How to Choose the Right Brokerage Firm for You
Updated
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If you want to invest money, you need to open a brokerage account. But with so many different brokers out there -- from robo-advisors to investing platforms with in-depth research for hands-on investors -- how do you pick the right one?
While there's no shortage of broker options out there, picking the right broker isn't as tricky as it looks. Truthfully, it all comes down to knowing your investment goals, how involved you want to be in your investments, and how much you're willing to pay (if anything at all) for your brokerage account.
To ensure you make the right decision and end up happy with your broker over the long run, let's take a look at how you can choose the best brokerage firm for you.
Before you get your hands dirty sifting through the best brokerage firms, it's best to step back and ask yourself: What kind of account am I looking to open?
It's not a trick question. Often, you know in your head the type of account you're looking for, even if you're not sure what the name is. For instance, if you plan to use this account for retirement savings, then you're likely looking for a tax-advantaged account like an IRA. On the other hand, if you want to grow money for near-term purposes, then you're likely looking for a standard taxable brokerage account.
Here are some of the most popular accounts you can open at brokerage firms:
Not all brokerage firms offer all types of accounts, so consider what your plans are to make sure you find a broker that will accommodate your financial needs.
$0 for stocks,¹ $0 for options contracts⁴
$0
This brokerage is a clear standout for its well-rated mobile app and 1% IRA match.⁸ It also has unique investment offerings like IPOs, options,⁴ and fractional shares.³
On SoFi Invest's Secure Website.
$0 for stocks, ETFs, and options
$0
Robinhood is a simple, low-cost brokerage with a few rare perks. It matches retirement deposits like an employer, the interface is gorgeous, and it's extremely affordable. No matter what or how you trade, Robinhood fees tend to match or beat the competition. It's worth a look.
On Robinhood's Secure Website.
Commission-free; other fees apply
$0
E*TRADE offers low fees and tons of account types. If you need it, chances are, E*TRADE has it. You can access advanced features through its popular Power E*TRADE platform. Open an E*TRADE account to trade fee-free mutual funds and do all your investing in one place.
On E*TRADE's Secure Website.
Different brokerage firms have different strengths, and your investing priorities will help you determine which strengths are better for you.
Some brokers, for instance, are better for people who want to trade now but don't have much money to start with, while others cater to investors with a higher net worth. Some brokers focus on full-featured desktop trading platforms for experienced traders, while others are designed for mobile users who want quick and simple trades. Some are no-frills and charge low or no fees, while others may cost more but have advanced tools or provide better customer support.
There's also a big difference in the types of assets different brokerage firms focus on. For example, some have a huge selection of inexpensive exchange-traded funds (ETFs) and no-load mutual funds, while others focus on cryptocurrency trading -- which many mainstream brokers still don't offer. You'll want to think about what types of assets you're hoping to trade and look for a brokerage firm that will allow access to all of them.
Think about the type of experience you want to have and what's most important to you. When you approach brokerage firms with your priorities firmly in mind, it's easier to find a good match.
Since different brokerage firms cater to investors of different levels and priorities, their platforms and accounts will likewise be designed with specific investors in mind.
For instance, if you're a beginner investor, then you may have different needs when it comes to customer education and trading support. You may want access to webinars and educational articles that teach the basics of investing, or you may be interested in screeners that make it really easy to pick out different assets to buy.
Likewise, if you're an advanced investor then you're likely more interested in charting features, expert analysis, and in-depth company research.
Think about where you're starting out -- and how much time you plan to spend devoting yourself to researching investments -- so you can find a brokerage that offers the tools and materials you're looking for.
Many of the best brokerage firms today offer commission-free trades on stocks and ETFs. However, it's still important to look at all of the broker's fees first, as it may charge fees for other services, such as transferring money from one brokerage account to another or closing your account altogether.
While looking at costs, convenience is another factor to consider. For example, if you'd rather sit down and talk to an expert face to face, check to see if the brokerage firm has a network of brick-and-mortar offices -- and, if so, make sure there's one near you. Banks may also offer brokerage accounts to their clients, which could be convenient if you'd like to have your investments in the same place as your savings. In some cases, it might be worthwhile to pay for a full-service broker if it means getting the service you want.
Finally, you want to make sure you are comfortable navigating the brokerage firm's trading platform to buy and sell assets.
Most brokers will let you download their investment app or try out their desktop software without transferring money into the account. Consider spending some time playing with the platforms each broker you're interested in offers before you make your final choice.
Before making a final decision, you may need to look around, evaluate the pros and cons of different firms, and compare your favorites. It's okay to spend some time on this, especially since some brokers charge a fee when you cancel an account.
By following these five steps, you should end up with a brokerage firm that makes investing easy and gives you access to the type of account and assets you're looking for.
Uncover the names of the select brokers that landed a spot on Motley Fool Money's shortlist for the best online stock brokers. Our top picks pack in valuable perks, including some that offer $0 commissions and big bonuses.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Motley Fool Money is 100% owned and operated by The Motley Fool. Our knowledgeable team of personal finance editors and analysts are employed by The Motley Fool and held to the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands. Terms may apply to offers listed on this page.
E*TRADE services are available just to U.S. residents.
Robinhood disclosure
All investments involve risk and loss of principal is possible.
Securities are offered through Robinhood Financial LLC, member FINRA/SIPC. Cryptocurrency services are offered through an account with Robinhood Crypto, LLC (NMLS ID 1702840). Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Cryptocurrency held through Robinhood Crypto is not FDIC insured or SIPC protected. For more information see the Robinhood Crypto Risk Disclosure.
Trades of stocks, ETFs and options are commission-free at Robinhood Financial LLC. Other fees may apply. Please see Robinhood Financial’s Fee Schedule to learn more.
Fractional shares are illiquid outside of Robinhood and are not transferable. Not all securities available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see the Fractional Shares section of our Customer Agreement.
Robinhood Gold is an account offering premium services available for a $5 monthly fee. Not all investors will be eligible to trade on Margin. Margin investing involves the risk of greater investment losses. Additional interest charges may apply depending on the amount of margin used. Bigger Instant Deposits are only available if your Instant Deposits status is in good standing.
Investing is risky. Bonus offers subject to terms and conditions, visit robinhood.com/hoodweek for more information. Margin is not suitable for all investors. Robinhood Gold is offered through Robinhood Gold LLC and is a subscription offering services for a fee. Brokerage services offered through Robinhood Financial LLC (member SIPC), a registered broker dealer.
SoFi Disclosure:
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
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