With today’s digital innovations, investors are no longer limited to the brick-and-mortar brokerage firms that their parents used. But how can you find the best Online Broker for you?

Instead, online brokers
have enabled investors to go outside the boundaries of traditional trading
institutions. By circumventing the proverbial middle man, individual investors
can start investing in the stock market all on their
own.

But how do you find the
best online brokerage firm? And should you tackle investing alone?

They’re important
questions, and the answers to them will determine which is the best online
broker for you.

What Is a Brokerage
Account and Can I Use It to Buy Stocks?

A brokerage account,
including many of the apps that allow you to set up accounts, are investment
accounts that allow you to invest in the stock market. The returns your
investments generate are a form of taxable income. Yes, that’s right — you will
be taxed on any income you earn from online stock trading.

The way it works is simple.
Start by opening and funding an account with a cash deposit or ACH transfer.
After your deposit funds clear, you can immediately begin purchasing stocks.
Many online brokers will charge you a fee to make trades, even if you are
purchasing for the first time.

You can then monitor the
stocks you’ve purchased until you are ready to sell. If you choose to sell,
you’ll have the option to keep the funds in your brokerage account [for future
purchases], or you can transfer the balance back into your primary funding
account.

How to Find the Best
Online Broker for You

Learning how to start investing, especially if you’re a total beginner, can be overwhelming. Taking your money and investing it into the stock market is something a majority of people haven’t done on their own. Complicating things further is the fact that you’ll be responsible for preventing mistakes, doing your own research, and avoiding trading-oriented fees.

Then again, there’s the
legitimate appeal of not having to pay a steep management fee for someone to
invest your money.

For investors looking to
buy and sell stocks, there are many online brokers to choose from. Depending on
what your specific needs are, a broker that’s a great fit for someone else
might not be the best choice for you.

The DollarSprout team has
spent dozens of hours compiling research on all of the top brokers. We’ve
sifted through each company’s pricing models, functionalities, online reviews,
and more, and came up with a list of what we feel are the best online
brokerages for stock trading.

Below are the highlights of
our findings, along with links to more in-depth reviews and additional
resources.

Comparing the Best Online
Brokers

Editorial Disclaimer:
Please note that, although we regularly update this page, you should research a
broker’s website to get the most up to date information available (including
pricing and promotional info). Some of the links from this page are from paid
partners of DollarSprout. Here’s how we make
money
.

 

$0

Cost per trade

$0

Account minimum

5/5

Your Rating

Summary:

Founded in 1971, Charles Schwab is a full service investment firm. They offer a suite of investment options as well as several different types of accounts. They are a trusted name in the brokerage industry with fees and pricing now competitive with Vanguard, Fidelity, and other low cost brokerage firms. Their customer service can’t be beat.

Pros:

  • Free to trade
  • Offers fractional investing and no hidden fees
  • You can borrow against your portfolio in some instances
  • Automates investing and rebalancing

Cons:

  • They do not offer tax loss harvesting
  • They only offer stocks and ETFs; no mutual funds

Best For:

Hands off investors who want
the benefit of a robo-advisor
with $0 per trade. Also, it’s best
for people who want to invest in
stocks and ETFs,not mutual
funds.

$0

Cost per trade

$100

Account minimum

4.5/5

Your Rating

Summary:

Ally Invest is the investing portion of Ally Bank, an online only bank with no brick and mortar locations. Ally acquired Trade King in 2017 and now offers a suite of investment options. This platform is great for active day traders, but it’s also easy for a beginner to get started. Ally is well regarded in the financial space, and they have a good reputation.

Pros:

Managed Accounts 

  • No advisory fees.
  • Automated investing.
  • $100 account minimum.
  • Interest-earning cash buffer.

 
Self-Directed Accounts

  •  Commission-free trading on U.S. listed stocks and ETFs.
  •  Transfer fee reimbursement.
  •  $0 account minimum.
  •  Up to $3,500 cash bonus.

Cons:

Managed Accounts 

  • No tax loss harvesting.
  • No human advisor.
  • No physical branch.
  • No existing promotions.

 
Self-Directed Accounts

  • No automatic rebalancing.
  • Mutual funds carry transaction fees.
  • No human advisor.
  • No physical branch.

Best For:

  • Managed accounts are best for beginners looking for low-fee, completely automated investing.
  • Self-directed accounts are best for active traders, forex traders, day traders, and options traders.

$0

Cost per trade

$100

Account minimum

4/5

Your Rating

Summary:

M1 Finance is a combination online brokerage and robo advisor. It’s very highly rated across the personal finance community for it’s interface, fund availability, and low costs. They offer investment portfolio templates you can choose from, and you can invest completely free.

