Best Online Brokers for Beginners

You don’t need a degree in finance to start investing. Online stock brokers make it easy to get started without a ton of money, and some even offer a vast library of education resources to help you feel comfortable before you start.

Here are the best online brokers for beginner investors.

TD Ameritrade: “Best Overall”

One of the largest online brokers, TD Ameritrade is our overall top pick for new investors. With its vast educational library (including articles, videos, webcasts and current news), TD Ameritrade is a great place for new investors to start learning about investment.

Pair that with a user-friendly mobile app, no-fee trading, and 24/7 customer service, and TD Ameritrade stands out as the best online broker for the next generation of investors.

Additionally, its trading platform “thinkorswim” provides users with access to real-time market data and even a “paper money” option to test out stock market trading (with fake money, of course).

Pros

  • The most in-depth training library on the market
  • Mobile-first design for a simple investing experience
  • 175+ local offices nationwide for one-on-one help by licensed advisors
  • Chat with support team directly through Facebook & Twitter or text message
  • $0 trades

Cons

  • No fractional shares available

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Merrill Edge: “Best for Low Costs”

Owned by Bank of America, Merrill Edge is a robust investing service with access to quality research and a powerful trading platform (Merrill Edge MarketPro®). With unlimited free trades on stocks and ETFs – as well as no account minimums – the company also offers more than 3,000 mutual funds with zero transaction fees.

In addition to no-fee trading, Merrill Edge offers a rewards program for Bank of America customers. This includes higher interest rates on savings accounts, discounted mortgages, auto loans, and increased rewards on Bank of America credit cards.

Pros

  • No trading fees, minimums, or account fees
  • Access to high-quality market research and educational tools
  • Power mobile app with access to most investing and trading tools
  • Access to Bank of America advisors nationwide and online

Cons

  • No access to futures, forex, or cryptocurrency trading

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Robinhood: “Best for Quick Set Up”

An increasingly popular investing app, Robinhood has risen to fame by being one of the first brokers to offer no-fee trading. Though the industry has “caught up” in regards to lowering its fees, Robinhood is still one of the easiest accounts to set up – all within the mobile app.

Simply download the Robinhood app, input your information (i.e., name, address, birthday, social security number) and you’re ready to invest. As soon as you sign up, an app tutorial shows you exactly how to start investing with Robinhood.

Pros

  • $0 trading, including options, ETFs, and cryptocurrencies.
  • Simple mobile app makes it easy to buy and sell stocks
  • No account minimums or hidden fees

Cons

  • No retirement accounts
  • No bonds or mutual funds
  • No customer service phone number

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Best Online Brokers for Stock Trading and The Advanced

If you’re looking to take your investing up a notch, we’ve put together our top online brokers for stock trading and advanced investing features.

E*TRADE: “Best Overall”

One of the first online brokers, E*TRADE has been an online-first trading platform since 1991. They have continued to innovate and are geared toward active traders.

With access to stocks, options, futures, ETFs, mutual funds, bonds, and CDs, E*TRADE provides advanced investors a wide array of trading options. It also offers a comprehensive web-based platform (Power E*TRADE) and mobile apps to help investors make informed trades more quickly.

Pros

  • Well-designed trading platform (Power E*TRADE) with a simple-to-use interface
  • Power E*TRADE mobile app offers advanced trading, including complex options and futures
  • No minimums, zero-fee stock and ETF trading, and low-cost options trading
  • 24/7 phone, chat, and email support

Cons

  • Trading penny stocks incurs an additional $6.95 transaction fee

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Interactive Brokers: “Best for International Trading”

Interactive Brokers is an advanced trading platform designed for professional traders. It offers far more trading options and order types than any competitor, as well as exposure to many international markets.

Interactive Brokers offers two account types: IBKR Pro (for professional traders) and IBKR Lite (for casual investors). IBKR Pro has all the bells and whistles that institutional investing firms rely on, including more than 60 order types and access to over 130 international market centers around the globe. IBKR Lite has $0 stock, ETF trading, and no account minimums.

If you’re looking for an online broker to give you direct access to international markets, Interactive Brokers is the industry standard.

