Choosing an online stock broker can be an intimidating process, but it’s an important first step in your investing journey and can help you build substantial wealth over time. While the task of choosing a broker can be daunting, especially with stocks entering a bear market in 2022, it’s actually quite simple to get started.
When you’re just starting out, you’ll probably want a brokerage that includes accessible educational resources, an easy-to-navigate app and website, zero commissions, low fees and attainable minimums — all attractive qualities if you’re getting started. Here are several options to consider.
The best online stock brokers for beginners:
Topics covered on this page:
Overview: Top online brokers for beginners
Other options: Top robo-advisors
How to choose the right broker for you
Do you need a lot of money to use a broker?
What other resources do you need?
Overview: Top online brokers for beginners in February 2023
Fidelity may be the most investor-friendly broker out there, making it a top choice for beginners. This broker offers it all and does it at a high level, with remarkable customer service, too, especially by phone, where you can get an answer to your detailed question in seconds.
The research resources here are deep, with a variety of reports available. You’ll get all the basics on how to invest smartly and so much more. You can attend webinars or view recorded ones that cover almost any area of investing, so you’ll be knowledgeable in no time.
Fidelity’s site is easy to navigate, and you’ll find what you’re looking for quickly without much fuss.
Charles Schwab is the original discount broker and it’s made the leap to online broker with ease. Schwab is as investor-friendly as they come, and offers a full range of features, which will help you as you make your way from novice to confident investor.
Schwab offers stock reports, Morningstar reports and news from Reuters, while the broker’s ETF screener will help you search for a winning fund. Schwab also provides great educational materials for beginners, so you’ll be able to learn all the fundamentals of good investing.
A fully featured mobile app allows you to do virtually all you can do on the desktop platform. Schwab also offers some nice features for beginners. You can receive up to a $1,000 bonus with a qualifying deposit and a referral code from a friend. New accounts that are funded with at least $50 within 30 days of being opened will receive a $101 bonus that will be invested in the top 5 stocks by market cap in the S&P 500 using Schwab Stock Slices, the broker’s fractional shares offering.
One thing that’s important for both beginners and experienced investors alike is to keep costs as low as possible. Interactive Brokers does this as well as anyone in the industry, with commissions that start at $0 for the broker’s Lite pricing plan and more than 18,000 no-transaction fee mutual funds available. You also won’t pay a transfer-out fee that is common at other brokers.
Interactive Brokers comes with a solid research offering and educational resources that include how-to articles, webinars and a training course. You can get questions answered over the phone or through a chat system 24 hours a day Monday through Friday, as well as on Sunday from 1 p.m. to 7 p.m. ET.
Robinhood may appeal to beginners who are looking to keep costs as low as possible. The app offers commission-free trading on stocks, ETFs, options and even cryptocurrencies. You’ll also be able to purchase fractional shares, so you don’t have to worry about having a lot of money to get started investing.
The easy-to-use mobile app makes it easy to trade from anywhere or just keep track of your portfolio. Robinhood has also worked to improve its customer service and now offers 24/7 chat and phone support, so you should be able to get your questions answered at any time of day.
E-Trade is considered by many as the online brokerage pioneer, but it’s kept up with the times, too, offering two mobile apps. On the E-Trade mobile app, you can move money using mobile check deposit in addition to other features, such as tracking the market or trading stocks and ETFs. Its other mobile app is called Power E-Trade, and allows you to enter orders, including complex options trades, on a single ticket. You’ll also get streaming news, quotes and a customizable options chain.
Importantly, E-Trade is great for beginners because it also offers all kinds of content to help you understand what you’re doing — videos, articles and live education sessions included.
TD Ameritrade is good for beginners because of all of the information it makes available to guide you into the world of investments. New investors can take advantage of all kinds of educational material, including more than 200 instructional videos, tutorials and more.
TD Ameritrade also makes it easy to ask investment questions without worrying about whether you’re getting judged for asking something “too basic.” You can also interact with the brand on apps you already use, like Facebook Messenger and Amazon Alexa devices.
Two mobile trading apps, TD Ameritrade Mobile and thinkorswim Mobile, give you trading access and much more wherever you are.
(Charles Schwab has purchased TD Ameritrade, and the companies expect most accounts to be converted to Schwab between April and September 2023.)
