Best Online Brokers for Buying and Selling Stocks
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With today’s digital innovations, investors are no longer limited to the brick-and-mortar brokerage firms that their parents used.
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
At a glance:
- Charles Schwab – Best overall broker
- Ally Invest – Great for new traders who want to be more active
- M1 Finance – $0 per trade, hands off investing
- Fidelity – Best overall broker
- Trade Station – Ideal for advanced level traders
- TD Ameritrade – Suitable for traders & long term investors
- Vanguard – Great for low cost, low maintenance index fund investing
- E*TRADE – 250+ commission free ETFs and an excellent mobile app
- FirsTrade – Ideal for international investors
- Motif Investing – Best for socially responsible investing
- Merrill Edge – Great for existing Bank of America customers
- Interactive Brokers – Frequent trading, advanced trading
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.
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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.
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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.
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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.
Summary:
Trade Station offers professional level trading for experienced investors, brokers, and day traders. They have a robust online platform with significant research and education available to their users.
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TD Ameritrade is a large brokerage firm that offers many different types of accounts, stocks, ETFs, mutual funds, and more. They recently acquired Scottrade in 2017. They have brick and mortar offices but also many different online tools and educational resources. They are a well known brokerage firm with a wide array of offerings and generally have a positive reputation.
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Vanguard is one of the longest standing brokerage firms. Created by Jack Bogle in 1975, Vanguard has always been known for its low cost investing options and has served as a model for other low cost brokerage firms.
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Etrade is a brokerage firm with three different trading platforms, so there is something for beginning investors all the way to active investors. They were among the first online brokers and also have significant data available to their customers. Note: If you make more than 30 trades per quarter as an active investor, the cost per trade drops to $4.95.
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Summary:
Firstrade is a discount online brokerage firm that offers completely free trades with no account minimums. They have a powerful trading platform with no hidden fees. In addition to offering low cost investment options, they also offer educational resources, calculators, and more to their customers.
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Summary:
Motif Investing is a very unique hybrid investment company that is part brokerage firm and part robo-advisor. It usus an interesting platform idea where you can purchase "motifs" or thematic based investment packages. The motifs feature 20-30 stocks or ETFs around a certain theme like "online gaming" or "biotech" which allows investors to be creative and learn more about the process.
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Summary:
Merrill Edge is a brokerage firm and a subsidiary of Bank of America, so it's helpful to people who are Bank of America customers who want to keep their accounts with the same bank. They do offer up to 100 free trades per month if you meet certain qualifications such as having a Merrill Edge balance of $25,000 or more or a BoA balance of $25,000 or more.
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Summary:
Interactive Brokers is a sophisticated trading platform which benefits those who are active traders. They offer lower commissions than other top brokerage firms, but their fee structures truly benefit those who are advanced traders.
Show Hide moreWhat 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.
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.
Research Lead: Cat Alford
Product Reviewer: TJ Porter
Final Review: Jeff Proctor
Review Date: October 5, 2019