One of the best ways to start investing is to use the services of an online discount broker. However, there are so many discount brokers that it can be difficult to determine which one is best. There is no universal “right” answer because which discount broker is right for you depends on your investing style and other considerations.
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Top Online Discount Stock Brokers
The following is a list of top discount brokers with the emphasis on low cost online stock trading. These brokers are particularly well-suited for active traders. The list is sorted from the lowest commission fee to the highest fee for stock and ETF trades. If the fees are the same, we take into consideration other factors and rank the better broker above. In addition to the fees, we also list other special offers and features when appropriate.
Since brokers can change their offers at any given time, it’s highly recommend that you visit the site and review the most recent information carefully.
List updated December 21, 2016.
||Open and fund an OptionsHouse account to receive up to $1,000 worth of commissions on online trades for a full 60 days.
||TradeKing earned 4-Star Rating in Barron’s Online Broker Survey for 10 year in a row, 2007-2016.
||Fidelity boasts a robust mix of investments, tools and banking services.
||Schwab has a well-rounded services and products portfolio, and offers more advice and research than many competitors.
||OptionsXpress is a Charles Schwab company. It is rated Barron’s 4+ stars for 2002-2012. Open an account today and receive $100.
||Open an account today and trade free for 60 days, and get up to $600 based on your deposit amount.
||E-trade is strong in research and trading tools. Trade free for 60 days, plus get up to $600 for deposits of $10K or more.
Fees are lower for high volume traders.
How to Find the Best Stock Broker
Here are seven factors to consider when choosing a discount broker:
1. Breadth of Investment Products and Mutual Funds
This should be your first consideration when searching for a stock broker. Does the broker have the investment products you want to invest in? All discount brokers allow you to trade stocks, but they may not offer the exact mutual funds and/or other investment products that you want. If you have particular investments in mind, make sure your broker offers the product at a reasonable price.
This is the area where big firms like Fidelity, Charles Schwab, and TD Ameritrade really shine. For example, Fidelity has an impressive mix of more than 16,000 mutual funds — many of which don’t carry transaction fees.
2. Trade Commissions
If you plan to trade stock frequently, the list at the beginning of this article is perfect. For example, nobody can beat Just2Trade, a company offering $2.50 for both equity and mutual fund trades. However, the broker is only available to experienced investors. If you are a beginner, you might try OptionsHouse or TradeKing, both of which cost $4.95 per transaction, but include more comprehensive services and tools.
If you plan to invest mainly in mutual funds, look for a broker that offers a wide selection of mutual funds — especially funds with no loads and no transaction fees. Be especially careful of mutual funds that carry transaction fees; these are generally very expensive — for example, TD Ameritrade charges $50 for buying and selling mutual funds ($0 for N0-Transaction Fee funds).
3. Miscellaneous Fees
Some brokers charge a host of other fees, including maintenance fees, inactivity fees, check writing fees, and more. You don’t want all your gains to be wiped out by extra fees. Figure out what you want to do with your brokerage account, and find the one that lets you accomplish your goals for the least amount of money.
Discount brokers usually list their fee schedule online, such as this fee schedule from E-Trade. If you can’t find it online, you should be able to get a copy from the broker’s customer service department. Don’t sign up with a brokerage unless you understand all of the fees.
4. Research and Education Tools
Next, make sure you can find the right information for your trading needs. If you’re a technical trader, make sure you have access to technical analysis tools and up-to-date charts. If you’re a fundamental investor, make sure you have access to stock fundamental research tools. I am very big into asset allocation, so I love the Portfolio X-Ray tool that comes with my TD Ameritrade account.
5. Online Trading Platform
This is another important factor to consider. You’ll interact mainly with the web interface, so make sure you’re comfortable. I use primarily TD Ameritrade and TradeKing, and I can tell you that they have very different user interface and experience. Overall, I feel TD Ameritrade offers me a more robust set of tools, but TradeKing is more user-friendly with its simpler interface.
6. Banking Services
This may or may not be important to you. If you already have a bank account that can accommodate all of your banking needs, this is a non-factor. If you’re looking for a broker that also doubles as a bank, then this consideration is important.
For example, I do not use TradeKing for banking services, but I do use TD Ameritrade as a bank account, e.g., free ATM/VISA debit card, the ability to pay bills online, make cash transfers, and accomplish just about any banking transaction you can think of.
(Get more information from our list of best banks and savings options.)
7. Customer Service
For me, this is very important. I like to have access to customer service 24/7 and occasional face to face discussions. If you want to be able to see someone face to face, the best bet is searching your neighborhood for an office. There are TD Ameritrade and Charles Schwab brokerage offices near where I live.
Another good idea is to give the discount brokers on your short list a call and shoot them an email. How fast are they responding? Are they knowledgeable? Are they courteous? This will help you narrow down the list before committing.
Investing Tools and Resources
In addition to the brokers listed above here are additional websites that might be of interest to you.
|Personal Capital is a free online accounts aggregator, net worth and expense tracker, portfolio planner and analyzer all in one. It offers a comprehensive overview of your investment portfolio allowing you to make adjustments to lower your expenses and improve your asset allocation.|
|Betterment is a simpler way to invest. Instead of doing your own investing, all you have to do is just answer a few questions about who you are and Betterment will automatically invest the money for you.|
Pinyo is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.