Why do investors use discount brokers?

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.

Can I buy stocks without a broker?

It is sometimes possible (but usually extremely complicated) to buy stocks without a broker. You will usually need substantial wealth to take advantage of other methods.

How do I buy stocks online?

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.

Can I earn interest on a brokerage account?

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.

What is a stock trading fee?

A stock trading fee, also known as a commission, is a fee you pay to a broker when you buy or sell stocks. 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.

Best Online Stock Brokers for February 2021

by: Matt Frankel, CFP | Jan. 12, 2021

Best of February 2021

Best Brokers for Beginners

Best Brokers for Options

Best IRA Accounts

Best Roth IRA Accounts

Best Robo-Advisors

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

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 to find one of the best brokerage accounts.

Fortunately for everyday investors, 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 brokerage firms. 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 brokerage accounts, as well as what you should consider in choosing the best stock broker for you.

The Ascent's best online stock brokers for February 2021

Customer support: Merrill Edge® Self-Directed
Mobile platform: E*TRADE
Low fees: Robinhood
Active traders: TradeStation
Research: TD Ameritrade
Beginners: Fidelity
Low fees: Ally Invest
Retirement investors: Charles Schwab
Passive investors: Vanguard

Show The List [+] Hide The List [-]

Ratings Methodology

Merrill Edge® Self-Directed

Open Account

Our Rating:

Rating image, 4.5 out of 5 stars.

4.5 stars

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 Review

Fees:

$0 per trade

Account Minimum:

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.

E*TRADE

Open Account

Our Rating:

Rating image, 4.5 out of 5 stars.

4.5 stars

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 Review

Fees:

$0 per trade

Account Minimum:

Special Offer

Open an E*TRADE account & get $50 to $2,500 (depending on deposit) w/ code: WINTER21

Open Account

On E*TRADE's Secure Website.

Robinhood

Open Account

Our Rating:

Rating image, 4.5 out of 5 stars.

4.5 stars

Bottom Line

With no fees, access to trade fractional shares and cryptocurrency, Robinhood is a no frills but efficient trading platform.

Read Full Review

Fees:

$0 per trade

Account Minimum:

Special Offer

See Robinhood's website for more details.

Open Account

On Robinhood's Secure Website.

TradeStation

Open Account

Our Rating:

Rating image, 4.0 out of 5 stars.

4.0 stars

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 Review

Fees:

$0 trades

Account Minimum:

Fees:

$0 per trade

Account Minimum:

Read Review

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.

TIP

Buying your first stocks: Do it the smart way

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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. The best discount brokerage accounts 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® Self-Directed is the discount brokerage arm of the full-service brokerage Merrill Lynch, for example.

Top features of the best brokerage accounts

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 best brokerage accounts 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 brokerage accounts

The best online 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.

More resources

If you're just getting started with investing, check out these other resources on our website:

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.

Review other stock brokers

Not every stock broker is the right fit for every person. While we think you can't go wrong with our top picks, it may be worth reviewing other stock brokers to find the right fit for you. See below for a list of all-around great picks as well.

Stock brokers

Interactive Brokers review: $0 commissions, great for active traders
SoFi Active Investing review: $0 commissions, great for modern investing experience
Cash App Investing review: $0 commissions, great for stocks and fractional shares
WeBull review: $0 commissions, great for active traders on mobile devices

Robo-advisors

E*TRADE Core Portfolios review: Great for low costs and customer service

SoFi Automated Investing review: Great for no management fee and no account minimum
TD Ameritrade Essential Portfolio review: Great for extensive portfolio selection
Fidelity GO review: Great for financial planning tools and educational resources
Wealthfront review: Great for low costs and cash management
Betterment review: Great for low costs and no account minimum
Charles Schwab Intelligent Portfolios review: Great for account options
Ally Invest Managed Portfolio review: Great for low pricing
Ellevest review: Great for low cost ETFs and career planning
You Invest by J.P. Morgan review: Great for mutual funds
Vanguard Digital Advisor review: Great for low costs
Acorns: Great for rounding up every purchase to invest

Online brokerage comparison of our picks

While we have listed out our best online brokerage picks in this list, it may be worth comparing brokerage firms across several key factors to understand which is the best stock broker for you. Our handy online brokerage comparison below helps to understand essential such as picks that are best for certain types of investors, our ratings, and commissions.

Broker/Advisor	Best For	Commission	Rating	Start Investing
Merrill Edge® Self-Directed	Best For: Customer support	Commission: $0 per trade	Rating image, 4.5 out of 5 stars. 4.5 stars	Open Account
E*TRADE	Best For: Mobile platform	Commission: $0 per trade	Rating image, 4.5 out of 5 stars. 4.5 stars	Open Account
Robinhood	Best For: Low fees	Commission: $0 per trade	Rating image, 4.5 out of 5 stars. 4.5 stars	Open Account
TradeStation	Best For: Active traders	Commission: $0 trades	Rating image, 4.0 out of 5 stars. 4.0 stars	Open Account
TD Ameritrade	Best For: Research	Commission: $0 per trade	Rating image, 5.0 out of 5 stars. 5.0 stars	Read Review
Fidelity	Best For: Beginners	Commission: $0 per trade	Rating image, 5.0 out of 5 stars. 5.0 stars	Read Review
Ally Invest	Best For: Low fees	Commission: $0 per stock trade	Rating image, 4.5 out of 5 stars. 4.5 stars	Read Review
Charles Schwab	Best For: Retirement investors	Commission: $0 per trade	Rating image, 4.5 out of 5 stars. 4.5 stars	Read Review
Vanguard	Best For: Passive investors	Commission: $0 per trade	Rating image, 4.5 out of 5 stars. 4.5 stars	Read Review

FAQs

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.
It is sometimes possible (but usually extremely complicated) to buy stocks without a broker. You will usually need substantial wealth to take advantage of other methods.
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.
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.
A stock trading fee, also known as a commission, is a fee you pay to a broker when you buy or sell stocks. 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.

About the Author

Matt Frankel, CFP

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.

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