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- Best Online Stock Brokers
Best Online Stock Brokers for July 2020
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The numbers are definitive: over the long term, there's been no better way to grow your wealth than investing in the stock market. And thanks to the internet, it's never been cheaper or easier to open a brokerage account and start investing. We just released our 2020 picks and updated reviews so you can compare and find the best online stock broker for you.
COVID-19 considerations for brokerage accounts:
There’s never a wrong time to start investing, and this is especially true right now due to current market volatility. For more information, check out the guide we put together to help you decide if now is the right time to open a new brokerage account.
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
Special Offer
Trade commission-free and get up to $2,500 when you open and fund an account
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.
Best for Mobile
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.
Best for Active Trader
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:
$500
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.
Best for Beginners
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
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
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
Best for Retirement
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
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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.
Types of stock 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.
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
We recognize that one brokerage can’t be the “best” choice for every single investor, so our view is that the best discount broker should thread the needle between offering the most functionality and perks at a price point that won’t break the bank.
The following features were considered particularly important in determining how to rank brokers you see in this list:
- Commissions and fees -- The key advantage of any discount brokerage firm is cost. Investors now pay $0 commissions at most of the online discount brokers. In addition to a low price for every trade, we also prefer brokers who don’t charge a monthly or annual fee just to have an account.
- Account minimums -- We think having a low minimum account size is advantageous, particularly for beginning investors who plan to start small and add to their accounts over time.
- Investment choices -- While most brokers offer roughly the same solutions for buying individual stocks on American exchanges, we think it’s important for a broker to have a large selection of funds to choose from, too.
- Research and screeners -- One key feature of having a brokerage account is that you can get access to a second opinion when you need it. Many brokers offer a full suite of third-party research as well as stock and fund screeners to help you sort through thousands of stocks and funds on key parameters like their price-to-earnings ratio, or the annual fees of investing in a fund, for example.
How to pick the best broker for you
The best brokerage largely depends on how you invest. Investors who invest solely in individual stocks and ETFs would want to seek out different features than investors who use mutual funds alone, for example.
Researchers have concluded that an investor should own as many as 30 stocks in order to have a truly diversified portfolio. Thus, investors who want to build a portfolio of individual stocks may want to focus on the cost of trading, as the difference in price can add up quickly when investors place as many as 20 to 30 trades just to set up their portfolio.
Thankfully, most online brokers have eliminated trading commissions, but there are a few that still charge for stock trades, so be sure you know a broker's cost structure before you get started.
Investors who use mutual funds or ETFs may want to prioritize a broker with a larger selection of funds to choose from. For example, E*TRADE offers thousands of mutual funds for investors to select from.
The best broker for mutual funds is a toss up, as many regard Schwab and Fidelity as the leaders for the fact they offer more than 10,000 different funds. Schwab has thousands of no-transaction-fee funds with $100 minimums, which makes it a favorite for beginning investors without a ton of money to get started with.
Of course, convenience also plays an important role. Merrill Edge is a popular choice among investors who use Bank of America as their checking or savings account provider, since the two accounts can be easily linked, and the brokerage firm offers free trades to Bank of America customers who keep a certain minimum balance. With a full research department, Merrill Edge customers benefit from getting access to Bank of America Merrill Lynch research reports and more on more than 1,000 different companies.
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 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.
FAQs
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Discount brokers are able to offer 90% of the service and functionality of a full-service broker at a price 90% lower than their higher-cost peers. Self-directed investors who are capable of choosing their own stocks and funds can save a fortune by using an online discount broker.
While discount brokers have a reputation for offering a “no-frills” solution to investing, they’re often matching many of the features you’d expect from full service brokers. Here are just some of the features that you get from most discount brokers today:
- Research -- Many discount brokers offer access to research from S&P, Moody’s, Morningstar, and other third-party research providers.
- No-cost funds -- While it costs money to place a trade to buy stocks, many brokers offer thousands of mutual funds and exchange-traded funds that you can buy without paying a commission, transaction fee, or loads. Funds sold by full-service brokers often carry fees known as loads, which can add up to as much as 5% of your investment capital. That means you could pay $250 in fees just to invest $5,000 in a load mutual fund. We prefer brokers that offer a long line of no-load, no-transaction-fee mutual funds you can invest in for free.
- Low minimums -- Whereas some financial advisors and full-service brokerage firms often have certain minimums (say, $100,000), most discount brokers require a minimum account size of $5,000 or much less in the majority of cases. Many discount brokers have no minimums at all. With that in mind, many discount brokers offer incentive bonuses for larger deposits and account transfers.
- 24/7 support -- Many brokers have customer service agents available around the clock. So, whether you need help placing a trade, or assistance to understand your latest mutual fund statement, you can get the help you need with a simple phone call any time of day.
- Access to your money -- Discount brokers are often banks, too. One key advantage to having an account with a discount broker is that they offer free checks or ATM cards that allow you to withdrawal cash from your account as if it were an ordinary bank account.
- Research -- Many discount brokers offer access to research from S&P, Moody’s, Morningstar, and other third-party research providers.
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It is sometimes possible 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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Online brokers make buying stocks online as easy as typing in a few numbers and letters and making a couple clicks. To buy a stock, all you need to know is the company’s ticker symbol, which ranges in length from one to five letters long. For example, Sprint’s ticker symbol is “S,” 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 to find the ticker on the order page or in the broker’s trading platform.)
Your broker will ask what kind of trade you want to make when placing your order. The first type of order is a “market order,” which is essentially an order to buy a stock at whatever price it takes to find sellers who want to sell enough stock to fill your order. You can think of this order as a time sensitive order, where getting the order filled quickly takes precedence over the price at which your shares are bought or sold.
The second type of order is a “limit order,” which is 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, it’s a good idea to default to a limit order. That’s because you can have the certainty of knowing the price before the order is completed. In contrast, there’s no way to know with certainty at what price you will buy or sell stock if you use a market order.
When trading less popular stocks, market orders can be simply dangerous. If you place a market order to buy 3,000 shares of a stock that only trades 100 shares a day, your order could easily move the price higher by several percentage points, forcing you to pay more than you wanted to for the stock.
Trading volumes are the highest in the first 30 minutes of a trading day (9:30 a.m. to 10:00 a.m. in New York City) and in the last 30 minutes of a trading day (3:30 p.m. to 4:00 p.m. in New York City). So, if there were ever a “safer” time to place a market order, the first and last 30 minutes of the trading session would be the time to do it.
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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.
