As an investor you have numerous brokers to choose from. If you are planning to trade stocks, you will need an online broker. Things you should look for include no hidden account fees, reasonable investment minimums, and access to customer support. But some features might be more important to you than others.
Before you pick the one that is best for you, this guide will help provide insight on what to look for before taking the leap into picking your brokerage account.
How Does a Brokerage Account Work?
Buying shares of stock in public companies requires that you set up a trading account with an online broker. You cannot just buy stock through the company or your bank account.
Over the last few decades, the brokerage industry has changed to allow everyday investors to buy stock without having to call a stockbroker to place the order on your behalf. Now, the majority of investors buy and sell stocks through a brokerage account. To do so, you deposit cash in your brokerage account to purchase stocks, bonds, ETFs, mutual funds, and other investments. The broker you select maintains your brokerage account and acts as the intermediary between you and the stock market. They buy and sell investments based on your instructions.
What Makes a Good Brokerage Account?
To find the right online brokerage account, consider looking for features that appeal you. Below you will find a list of options that you should consider within your decision-making process. Weigh the importance to each one of you, then rank them in priority before selecting the best account to jumps start your online investing.
Depositing and Withdrawing Funds Easily
When you are investing, it is important to understand how easy it is to move your money into and out of your brokerage account. If you are an investor with a set-it-and-forget-it strategy, you might not consider this as high of a priority as an investor looking to supplement their income. However, life can throw curve balls, so you should be aware of the deposit and withdrawal terms set by your broker.
Low Account Minimum Requirements
There are many online brokers that have no account minimums, while others have minimums of $500 or more. If you are looking to start investing with a smaller amount of money, you should consider brokerage accounts that have low account minimum requirements.
Low Commission Based Fees
Each broker has its own commissions for trading. Some base the commission off how often you trade, while others base it off account size. Either way, it is important to understand the commission fees associated with your account before you begin trading.
No Hidden or Extra Unnecessary Fees
Be sure to look for any hidden or unnecessary fees including annual or monthly maintenance fees, small account balance fees, and transfer fees.
Large Amount of Investment Options
Do you know the type of investments you are looking to make? If you are focused on a wide range of securities, you should ensure that your broker has options for stocks, bonds, mutual funds, ETS, options, futures, and even fixed-income securities. Some brokers even offer cryptocurrency investing, while others still do not have this option.
Offering Great Educational Resources
No investor begins with all the knowledge they need. If you are a new investor, you should look for a broker that provides a substantial library of educational resources to help guide you through the process. Many have how-to guides, webinars, video tutorials, and more.
Reliable Mobile Access
Is having mobile access at your fingertips important for your brokerage account? If so, finding a broker with a reliable mobile app will be beneficial.
Excellent Customer Service
While having resources and digital features at your disposal might be important, another feature many investors look for is the customer service side of the broker. Take a minute to look through the Help section of your different options. If you are a new investor, this is where you would look to make sure you can get a hold of a representative if you are stuck.
Additionally, technology does not always function properly 100% of the time. Does the broker you are considering have around the clock tech support? If not, be aware of any time frames that help is available when you are trading.
It is important to know how your brokerage keeps your information safe. Many will have advanced security features in addition to your password – things like answering security questions, time-sensitive codes sent via text or email, or even a physical security key that you put in your USB port.
5 Best Brokerage Accounts
At this point, you likely have a list of features that are must-haves and others that are nice-to-haves. Now, you can start looking at the different brokerage account options to see which ticks the most boxes for your personal investing needs.
Robinhood (Rating: 8/10)
Best For: Cryptocurrencies
Robinhood was created to provide everyday people with an easy way to enter the financial markets. It has a high-quality mobile app and has cryptocurrency trading if that is of interest to you. It also allows investors to buy fractional shares in thousands of stocks, even if you only have $1 to invest.
While Robinhood is one of the leaders in $0 commission and cryptocurrency investing, it does not provide access to IRA accounts, mutual funds, or fixed income products. It was also designed to be a simple product, meaning it does not provide research or informational tools for its users.
Robinhood has a $0 account minimums and $0 fees for stocks, ETFs, options, and cryptocurrencies. While Robinhood is a free product, its premium product Robinhood Gold costs $5 per month.
TD Ameritrade (Rating 9/10)
Best For: Beginners
TD Ameritrade is one of the best options for beginning investors. It has highly accessible customer service, detailed stock trading research, and competitive commission prices. It also has a mobile app that allows users to trade stocks or options contracts with their mobile device.
While TD Ameritrade is a great resource for beginners, it does not have cryptocurrency trading options. It also has margin rates that are beat by other trading platforms.
TD Ameritrade has a $0 account minimum and $0 fees for stocks and ETFs. Options are $0.65 per contract.
E*TRADE (Rating 8.5/10)
Best For: Web based platform
E*TRADE’s platform has a plethora of research tools including prebuilt portfolios for new and/or passive investors. It also offers traditional and Roth IRA accounts. If you live close enough to its brick-and-mortar locations, you can pop in to get additional customer support.
E*TRADE’s great as a web-based platform, but not as a mobile app. Additionally, it has one of the highest margin interest rates among the top brokers.
E*TRADE has a $0 account minimum and $0 fees for stocks and ETFs. Options are $0.65 per contract. Mutual funds range from $0-19.99. Customers who make 30 or more options trades per quarter can see their rates drop to $0.50 per contract.
Merrill Edge (Rating: 9/10)
Best For: Research
Merrill Edge is the top brokerage that offers quality third party research. It also offers a wide range of taxable brokerage, retirement, children’s investment, and small business accounts. Investors have an array of investment vehicles to choose from including stocks, mutual funds, ETFs, bonds, CDs, and options.
The biggest downside to Merrill Edge is that its trading platform can be beat by other brokers. Additionally, active traders who want to invest in foreign currency exchange or futures will need to find a different broker.
Merrill Edge has a $0 account minimum and $0 fees for stocks and ETFs. Options are $0.65 per contract. Mutual funds range from $0-19.95.
Fidelity (Rating 9.5/10)
Best For: Low Fees
Orders for Fidelity customers are executed 96% of the time at a price better than the national best bid/offer. Fidelity also offers a wide range of research tools for you to utilize. Additionally, any un-invested cash is automatically set into a money market fund, which helps your overall portfolio returns.
Fidelity is not available for non-U.S. citizens or residents. It also does not offer any commodities or options on futures. Additionally, traders need to manually refresh their data when utilizing the Fidelity website which some traders may find frustrating.
Fidelity has a $0 account minimum and $0 fees for stocks and ETFs. Options are $0.65 per contract. Mutual funds range from $0-49.95.
Find The Best Option For Your Investing Needs
It is important to review the top broker options to make sure your brokerage account fits your personal investing needs. Try not to let the choices overwhelm you. Create your list of attractive qualities you are looking for, then get started with your research.
Remember, there might not be the “perfect” choice — all your boxes might not be checked. But with a little research you can get the majority of your must-haves and start your investing journey. If you have any questions or wish to find out more information, try contacting a trusted financial advisor for more details.