5 Best Online Brokers for Buying Stocks
We make money in two ways: one is by working as an employee or for yourself as an entrepreneur. The other is making money work for you, by way of investing.
Investing is an essential aspect of growing wealth. If you’re keeping all your assets in the bank or store your cash under the bed, the money doesn’t grow and increase in value. You are only able to save just what you have. Over time, your money loses its purchasing power, and its value gets defeated by inflation.
On the other hand, investing allows you to make money on top of the money you already have. Whether you’re investing in a small business, on real estate properties, or in bonds and stocks, investing is the only way to make money and multiply what you have. So, whether you’re investing for retirement, future vacations or your child’s college fund, it’s important to know that saving alone doesn’t cut it. You have to invest to make more money.
But investing can seem like a daunting affair. You might think that it is reserved only for people who know the ins and outs of trading, not to mention those who have the assets to invest. It’s a whole new world we have today, and even those who don’t have a lot of investing knowledge can quickly get started with online brokers.
What are Online Brokers?
Back in the day, it would help if you had your investment broker to trade assets for you. You call the broker about your intention, and he will make the transaction for you. Today, you can cut the broker out of the picture and do your own trading (if you wish), by using your online trading account.
With an online broker, you no longer have to rely on a stockbroker. As the digitized version of the traditional stockbroker, an online broker facilitates the exchange of stocks, bonds, and other assets in public stock exchanges. The rise of online brokers in the internet era made investing more accessible to the broader public and considerably reduced stockbroker fees.
Additionally, investors now can trade their assets any time they please without having to call a stockbroker to do such for them. Investors with accounts in online trading platforms also enjoy added functionalities, such as market news, analytics, and stock prices posted real time.
Suffice to say, online trading and brokers allow almost any person to invest and trade on their own, via their smart phones or computer, without leaving the comfort of their homes.
The Benefits of Online Brokers
Online trading allows you to make your own investing decisions. In the traditional setting, people rely on their trusted stockbrokers for guidance and advice, and it’s a service that came with hefty fees. Nowadays, people have come to realize that they can do the investing themselves, and even win at it even without the input of traditional stockbrokers.
If you’re interested in online trading, here are the top benefits of working with online brokers.
1. Lesser Fees
The most obvious about cutting the middleman – the stockbroker—is that you get to slash the fees related to such service. Online brokers offer considerably lower rates than traditional stockbrokers do, with fees hovering between $5-$10 each trade. Some online traders even offer discounts for bulk trades (that is, the more you trade, the lesser you pay).
2. More and Better Control
Traditionally, people needed to consult their stockbrokers for a market move often made via a letter or phone call. Such communication leads to loss of valuable time, and online trading sorts of bridges that gap. With online brokers, you get to see market conditions real-time and perform trades anywhere, anytime. You don’t have to rely on your broker to make the trade for you; when you see a fitting transaction, you can make a move instantly.
3. Make Your Own Financial Decisions
Online trading allows you to invest on your own, although several online brokers are offering complete portfolio management. If you are a savvy investor, you likely want to monitor the market, perform your own analysis and even make your own projections. Ultimately, the goal is to make decisions that are for the best interests of your finances. Online trading exercises and improves your capability to manage finances.
Choosing an Online Broker
Online trading can be intimidating if you don’t know what to look for in an online broker. Here are the top things that you need to consider when picking out one.
Commission refers to the fee that you need to pay to be able to trade. Since this is a cost per trade, it is easier to compare online brokers across the board. Typically, commissions are between $4 to $7. However, you do need to look into other fees associated with the trade. For instance, options come with a commission plus fee per contract. Commissions also vary depending on the type of asset being traded (mutual funds, bonds, ETFs, etc.).
2. Required Account Minimums
Depending on the online broker, account minimums can go from zero to thousands of dollars. If you’re new at investing, it’s important to note how much initial investment you need to put in to trade. Often, it doesn’t matter if you’re working with the famous brokers; if you can’t put together the required account minimum, then you won’t be able to trade. To start with, look into brokers that don’t have account minimums and begin trading with just the comfortable amount.
3. Portfolio Planning
It can be overwhelming to you sort through different asset allocations and deciding which ones of them are the best to invest in. A lot of online brokers provide guidance in asset allocation, not just when you’re starting out, but as you go through the investing journey. At some point, you’ll need to do some rebalancing, so expert advice on portfolio planning can be valuable (but comes with a price tag).
4. Variety of Assets
An excellent online broker will give you options as far as assets are concerned, allowing you to fully diversify your portfolio. This strategy applies to the phrase, “don’t put all your eggs in one basket.” With that said, you want to be able to choose between numerous investment types, from ETFs, mutual bonds, stocks, futures and so much more.
