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- Best Online Stock Brokers
Best Online Stock Brokers for September 2020
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Over the long run, the stock market is one of the best places to put your money to work, but you can't just buy a stock through your bank account, or call the company and ask to buy shares -- you'll need a broker.
Fortunately for everyday investors like you and me, the brokerage industry has changed dramatically over the past couple of decades. To buy a stock, you used to have to call an individual known as a stock broker, who placed the order on your behalf. This process was complex -- and expensive.
The industry has evolved -- now most investors buy and sell stocks through online brokers. And competition in the industry has never been higher. With many offering zero-commission trading and research tools once available only to professionals, there are some excellent choices for investors. Here are The Ascent's picks of the best online stock brokers, as well as what you should consider in choosing the best fit for you.
The Ascent's picks for the best online stock brokers:
- Research: TD Ameritrade
- Customer support: Merrill Edge® Self-Directed
- Mobile platform: E*TRADE
- Low fees: Robinhood
- Active traders: TradeStation
- Beginners: Fidelity
- Low fees: Ally Invest
- Retirement investors: Charles Schwab
- Passive investors: Vanguard
Best for research
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
TD Ameritrade stands out as one of our top rated all-around brokerages with outstanding tools and products, in-depth and comprehensive research, and no account minimums.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
Open Account
On TD Ameritrade's Secure Website.
Best for Support
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Merrill Edge sports $0 stock and ETF trades, strong research offerings, and fantastic customer support. It's a solid option for all investors, and especially attractive for Bank of America customers.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
Special Offer
Get up to $600 when you invest in a new Merrill Edge® Self-Directed account
Open Account
On Merrill Edge® Self-Directed's Secure Website.
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
E*TRADE manages to cater to active traders with multiple trading platforms, while also appealing to long-term investors with thousands of mutual funds and ETFs that can be traded for free.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
Open Account
On E*TRADE's Secure Website.
Best for Low Fees
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
With no fees, access to trade fractional shares and cryptocurrency, Robinhood is a no frills but efficient trading platform.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
Special Offer
See Robinhood's website for more details.
Open Account
On Robinhood's Secure Website.
Rating image, 4.0 out of 5 stars.
4.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
A discount broker that's designed for active traders and cost-sensitive investors. If you're willing to do the work to price each of the two commission schedules, you can often spend less than with other platforms.
Read Full ReviewFees:
$0 trades
Account Minimum:
$0
Special Offer
New accounts funded with qualifying assets can earn between $100 and $2,500 in cash rewards.
Open Account
On TradeStation's Secure Website.
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Fidelity combines $0 commissions, top-notch research, and an excellent mobile app, all in a simple platform. With $0 account minimums and zero-expense-ratio index and mutual funds, this is one of the most affordable brokers.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Ally Invest impresses with $0 commissions and $0 account minimums. It's a great choice for those looking for an intuitive platform from which to make cheap trades.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Schwab has aggressively slashed fees on its mutual funds and ETFs, eliminated common account fees, reduced commissions to $0 per trade, and allows investors to buy fractional shares of stock, making it extremely affordable.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
It's not the best option for more active traders, but Vanguard remains a top option for passive investors with excellent zero-commission options for index funds and ETFs.
Read Full ReviewFees:
$0 per trade
Account Minimum:
$0
What is a stock broker?
You can think of stockbrokers as conduits to the stock exchanges. In exchange for a commission on every trade, they send your orders on to stock exchanges and market makers, which actually do the heavy lifting of matching your buy order with someone who wants to sell, and vice versa .
You and I can’t knock down the door to the stock exchanges and make a trade ourselves without a broker. In truth, the stock exchanges as we think of them from their depictions in movies and on TV don’t really exist today. Believe it or not, most trading actually takes place between computers located in dimly lit server rooms in New Jersey, a few miles away from New York City’s financial district.
Full-service vs discount brokers
Just as the process for processing stock trades has changed, the terms we use for the people and businesses who facilitate trades has changed, too. Today, instead of using the term “stockbroker” as an all-encompassing term for any person or firm that deals in stocks, we generally divide companies into two categories: “discount brokers” or “full service brokers,” labels that better describe what they actually do.
