this year. Wonder if TD AMERITRADE's promotion of giving new customers 45 days of free trades plus $100 had anything to do with that?

The Charles Schwab Corp. (SCHW)

Snapshot: Schwab provides securities brokerage, banking, and financial services to individual and institutional investors.

PRICE: $18.98

Pros:

• Charles Schwab is the heavyweight champion of the three contenders here, as far as expanding assets. In fact, one analyst estimates that the company is growing organically to the tune of $10 billion a month.

• Check out these numbers: As of July 1, E*Trade and Ameritrade had a combined total client assets on the books of approx $510 billion. Meanwhile, Charles Schwab had a "mere" $1.4 trillion alone. Yes, Charles is in charge!

• Here's a debt-to-equity ratio any mother would love: 0.076 -- or $20.87 billion in cash and $384 million in debt. That is some keen financial management that even a freshman - of all things - can understand, right?

Cons:

• The company may jump into the TD AMERITRADE merger sweepstakes, which could cost it billions of dollars in acquisition costs. The last big merger Schwab did was a disastrous investment banking deal several years ago. A takeover of TD AMERITRADE would put immense pressure on management and perhaps the stock.

• Sales are projected to fall this quarter by 4.2 percent. But don't shed a tear for Charles & Co., as Schwab will still pull in a massive $1.24 billion in sales.

• The company's mortgage services division likely has some exposure to the sub-prime lending debacle. However, Schwab has plenty of cash to cushion any blow the mortgage meltdown may cause.
  

Michael Abramowitz is a freelance writer based in Florida. To avoid a conflict of interest, he does not currently own any of the stocks mentioned above. 

Price quotes are from September 20, 2007.

© 2007, InCharge® Education Foundation, Inc.