Investing is the single best way to build long-term wealth. And while many people get their start investing in a workplace retirement plan, you might find that you’re ready to venture out on your own and open a brokerage account.
A brokerage account is where you deposit the money you want to invest, and a brokerage firm is the one doing the buying. Brokerages may offer tax-advantaged accounts like IRAs and Roth IRAs in addition to more flexible, taxable investing accounts. You may have heard of Fidelity, Vanguard, or TD Ameritrade. These are just some of the few brokerage firms where you can invest.
But with all the options, which one is the best for you? We spoke with five financial experts to find out their favorite online brokers and help you narrow down your own search.
What to Consider When Choosing an Online Broker
The incredible number of online brokers on the market today means that every investor can find one that meets their needs. But the number of options also makes it that much more difficult to choose the right broker for you. Here are a few things to consider before choosing an online broker.
- Fees: Any fees you pay ultimately eat into your returns, so it’s best to choose a broker that charges low fees. Most brokers now offer commission-free trading, and there are a multitude of low-cost funds on the market that can get you investing pretty quickly.
When buying an investment (at any brokerage) check its expense ratio, which is the fee for owning the fund. Many index funds offer expense ratios as low as 0%.
- Investment options: Ensure that whatever broker you choose offers the investments you want in your portfolio. If you want a more hands off approach, consider brokers that offer passive investing.
- Usability: Before opening a brokerage account with any broker, visit their website and app to ensure they’re user-friendly and that you can navigate them.
- Customer service: When you’re trusting a company with your money, you want to ensure they’ll be there to address any problems you run into. Finding a company with 24/7 customer service can come in handy should you have any questions.
- Minimum account requirements: Some brokers require that you have a certain amount of money in your account to start investing or to invest in a particular fund. These minimums can be troublesome for new investors who are just getting started with $100, but don’t let that scare you. Many brokers nowadays don’t require a minimum to get started.
5 Best Online Brokers (According to the Experts)
We talked to five personal finance experts and here’s what they had to say:
Fidelity: Experts’ Favorites
Fidelity was overall the expert’s favorite online broker.
This brokerage offers funds with 0% expense ratios, retail accounts with no account fees, and 24/7 customer service. Fidelity “allows you to do all kinds of accounts—employer-sponsored accounts, IRAs including traditional, Roth, rollover, self-employed accounts like a solo 401k and SEP IRA, and taxable brokerage,” said Shang Saavedra of Save My Cents. “I love how friendly their customer service is, and they have in-person branches.”
What Shang invests in: Low-fee index funds that track the US market. Index funds allow you to invest in an index, rather than an individual stock. You may have heard of the S&P 500 or the Dow Jones Industrial Average. These two indexes allow you to invest in the largest companies in the stock market, meaning your portfolio is diversified (or spread out) and more protected.
Fidelity offers commission-free trading on US stocks, exchange-traded funds (ETFs), and options.
Fidelity has some of the lowest fund fees on the market, including the first zero-expense-ratio index mutual funds. Low-cost funds are music to the ears of an investor.
Robust app that allows for buying and selling stocks.
Vanguard: Best for Low-Cost Funds
Vanguard is one of the biggest names in investing and is especially well-known for its low-cost mutual funds and ETFs. The platform offers commission-free trading on stocks, ETFs, and Vanguard mutual funds, of which there are many to choose from.
“My favorite thing about Vanguard is its low-cost, low minimum deposit requirements, and the fact that they don’t just have a platform where you can purchase funds, but where you can also read articles, and find definitions to better understand investing terms,” said Mandi Woodruff-Santos, wealth-building and career expert at MandiMoney.com. “For passive investors, Vanguard is one of the best.”
According to Woodruff-Santos, Vanguard’s biggest downside is the usability of its online tools. The company’s user experience on its website and app can make it difficult to get started and track your investments.
What Woodruff-Santos invests in: Vanguard Total Stock Market Index Fund (VSTAX) and Vanguard 500 Index Fund ETF (VOO)
Vanguard has a massive selection of low-cost mutual funds and ETFs making it well-suited to passive investors.
There’s no commission on stocks, ETFs, or Vanguard mutual funds.
Vanguard offers robo-advisory services at a lower fee than other major robo-advisors on the market.
Vanguard’s platform can be difficult to navigate and isn’t as user-friendly as many competitors.
Many Vanguard funds require $3,000 minimum deposits.
Charles Schwab: Best for Customer Service
Charles Schwab is a full-service broker that offers a wide range of investment products, private investment management, robo-advisory services, financial planning, banking, and borrowing.