Discount brokers
Online brokers are discount brokers. They aren’t in the business of giving you advice or phoning you up with stock picks. Instead, discount brokers simply focus on the very basic service of helping you buy or sell a stock (or other type of investment) when you want to from the convenience of your own home. Because discount brokers forgo many of the frills, they can price their services at rock-bottom prices. Many of the best online discount brokers charge $0 to place a stock trade, a bargain especially considering what traditional brokers charge. In addition, discount brokers also tend to have lower minimum investment requirements, some with no minimums at all, making them accessible for everyone.
Full-service brokers
Firms we label “full-service brokers” are more closely related to the stockbrokers of days gone by. Full-service brokers often employ human brokers who can help you make a trade, find mutual funds to invest in, or make a retirement plan. That said, full-service brokers are costly, since people are inevitably more expensive than computers. A popular full-service broker charges a minimum of $75 to place a stock trade, which can jump as high as $500 or more to buy a large amount of stock. Buying a mutual fund through a full-service broker can potentially set you back thousands of dollars since they often charge fees equal to a portion of the amount you invest. Full-service brokers are more likely to have higher account minimums; some advisors only work with clients who have $1 million in assets or more!
Realistically, the lines between the two types of brokers are slowly starting to converge. Discount brokers now have wealth management services that offer the help of a human advisor at a full-service price. Some full-service brokers also offer a basic level of service at discounted prices. Merrill Edge is the discount brokerage arm of the full-service brokerage Merrill Lynch, for example.
TIP
Determining the right type of broker for you
Ultimately, it comes down to how much service you need and what you’re willing to pay. As self-directed investors who pick our own stocks and funds, we’re biased by own our experience -- we view the cost savings of a discount broker as being far more valuable than the personalized service of a full-service broker for our own portfolios.
Top features of the best online brokers
As with most financial products and services, there's no such thing as the perfect stock broker for everyone, so we're sharing several of our favorites.
The brokers on our list offer different investment platforms, different educational resources, and more. With that in mind, here are some of the features we looked at when deciding which online stock brokers were the best in the business, and why they matter to you:
- Commissions and fees: Basic, online stock trades should be totally free. Period. Investors now pay $0 commissions at most online discount brokers, and some even offer options trading for free. Some charge commissions for mutual fund trades and other services you might need, so it's still important to compare fee structures
- Mutual funds: While most brokers charge a commission for mutual fund trading, it's also important to know that most have a list of hundreds or even thousands of funds that trade with no commissions at all.
- Account minimums: Many of our favorite online stock brokers don't have an account minimum, but a few do. If you're a beginning investor, it's important to verify that you can meet any minimum investment requirements before you consider a broker.
- Trading platform: Some brokers have full-featured and complex trading software available to clients, including robo-advisors. Others take a more simplistic, user-friendly approach. And many have top-notch mobile trading apps that could come in handy if you want to buy and sell stocks from anywhere in the world.
- Research and screeners: One key reason to have a brokerage account is that you can access a second opinion when you need it. Many brokers offer a full suite of third-party research as well as stock and fund screeners so you can find, for example, the annual fees for investing in a fund, or get help sorting through your choices via parameters like price-to-earnings ratio.
How to compare the best online brokers
The best brokerage for you depends on your needs. Here are a few things you might want to consider:
- If you plan to simply buy and hold stocks, you probably don't need a full-featured trading platform.
- If you primarily plan to buy mutual funds, you should look for a broker with an extensive no-transaction-fee mutual fund list.
- If you are a brand new investor and only want to invest a few hundred dollars at first, you'll probably want to look for a broker with no minimum investment requirement.
- If you plan on trading bonds or stock options, or plan on making trades over the phone as opposed to online, be sure to compare what each broker charges for these activities.
How much money do you need to start investing?
While some brokers have minimum account requirements, the amount you need to get started as an investor has more to do with what you invest in than where you open an account.