Webull may not be as well known as its rival trading app Robinhood, but it still provides a trading experience that should appeal to beginners. It keeps costs to a minimum for traders by offering commission-free trades on stocks, ETFs and options, and it doesn’t charge a direct fee on cryptocurrency trades. The mobile app is easy to use and makes it easy to keep track of things while you’re on the go.
Webull added fractional shares trading in 2021, so investors can get started buying certain stocks and ETFs for as little as $5. If you’re totally new to investing, there’s also educational content to help you learn the basics on financial markets.
Ally Invest is a newer entrant to the brokerage space, and it’s a solid offering for those who already do business with Ally Bank and would like an easy way to expand their relationship into investing.
You can also access your account on Ally’s mobile app to get quotes and make trades. The direct bank is also widely recognized for its excellent customer service and its progressive digital banking features, and you can quickly move cash from your bank account to your investment account.
It also offers a resource center with helpful content written in a more enjoyable way than most — think headlines like “What mutual funds and pizza have in common,” for instance.
With no minimum investment, Bank of America’s Merrill Edge is another good option for beginning investors — particularly if you’re a Bank of America bank customer. As one of the bank’s customers, you’ll have immediate access to cash transfers to your brokerage account, and you’ll be able to access a Merrill advisor at more than 2,000 Bank of America locations.
Merrill Edge’s integrated mobile experience lets you make credit card payments and place trades — assuming you’re a bank customer and investor.
Merrill Edge also provides ample research to help you make trading decisions and a wealth of educational materials can help you get up to speed on investing.
Other options: Top robo-advisors
If getting started is still too daunting and you want a low-cost option that manages a portfolio of investments for you, then a robo-advisor is a great option. A robo-advisor will create a portfolio based on your risk tolerance and time horizon, and you’ll pay a low fee based on how much you have in the account. And it still takes only a few minutes to get started.
Two of Bankrate’s top-rated robo-advisors are Betterment and Wealthfront.
How to choose the right broker for you
Decide what kind of brokerage account you want to open
The first step in determining which broker best suits you is to decide what kind of investing you are planning to do. Ask yourself: Do I want to open a retirement account? Do I need to stay liquid? Do I want to start with a traditional brokerage account and then maybe look into other tax-advantaged options in the future?
The answers to these questions and more will help you narrow down what kind of broker is best for you.
Identify your investing goals
If retirement accounts are your main priority, you might consider Fidelity for their ease and breadth of the retirement space. But if you are interested in trading something more exotic like futures or cryptocurrency, then a broker like Interactive Brokers might be a better fit as it provides more offerings for advanced investors.
Know the types of investments you’re most interested in
There is certainly no shortage of investment options, but the differences (not to mention tax treatment) amongst them is vast. The kind of returns you can expect from a bond fund versus equities are very different, as are their time horizons. Options and crypto might be considered more volatile assets than bonds but can also offer higher returns. That said, there are bonds that can hold higher risk (for a higher yield) as well, meaning that it’s crucial to know exactly what you’re investing in as there’s no one umbrella strategy for any asset allocation.
This holds true of tax treatments as well. Your investment in a Roth IRA for example is treated entirely differently than a standalone ETF or mutual fund. Online brokers have an array of educational tools to help inform investors, but also provide personal financial advising services to direct customers to the most suitable investment for their profile. If you want to take it a step further and start trading options for example, that will help in narrowing your search as not every brokerage platform offers these kinds of investments.
Take a close look at fees and commissions
Once you have a clearer idea of your investor profile, you can narrow down your options by looking at different fee structures. While commissions on trading stocks and ETFs have gone to zero as a basic industry standard, there are still other costs that make a difference from broker to broker.
For example, each options contract traded on Fidelity, Schwab and Merrill Edge costs $0.65, whereas Robinhood and Webull allow options contract trades for free.
The main trade-off with fees will come down to the offerings at each broker and which platform allows you the straightest path to your goals. Minimum balances and private broker fees are also something to take into consideration when making your decision. High fees might be worth it if they are accompanied by personalized service that helps you meet your investment goals.
How brokerage accounts work
Brokerage accounts allow you to purchase securities such as stocks, bonds and ETFs and are a great way to save toward your financial goals. A brokerage account might be used to save and invest for a specific financial goal such as paying for a child’s education, or it may just be used to build wealth over time. Brokerage accounts also typically come with a number of additional features such as access to research reports and other tools.