As one of the largest brokers on the market, Schwab offers a high-quality trading platform, commission-free trading, and research to help investors guide their portfolio decisions.
“We’ve chosen Schwab as our primary custodian,” said Asher Rogovy, the Chief Investment Officer at Magnifina, LLC, an investment advisory firm. “Because so many major brokerages offer $0 commission and robust liquidity, we look to customer service. Schwab’s team is outstanding, and when it comes to your money, you shouldn’t settle for anything less.”
Schwab has commission-free trading on stocks, ETFs, and mutual funds.
Schwab offers trading on fractional shares, which can make some stocks more accessible.
TD Ameritrade: Best Advanced Trading Platform
TD Ameritrade offers commission-free trading on stocks, ETFs, mutual funds, options, and Treasury securities. It also has one of the most robust trading tools.
“At the moment, my favorite broker is TD Ameritrade,” said Baruch Silvermann of The Smart Investor. “This is because it has a great range of asset classes. The trading platforms are very simple to use and require little to no training. The customer support team is top-tier and there is a huge collection of educational materials.”
Silvermann shared that the TD Ameritrade platform is well-suited to advanced traders, thanks to its top-notch trading platform and tools. At the same time, it’s intuitive and educational enough for beginner investors.
According to Silvermann, the primary downsides of TD Ameritrade is that its cost structure is higher than some of its competitors and it doesn’t offer trading of fractional shares.
What Silvermann invests in: SPDR Gold Shares (GLD)
TD Ameritrade offers commission-free trading on stocks, ETFs, mutual funds, options, and Treasury securities.
There are educational tools and a paper trading tool to help investors try their hand at investing before they get started.
TD Ameritrade doesn’t offer trading of fractional shares.
While the educational tools make TD Ameritrade an attractive tool for investors, its trading tools may be too advanced for some beginners.
Ally Invest: Best Easy-to-Use Interface
Ally Invest offers self-directed trading in stocks, bonds, ETFs, mutual funds, options, and more, and offers commission-free trading on stocks, ETFs, and options.
Jim Wang of Wallet Hacks likes Ally for its low costs since the company doesn’t charge maintenance fees or commissions.
“It’s easy to make trades and it doesn’t have the bells and whistles that newer brokers have but it also doesn’t deluge you with information on every single screen,” Wang said. “They have a lot of research tools so you can find more information if you want it.”
While the lack of advanced trading tools may be a downside to more active traders, Wang appreciates the simplicity of the platform, and it may appeal to new investors as well who just want a straightforward tool to help them get started.
What Wang invests in: Vanguard Total Stock Market Index Fund (VSTAX)
Ally offers both self-directed trading and managed portfolios, so each investor can choose the option they’re most comfortable with.
Ally offers commission-free trading on stocks, ETFs, and options.
While there is a $100 account minimum for a managed portfolio, there are no account minimums for self-directed trading.
Ally doesn’t have the robust trading tools that some of its investors offer, meaning it may not be right for advanced or active traders.
Ally doesn’t offer trading of fractional shares.
What is a brokerage account?
A brokerage account is a type of account where investors can buy and sell securities. And just like a bank account holds your money, your brokerage account holds the securities you own. You can open a brokerage account at either an in-person or online broker, but online accounts have increasingly become the norm for many investors.
Why should you invest?
Investing is the most effective way for most people to build wealth. Most would never be able to save enough to retire comfortably but thanks to compound interest, investing allows our money to grow exponentially. The longer your money is invested, the more time it has to grow.
Once you’re investing enough to enjoy a comfortable retirement, investing can help you achieve other long-term financial goals as well, including large purchases, your child’s college education, or early retirement.
How do you deposit money and start investing?
Once you’ve decided which online broker to use, you can have your account open and set up in just a short amount of time. To sign up, you’ll have to provide personal information about yourself including your name, contact information, and identifying information such as your Social Security number.
Once you’ve provided the necessary information and your account is set up, you can fund your account by connecting your bank information. You can also fund it by sending a check or rolling over the balance from another brokerage account.
Once your account is fully funded, there’s nothing left to do but actually invest. Before buying any securities, be sure to do your research to ensure any investments you choose align with your financial goals, risk tolerance, time horizon, etc.
How much do online brokers cost?
The cost of an online broker depends on what broker you choose and what you invest in, but it’s become increasingly common in recent years for brokers to offer commission-free trading, which is the case for several of the brokers on our list. That being said, many still charge commissions or trading fees so be sure to familiarize yourself with any and understand when they start taking away from your profits.
Commission also isn’t the only cost you may incur. If you invest in mutual funds or exchange-traded funds (ETFs), then you’ll also pay an expense ratio, which is a fee.