Here’s how we think about the effective minimums for certain types of investments:
- Mutual funds -- Due to the paperwork and backend work of maintaining accounts, many mutual funds have minimum investments of around $1,000, though there are some notable exceptions to the rule. Fidelity now offers some of its mutual funds with no account minimums, and even some funds with minimums will waive this requirement if the investor agrees to make automatic investments at regular intervals.
- Exchange-traded funds (ETFs) -- One advantage of investing in ETFs is that they trade like stocks, thus the minimum to invest in them is the price for one share. The largest ETF in the world, SPDR S&P 500 ETF Trust, which owns all 500 stocks in the S&P 500 index, trades for about $275 per share. Many other ETFs have lower share prices, trading for $100 or less.
- Stocks -- Just like ETFs, the minimum amount to get started investing in stocks is typically the price of one share. Shares of Ford recently traded for $11 each, while Facebook shares trade for about $200, and shares of Amazon traded for more than $1,700. However, Schwab recently started letting its customers trade fractional shares, making the higher-priced stocks accessible to investors with limited capital.
As we mentioned before, buying individual stocks at most of the online discount brokers will cost you $0 in commissions, which makes it very cost-effective to fill out your portfolio and less expensive to diversify with a number of stocks.
Best online stock brokers compared
FAQs
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Discount brokers are able to offer most of the service and functionality of a full-service broker -- at a much lower price. Investors who like choosing their own stocks and funds can save a fortune by using an online discount broker.
Some features you might find at an online broker include research, no-cost funds, low minimums, 24/7 support, and access to your money.
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It is sometimes possible (but usually extremely complicated) to buy stocks without a broker.
You can do this by enrolling in a dividend reinvestment plan. With this type of plan, dividends paid to you because you own a company’s stock can be automatically reinvested in additional shares. Some companies also offer direct stock purchase plans, which enable you to buy shares directly from the company.
Outside of these situations, it can become very complicated to try to buy stocks without a broker and you will usually need substantial wealth to take advantage of other methods.
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To buy a stock online, all you need to know is the company’s ticker symbol. For example, Disney’s is “DIS,” and Adidas’s is “ADDYY.” If you don’t know the ticker for a given stock, most brokers also allow you to type in the name of the company.
There are two types of trades:
- Market order: An order to buy a stock at whatever price it takes to find sellers. Getting the order filled quickly is more important than the price.
- Limit order: An order to buy or sell a stock only at a specified price. Shares of Disney (DIS) currently trade for about $130 each as of this writing, but you might only want to buy it if it falls to $120 or less. Placing a limit order to buy Disney stock at $120 per share tells your broker to buy the stock only if you can get it for $120 per share.
If you’re stuck on which type of trade is better, consider a limit order. With a limit order, you'll know the price before the order is completed. There’s no way to know the cost per share if you use a market order.
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Some online brokers pay interest on cash invested in their brokerage accounts. The interest brokers pay is often below the interest rate on high yield savings accounts, so you may want to research all your options before keeping much cash in your investment accounts.
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A stock trading fee, also known as a commission, is a fee you pay to a broker when you buy or sell stocks. For example, if a broker charges a $4.95 commission, you’d pay $4.95 when you buy or sell stock. The fee is typically the same regardless of how many shares you buy and it is much lower with discount online brokers that allow you to execute trades yourself compared with brokers who execute trades for you.
Many discount online brokers have now eliminated stock trading fees so you may wish to consider shopping around for a brokerage that charges no commission -- especially if you are an active trader or if you have a small portfolio.
About the Author
Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice for The Ascent and its parent company The Motley Fool, with more than 4,500 published articles and a 2017 SABEW Best in Business award. Matt writes a weekly investment column ("Ask a Fool") that is syndicated in USA Today, and his work has been regularly featured on CNBC, Fox Business, MSN Money, and many other major outlets. He’s a graduate of the University of South Carolina and Nova Southeastern University, and holds a graduate certificate in financial planning from Florida State University.