Etrade is one of today’s most prominent online stock brokers, thanks to its robust features that are useful for both beginner and veteran investors. While Etrade’s pricing isn’t the lowest there is, investors appreciate its suite of research and data advantage, retirement planning assistance and so much more.
Etrade is best known for its comprehensive trading platforms, particularly the OptionsHouse. OptionsHouse is the go-to platform for all free platform for all types of traders. It is packed with so many useful features like real-time data, myriad of technical studies, charts and graphs and other cool customizable options.
You can take trading with Etrade up a notch if you can invest a minimum of $250,000 with the Etrade Pro platform. With Pro, you gain access to exclusive features like the Strategy scanner as well as the opportunity to do a minimum of 30 trades each quarter. Additionally, Etrade also has a mobile app that allows investors to monitor their accounts, screen for stocks and ETFs, access to informational videos and technical analysis among others.
Despite ETrade’s robust features, the rates, fees and account minimums are another matter. You need to put in at least $500 in your account to start trading, which in essence, is not very uncommon. However, there are other discount brokerages that don’t even impose account minimums.
Additionally, Etrade’s trading fees are at $6.95, but this can be discounted to $4.95 each trade if you do a minimum of 30 trades per quarter.
Other fees and rates apply, such as $15/month for the Max Rate Checking account, but the platform is willing to waive the fee if you’re willing to compromise at least 30 trades per quarter or perform a direct deposit minimum of $200 per month.
Etrade is one of the most user-friendly online trading platforms out there, catering to both newbie and seasoned investors alike. It’s great for both starting points and long-term investing ventures, allowing you to hold and trade ETFs, bonds, stocks, and futures with much ease.
TD Ameritrade is another well-loved online stock broker, servicing more than 11 investors and doing around 650,000 trades daily. There is a reason for such popularity though, and that is Ameritrade offers a well-rounded experience to their account holders.
Ameritrade is one of the online trading platforms with such a long-standing reputation. The highlight of trading with Ameritrade is its Thinkorswim platform which allows investors to access a set of comprehensive features necessary for advanced trading, including technical analysis, backtesting, strategies testing, and a host of educational information and tools. The best thing about Thinkorswim is you don’t need to fulfill a minimum trade to gain access.
There’s also Ameritrade’s web platform which is the TDAmeritrade.com, catering mostly to newbie investors. The platform boasts of a Portfolio Planner, a tool handy to people who are getting their first dibs on investing. The planner aims to help new investors craft the best asset allocation based on their investment strategy, or pick one of the pre-formed portfolios and customize it later on.
Perhaps Ameritrade’s most significant selling point is the fact that it doesn’t require a minimum amount. You can start with as little as you are comfortable with, and go up as you please. Unlike other online brokers that impose a minimum amount on their investors’ account, Ameritrade allows new investors to try their platform without the risk of losing so much should it not work out for them.
The trading fees are fairly competitive, almost at par with that of Etrade’s. Ameritrade’s flat trading fee is $6.95, but you do have to add an extra $0.75 for options trading. Additionally, the platform does not charge inactivity and maintenance fees, but it does have $75 fee for outgoing transfers.
It is important to note though that while you can take advantage of zero account minimums, you do have to hold at least any of the 300 commission-free ETFs; otherwise, you have to pay the steep price of $19.99 (for short-trading fees).
Overall, Ameritrade has proven itself as one of the best online brokers out there, offering comprehensive tools for all sorts of investors in their wealth-building journey. It is packed with educational and informational features, customizable portfolio planners, and a universe of asset allocations that matches your investing profile. Despite the competitive trading costs, Ameritrade remains to be one of those that allow you to start investing and trading quickly and simply.
Ally Invest which is formerly the TradeKing, is one of the best low-cost online brokers you will find today. Ally Invest manages more than 250,000 accounts and has $4.7 billions of assets under management. It caters to investors who desire to have managed accounts, and self-directed day traders. Either way, Ally Invest offers a slew of tools and features for a streamlined and simplified online investing.
First, let’ start off with Ally Invest’s trading platform. It may not be as sophisticated and remarkable as that of its biggest competitors, but Ally Invest’s web-based platform is enough and basic enough for any type of investor. It doesn’t fall short where quick trading is concerned, and it’s even packed with tools like real-time streaming and customizable dashboard. Whether you’re trading from home or work, using the computer or smartphone is as breezy as can be. It doesn’t require any downloads, and it’s easy to navigate through both mobile and web platform with ease.
Next, you might want to know how remarkable Ally Invest is when it comes to commissions and account minimums (which is such a huge deciding factor for potential investors). The platform does not have an account minimum so that you can get started as quickly and easily as possible. Additionally, Ally Invests commission fees are one of the lowest among its competitors, charging only $4.95 for both ETFs and stocks trading. Those who are more active in investing can enjoy the discounted rate of $3.95 if one does a minimum of 30 trades each month or holding at least $100,000 in their accounts.