Pros

  • Access to international trading via 135 market centers in 33 different countries
  • Quick and powerful investing platform “Trader Workstation”
  • IBot artificial intelligence bot that allows you to place orders via chat (or voice)
  • ESG rating system for socially-conscious investors

Cons

  • May be overwhelming to new investors
  • Inactivity fees charged in IBKR Pro

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Tastyworks: “Best for Option and Tax Strategy”

A newcomer to the online brokerage space as of 2017, Tastyworks is directly aimed at investors who trade options and futures. Developed by the creators of the Tastytrade online video channel, they only offer access to options trading, stocks, and futures trading. 

*Fun fact: The Tastyworks team also developed the thinkorswim platform that sold to TD Ameritrade in 2009.  

With web, desktop, and mobile apps available, you can access a similar dashboard on each – with all the tools needed for informed options trading. These apps offer customizable charts, watchlists, simple order adjustments, access to the Tastytrade video channel, and live trade data.

Finally, Tastyworks only charges $1 to open an options contract and $2.50 to open a futures contract. There’s a $0 commission to complete either trade, which is unique in the industry. This makes Tastyworks a very low-cost broker for active traders who regularly trade in and out of options and futures positions.

Pros

  • $0 commission to close out positions
  • Detailed, user-friendly trading platform designed with options traders in mind
  • Integration with Tastytrade video channel
  • Community live trade data to see what others are doing on the platform

Cons

  • Cannot buy/sell mutual funds or bonds
  • Only U.S. stocks, options, and futures available

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What Are Online Brokers?

Online brokers are intermediaries that facilitate the buying and selling of securities over the internet. Using an online broker, individual investors can sign up for an account online and start buying or selling quickly.

The shift from in-person to online stock brokers has significantly reduced costs for investors, leading to a rise in no-fee trading and $0 commissions on thousands of mutual funds and ETFs. Many online brokers also offer management services for those who don’t want to manage their own investments. For a hands-off approach to investing with less fees, robo advisors can automate your investing while charging a fraction of the cost of traditional portfolio management.

In addition to buying and selling securities, many online brokers offer investor education, lending services, and banking services.

How Do Online Brokers Work?

Online brokers have access to financial markets (like the NYSE and NASDAQ) where trades are performed. When you choose to buy a security, you place your order and your online broker will match you with a seller of that security. 

The trade is then executed and both parties receive a confirmation. Sellers will receive their money automatically and buyers lock in the value of the security purchased (though there’s a “settlement period” of 2-3 days before they own it).

Brokers make sure trades are properly executed and comply with regulations set by the Securities and Exchange Commission (SEC)

How Much Do Online Brokers Charge?

Depending on the services provided, online brokers have several fees and charges:

Trading Fees

Though many brokers offer no-fee trading of stocks and ETFs, there are still many securities that incur trading fees. This is a one-time fee charged for each trade transaction (typically under $10).

Management Fees

A full-service online broker who manages your portfolio will typically charge an assets under management (AUM) fee. This typically ranges from 0.50% to 2% of your total assets.

Account Maintenance (or Inactivity) Fees

Some online brokers will charge an annual maintenance fee on your account (usually under $50). This fee is typically for accounts that drop below a minimum amount. 

Brokers that focus on active trading may also charge an “inactivity fee” on accounts that do not trade frequently.

Margin Fees

For investors who borrow money to invest, these “margin” accounts will incur interest charges until paid in full.

Withdrawal Fees

To withdraw funds from an online broker, there may be a one-time withdrawal fee incurred.

How Much Money Do I Need to Start Investing?

Many online brokers have a $0 minimum to open a standard brokerage account and require very little to start investing. You can purchase ETFs for the price of a single share, many starting at under $100.

If the online broker offers “fractional shares”, you can invest for less – sometimes as low as $0.01.

For a retirement account (such as an IRA) many brokerages require a $500 minimum to get started.

How Do Online Brokers Make Money?

From trading and account fees to charging for management services, brokerages have plenty of ways to stay profitable.

Though many online brokers now offer thousands of $0 fee trades, they continue to grow by providing additional services to their customer base.

For example, many brokers now offer banking services, including checking and savings accounts. They use the deposited funds to invest in securities themselves, earning much more interest than they pay their customers.

Many brokers also offer full-service account management, charging upwards of 1% of total assets to manage investments for their customers.

They also act as a lender, offering margin to customers and collecting the interest income. 

Are Online Brokers Safe?