Unlike retirement accounts, you’ll be able to access your money at any time in a brokerage account, but will likely owe taxes on any gains on your investments, depending on your income.
Do you need a lot of money to use a broker?
The great news for investors these days: It’s never been cheaper and easier to get started investing. In fact, lower fees have made online brokerages more investor-friendly than ever. So you won’t need a lot of money to get started on your investing journey.
Virtually every major online brokerage allows you to get started with no account minimum, so you can start off with $5 or $500. It’s also easy to find a broker that offers no-commission trading of stocks and ETFs (and sometimes options), so you won’t rack up fees when buying or selling. With no commission, you can invest tiny amounts and have it all go into your securities.
About the only routine fee that brokers consistently charge is a “transfer-out fee” if you want to move securities to another account. And you’ll only pay that if you do make a transfer of securities, but you won’t pay for any cash transfers.
For these reasons it’s never been cheaper for investors to get started investing in the market.
How much should you start with in a brokerage account?
If you have disposable income remaining after paying your expenses each month, you can start slowly contributing your savings into a brokerage account.
It’s best to start off with what you can afford, regardless of how small, and then start gradually increasing your contributions as you’re able to do so.
Remember that investing is a game best played long, and accrued interest is still accrued interest regardless of how small the principal. Even $50 or $100 (consistently) a month can make a big difference several years down the line.
Is my money safe in a brokerage account?
You may be familiar with the Federal Deposit Insurance Corporation, or FDIC, and that it protects deposits held in FDIC-insured banks in the event a bank fails.
A similar protection exists for brokerage accounts through the Securities Investor Protection Corporation, or SIPC, a nonprofit membership organization that was created in 1970 by federal law. The SIPC protects customers of SIPC-member brokers in the event that the firm fails. Customers are covered for up to $500,000 for all accounts at one institution, including a maximum of $250,000 for uninvested cash.
It’s important to note that the SIPC does not protect you from investment losses, but rather only if your brokerage firm fails financially. So don’t expect a bailout if you see the value of your stocks or bonds decline.
How to withdraw money from a stock broker
Yes, unlike retirement accounts such as 401(k)s or IRAs, brokerage accounts don’t have age limits on withdrawing your money. You’ll be able to access your money in a brokerage account whenever you’d like, but there are a few steps to the process.
First, you’ll need to sell any investments in order to have cash in your account if you didn’t have uninvested cash already. Then you’ll need to transfer the cash to your bank account, which typically takes a couple of days. If you know the day you’ll need the money, it’s best to plan ahead and start the process a few days early. You could also request a physical check from your broker, but that would likely increase the time it takes to get the money in your hands. Keep in mind that money you need soon shouldn’t be invested in long-term assets such as stocks in the first place.
What’s the difference between a discount brokerage and a full-service brokerage?
Discount brokers are increasingly online brokers that offer investors the opportunity to buy and sell securities at little or no cost. A full-service broker also allows clients to trade securities, but will also offer advice on which securities to buy and may act as more of a financial advisor. This increased level of service and attention typically comes with a higher cost, either in the form of commissions on trades or an annual fee. You may need a larger amount of money to attract attention from a full-service broker, whereas discount brokers typically have no account minimum.
Discount brokers tend to be the cheaper option, but you will need to take a more hands-on approach to your investments because you’ll be the main person overseeing them.
What other resources do you need?
While cost is an important factor in choosing a brokerage, you’ll also want to consider other traits that may improve your experience, such as:
Research: How much research does the broker offer? Is it in-house work or from third parties? Do you need research on individual stocks or are you looking for funds?
Education: Many brokers offer a ton of educational resources so you can understand how to invest effectively. Quite a few brokers offer articles and webinars on how to use their advanced products and tools, especially if you’re looking to trade more often.
Trading simulators: Some brokers offer trading simulators that give you a wad of virtual money and let you use the simulator to try out their platform and test your skills.
Customer support: If you’re just starting out, you may have a lot of questions, so good customer support can be vital. Check a broker’s availability and see if it matches up with your needs.
Mobile apps: If you’re looking to trade via mobile, you may want to take a peek at the broker’s app first. While some brokers are mobile-first and known for the quality of their app, almost all major online brokers offer an app that can get the job done.
Those are some of the major features that you’ll want to consider, but you may have other “must-have” features depending on your needs.
Note: Bankrate’s Brian Baker also contributed to this story.
Leave a Reply