Ally Invest has also added commission-free ETFs. As the standard rule, you have to hold at least any of these ETFs for a month to get away from the short-term trading fees. There are no inactivity fees, and it offers a cheaper for both $50 in fees for outgoing transfers and closing of IRA accounts.
The fees mentioned above apply to self-directed accounts. But you also have the option to take managed accounts instead, wherein a robo-advisor picks the assets and put together a portfolio based on your financial goals. To avail this, you need to invest at least $2,500 in your account. An annual fee of 0.30% also applies.
Appealing to both new and veteran investors, Charles Schwab offers a slew of high-investing tools, portfolio planning, and comprehensive market information. As one of the most established and well-known brokers, Schwab manages over $3.8 trillion in clients’ assets and serves over 10.6 million active account holders.
Schwab offers three platforms rich for investors. One is the StreetSmart Edge, an investing platform suite that’s fully customizable to the investor’s preferences. It is packed with fantastic and useful features, such as the High/Low indicator and Launch Tools which allows you to see the products offered in the platform quickly. It also comes with markers that indicate the date and price purchased products, another useful tool that doesn’t come with competing platforms. Efficient and user-friendly, Schwab’s web-based trading platform takes only a little learning curve, and the rest comes easy.
For the more seasoned and sophisticated investors, Schwab also has the Trade Source which displays the investor’s market positions, contents of their portfolios, and even status updates of their orders. This dashboard is an excellent venue to view your investment status in one place. Both StreetSmart and Trade Source require no minimum accounts, so they’re easily accessible even for new investors.
And finally, there’s the StreetSmart Central where you can do trading activities as well as see all your trading futures trading options. You may also download the mobile app for StreetSmart so you can trade on the go.
As for commissions, Schwab stands at par with Ally Invest in that trades are charged $4.95 only, one of the lowest you will find. There are additional 0.65 cents per contract for options trading. It offers 250 commission-free ETFs and over 4,000 selections of no-transaction-fee mutual funds. Considering how comprehensive the tools are at Schwab, the cost is pretty much a good deal. And just like Ally Invest, Charles Schwab does not have a required account minimum. You can start trading at Schwab with a smaller initial investment.
Overall, Charles Schwab is another online broker worth looking into. It comes fully packed with all the necessary tools and fantastic features to meet the demands of day trading.
Geared towards the more aggressive and expert traders, TradeStation has made tools and features formerly only accessible only for brokers to day traders at a very low cost.
TradeStation offers a slew of investments, ranging from stocks, futures, ETFs, mutual funds to options and penny stocks. It also holds a comprehensive set of investment accounts, including Traditional and ROTH IRA, taxable accounts, Trusts, Simple IRA and Joint Accounts. TradeStation is most appealing to people who already have a lot of experience in investing, DIY investors and investors who like to use their smartphones.
TradeStation does have a required account minimum. Stock trading accounts start at $500, while $2,000 is the minimum necessary for options trading and $5,000 for future’s trading. The pricing is also pretty much competitive, with flat-fee commissions of $5 each trade. For options trades, the commissions add an extra $0.50 per contract.
But unlike the previously mentioned online brokers, TradeStation does not have commission-free ETFs and no-transaction-fee mutual funds. Mutual funds trading has a flat fee of $14.95.
The highlight for TradeStation is the trading platform itself. It has a remarkable desktop platform that allows investors access to direct market, as well as check and automate their trading activities. It also comes with a tool that investors to simulate projected results of a trade real-time, so they get to see and feel what results the transaction is likely to bring.
TradeStation also stands out when it comes to research. The platform provides robust research with historical backing that many advanced investors genuinely appreciate. It also has plenty of educational tools, ranging from video tutorials to articles. TradeStation does provide as much support as it can to investors as far as education and information are concerned, and it doesn’t fall short in this area.
As far as hardcore day traders go, TradeStation is one that they rely on. It is comprehensive and robust, though not as cheap as the others, but it’s a reliable platform many investors swear by.
Online trading may seem like a sophisticated activity, but technology has made it accessible even for people with no experience and little knowledge about it. If you’re interested in doing online trading whether full time or part time, it pays to know what type of trader you are, your risk tolerance level and your financial goals. These online brokers can offer you with all the things you need for online trading, but they aren’t created equal. One platform may be better suited to one investor than the other.
Before you go ahead and invest your money, perform your own due diligence. Investing comes with a risk, but the risks lessen and even become more manageable if you enter it with more knowledge and realistic expectations.
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