Most online brokers carry several types of insurance to protect your assets. The two main types are FDIC insurance (up to $250,000 on cash accounts) and SIPC insurance (up to $500,000 on investment accounts).

FDIC insurance is for cash accounts (i.e. money market, savings, checking) and covers up to $250,000 of cash balance if it were to go missing.

SIPC insurance is similar coverage for investment accounts, covering up to $500,000 in lost or missing securities. If your online broker does NOT have SIPC insurance for your investments, your investments are at risk.

Note: Neither of these types of insurance will protect you from the risk of loss when investing your money into securities.

What Should I Look for In An Online Broker?

We’ve put together a comprehensive list of criteria to look for when choosing an online broker. Evaluate these to find a broker that best fits your investing goals.

Account Fees

When using an online broker, understanding how fees are charged is important to your overall investing strategy.

When looking at the total costs for any online broker, some of the fees to review include:

  • Stock, ETF, and mutual fund trading fees
  • Options and futures contract fees
  • Options per-leg fees
  • Margin interest rates
  • Account minimum or inactivity fees
  • Assets under management fees (for managed accounts)

Most discount online brokers should offer no-fee equity trades, low-cost options contracts ($1 or less), and no per-leg options fees. Unless you choose an active trader platform, most shouldn’t require any account minimum or inactivity fees.

Expense Ratios

When investing in any mutual funds or ETFs, there will be an expense ratio for holding those investments. While most index funds are available for less than 0.25%, mutual funds may have more exorbitant fees (sometimes exceeding 1% of your investment).

For managed accounts, the annual AUM fees may be up to 2% of your total portfolio.

Account Minimums

Depending on the type of investment account you open, there may be a minimum investment amount required. Many online brokers boast $0 minimums for most accounts, but some accounts (like IRAs) may require $500 or more.

When choosing stocks or funds to invest in, make note of the minimum investment required for each security.

Investment Options/Choices

When evaluating your favorite online broker, take a look at their available investment options. Some brokers have a more limited selection of securities to invest in while others have thousands of investment options available.

A few options you may want to have available are:

  • Stocks
  • Bonds
  • Mutual Funds
  • ETFs
  • Options
  • Futures
  • International markets

Investment Account Options

When looking for the right online broker, review which types of accounts are available. Here’s a quick list of account types to consider:

Portfolio Construction

Building the right asset allocation is a critical part of investing. Understanding how your online broker helps build your portfolio (and maintain your asset allocation) is something to consider.

To help stay on track toward your investment goals, look for features like access to pre-defined portfolios and the ability to automatically rebalance.

Tax Strategy

Investing will typically impact your taxes, so understanding how a broker handles tax statements and reporting will save you a headache down the road.

Customer Service and Support

You want to know that your broker is there to provide support. Understanding how customer services works – and when they are available – is very important to your peace of mind.

Look for companies with 24/7 live support, whether over the phone or online via chat. Waiting on an email can feel like years when there is a critical issue with your account.

Mobile Compatibility

We’re in a mobile-first world, so it’s crucial to have access to your investments on your mobile device. Online brokers should have simple access to your accounts via the mobile web (or better yet, through a mobile app).

Account Setup

Signing up for an online broker should be a simple, painless process. Understanding the necessary information to get started and approved for an account is important when researching a potential online broker.

Education and Security

Online education is available through most of the larger online brokers, with some offering extensive libraries to beginner and advanced investors alike.

Regarding security, every broker should carry SIPC insurance (and FDIC insurance for any banking products).

Ease of access

Logging into your investment account and accessing your account tools should be easy. If you want to actively trade, you’ll need a powerful trading platform and mobile app that gives you complete control.

No matter what your investing goals are, your online broker needs to be built with the user in mind.

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How Can I Quickly Start Trading?

Once you open your account, you’ll need to connect your bank account to fund your investment account. Many brokers will allow you to ACH transfer money directly from your bank account to the brokerage account. 

It may take a few business days for the money deposit into your account. Once your account is funded, however, you can start trading right away.

How Does Diversification Work with Online Brokers?

Splitting your investments across several asset classes is always a good idea, but online brokers vary in how they approach diversification. Some will provide a suggested asset allocation (depending on your age, goals, risk tolerance, and other factors) while others are geared for active traders and don’t focus on investment diversification advice.

No matter which broker you choose, it’s ultimately up to you to determine how your investments are diversified and managed.