Pros:

  • Free to trade
  • Offers fractional investing and no hidden fees
  • You can borrow against your portfolio in some instances
  • Automates investing and rebalancing

Cons:

  • They do not offer tax loss harvesting
  • They only offer stocks and ETFs; no mutual funds

Best For:

Hands off investors who want the benefit of a robo-advisor with $0 per trade. Also, it’s best for people who want to invest in stocks and ETFs, not mutual funds.

$0

Cost per trade

$0

Account minimum

5/5

Your Rating

Summary:

Fidelity is a well known, multinational financial services company that offers a variety of different types of financial products from credit cards to taxable investment accounts to retirement accounts. They are competitive with other low cost brokers like Charles Schwab and Vanguard.

Pros:

  • Did away with almost all account fees
  • First broker to have mutual funds with no expense ratios
  • Has significant research available to customers to learn from
  • Great customer service and online tools

Cons:

  • Fees are higher if you need the help of a broker to make a trade
  • Some tools/products are only for active traders or people with large amounts invested

Best For:

People who want to invest for retirement and active investors as well. Also good for people looking for low cost funds.

What should you look for
in an online broker?

Here are some questions you
should always ask before deciding on an online brokerage for investing:

What are the account
minimums?

Most brokers will allow you
to start small, but be sure to check the account minimums to ensure you
qualify.

Do the tools fit my needs?

If you need access to
high-end tools for research and active trading, a platform designed for
beginners won’t be right for you.

How much do trades cost?

This is especially
important for smaller accounts and for people who trade often. Fees will always
eat into your returns, so this is an important consideration.

How is the customer
service?

Helpful customer service
will never go out of style.

What About Online
Investment Apps?

If you want to go further
than just exploring the best online brokerages, and would like to explore an
area where younger investors are flocking to, check out our research on the best investment apps.

At a glance:

  • Acorns
    Best overall
  • Stash – Best for values-based
    investing
  • Betterment – Best investing app for long
    term investors
  • M1 Finance – Best commission free
    investing app
  • Ally Invest – Best app for do-it-yourself
    investors
  • Fundrise – Best real estate investment
    app
  • Stockpile – Best for buying fractional
    shares
  • Robinhood – Best for options and crypto trading

Each of these apps and
services are specialized and meet the needs of a different kind of trader.

To get started with one,
you’ll need a well-balanced investing strategy; one that considers your entire
financial outlook.

If you do not have a sound
fiscal budget in place, an area where many younger, inexperienced investors
struggle, you’ll end up pouring too much money into rigid investment accounts
(with penalized withdrawals), instead of servicing high interest debt or paying
essential bills.

The Best
App for Investing Depends on Your Goals

Some investors may find Betterment a great option because the app is a
better fit for long term investment strategies. Patience is the name of the
game here, and the robo-advisor is the best in the industry for long term
investors.

Other investors, such as those who are looking to invest and utilize
option and cryptocurrency trading, may prefer Robinhood. This commission-free,
high tech app has all the bells and whistles needed to get started in the
crypto and options markets.

Getting Started is the
Most Important Step

If this is your first time
investing, not to worry. With so many trading platforms available, including
ones that require no minimum balance and no trading fees, you can learn on your
own and use our resources to guide you every step of the way.

Investing with an online
broker, even one of the best online brokers, doesn’t guarantee anything — the
stock market is not an exact science. Instead, the stock market sways and
shifts every single day and is deeply impacted by a myriad of factors that
range from everything between politics, news, weather, and the actions of other
traders.

The more time your
investments must mature, the more money you will end up having in retirement. That
means that the best time to start is now, even if you start small. The rise of
mobile has made tracking and growing your money easier than ever.

With any one of the
investment apps listed above, it’s easier than ever to get started with
investing today.

How DollarSprout Rates
Online Brokers

The Editorial Team at
DollarSprout looks at multiple factors when determining a 1-5 star rating for
online brokers. Here are the most important factors that weigh into our
ratings:

  • Cost
    per trade
  • Availability
    of commission free ETFs
  • Access
    to research
  • Fees, and the likelihood that a
    user will incur them
  • Account
    balance requirements
  • Customer
    service
  • Mobile
    app reviews

In addition to assigning a
1-5 star rating for each broker we research, we also aim to find the best
broker for certain types of investors, such as:

  • Best
    broker for beginner investors
  • Best
    broker for active traders
  • Best broker for index fund
    investors
  • Etc.
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