New to online stock trading platforms? Reviews.com consulted with day-traders, financial commentators and advisors to analyze the pricing structures of numerous top online stock trading sites. The following article was originally featured at Reviews.com (https://www.reviews.com/
Best for Cheap Trading: Ally Invest
Ally Invest leads the industry in low-cost commissions structure for all kinds of investors, from high-net-worth individuals to beginning buy-and-hold traders. Even though a rash of brokers dropped their commissions in 2017 to be competitive with Ally Invest’s $4.95 flat rate, it keeps its edge with a zero account minimum and enticing discount for active investors –– equity trades drop to $3.95 for users with 30+ trades each quarter or a balance of $100,000. While cheaper trades can still be found (Robinhood’s mobile platform boasts totally commission-free stocks and ETFs, for example), Ally Invest’s platform and resources stand out with quality research and tools, including access to its online trader network.
Best for Beginners: E*Trade
If you’re looking for something with an easy learning curve, but endless of room to grow, we recommend E*Trade. Its learning center is filled with educational videos, articles, and webinars to guide your through the basics. From there, you can stay up to date on investing news, reports, and commentary from their team of market analysts. Branch appointments are free to book, and online chat tools and 24-hour hotline are there to guide you from anywhere in the world. If you’re looking to expand your investing over time, E*Trade is equipped to handle everything from entry-level IRAs to aggressive trading of stocks and options.
Best Platform: TD Ameritrade
TD Ameritrade offers two best-in-class platforms, designed for two types of investors. Trade Architect is good for beginners, or anyone who prefers a simplified, educational interface that can walk them through the ordering process and explain potential strategies. Thinkorswim, on the other hand, is a powerhouse designed for advanced investors. This platform regularly racks up praise and awards and offers superior tools and features — including research reports, real-time data, charts, and technical studies. Both platforms are free to use for any investor with a TD Ameritrade account, which for many investors makes the $6.95 commission worth it.
Best for Active Traders: OptionsHouse
OptionsHouse is a top platform for investors with an options focus — but it’s the hands-down winner for active traders. Like Ally Invest, it’s been a longtime leader in rock-bottom pricing, with a flat $4.95 trade commission ($4.95 plus $0.50 per options contract) and, unlike many brokerages catering to active investors, no account minimums or inactivity fees. It’s also a standout with a streamlined interface and smart tools. It doesn’t offer currency trading, and has limited commission-free and transaction-free offerings, but its 2016 acquisition by E*Trade should help fill in those gaps as the two brokers continue merge.
Best Research & Tools: Fidelity
Fidelity wins for its quantity and quality of trading and investing research — ideal for the DIY investor looking to unleash their potential. Featuring research from more than 20 providers, plus stellar execution, it’s no surprise Fidelity was awarded best overall online stock broker in 2016 by both Barron’s and Kiplinger. And Fidelity shows no signs of slowing down. In early 2017, Fidelity lowered its commissions from $7.95 to $4.95, a sign that it’s looking to become a bigger player in the discount scene, as opposed to the high net-worth individuals it historically has catered to. It still reserves some of its tools and features for high-volume, active traders, but looking forward, Fidelity is going to get harder and harder to beat.
How We Found the Best Online Stock Trading Sites
It’s a tumultuous time for online stock brokers. The players have largely remained the same, but between significant cuts in commissions and a few major acquisitions (E*Trade acquired OptionsHouse; TD Ameritrade and Scottrade merged; Ally Invest now lives under Ally Bank), the competition is fierce.
This is all to say there is no one best online stock broker, but each one has different strengths and weaknesses. Our mission is to spotlight those, and help you find the best one for your investing style.
We leveraged the expertise of two stock traders — a former day trader and a financial commentator who has been trading for over 20 years — to dig into 13 of the most popular online stock trading sites.
Different investors are going to prioritize different things — a day trader, for example, requires speed and flexibility; whereas a beginning trader may value educational resources and customer support. But one thing every trader should care about is cost, so we spent a lot of time balancing price with what each site offered. A few of the fees we analyzed include:
Cost per transaction: Commissions are typically an investor’s biggest cost base. In 2016, a typical unassisted transaction fee averaged about $8, but early 2017 saw a slew of brokers decrease their commission, including Fidelity, E*Trade, and TD Ameritrade. Now, many trade for as low as $4.95, which is where, historically, only a few brokers, like Ally Invest and OptionsHouse, operated. No matter what the price, though, transparency is key. We wanted to see affordable pricing structures that were locked in for the long haul.
We also took note of new customer promotions, where brokers give you a chunk of free trades, usually based on how much you deposit. Promotions change regularly, but they can be a good indicator of the type of investor a broker is a good fit for. (Ally Invest, for example, offers incentives for deposits as low as $500, whereas Fidelity Investments has a higher barrier for entry — a $50,000 deposit to get 300 free trades.) Another thing we compared: how many commission-free ETFs a broker offered.
Account minimums: Seeing your nest egg shrink due to a tough market or bad strategy isn’t fun. It’s worse if you’re also getting dinged by your broker’s minimum account balance requirement.
Charges for data, research, and tools: All the best online stock trading sites have quality market data like real-time quotes, educational resources, and stock-screening tools built right into their platforms. But some, like Fidelity and TD Ameritrade, stand out for also providing top-shelf resources, totally free of charge.
Extra costs: There are lots of brokers that boast having financial experts on-call 24 hours a day to help you make a trade, but don’t tell you those services come with additional fees. (Executing a trade over the phone, for example, can increase an $8 commission fee to $25 or more.) Some platforms do offer free education on sophisticated strategies like options and futures, but require an upgraded platform with an annual fee.
There are plenty of additional fees that may crop up along the way (we discuss some of the more common ones here), but for pretty much every investor, cheaper will always be better. Depending on your strategy — trading on margin, for example — increased fees might just be the cost of doing business, but we looked to mitigate these costs in our top picks.
Alongside cost, we also valued educational resources, reports and tools, and the usability of the platform itself. Our expert users took each broker for a test-drive and weighed in on standout features. We also took ratings from investment publications like Barron’s and Kiplinger into account.
Our Picks for the Best Online Stock Trading Sites
Ally Invest Review – Best for Cheap Trading
You’re not going to find lower fees than Ally Invest, especially as an active investor. In a nutshell: It’s the most affordable broker there is, with a rock-bottom commission structure and easy entry point, plus a quality platform that gives you access to the entire universe of stocks and ETFs. Where some discount brokers focus on only one kind of trader — options, for example, or high-net-worth investors — Ally Invest provides an excellent experience for investors of all kinds.
It’s the blend of great trading tools with low prices that makes Ally Invest a standout. A focus on discount costs can be a red flag for quality (what is it skimping on?), but Ally Invest truly delivers with sophisticated calculators, profit-loss estimators, and more. Ally Invest also offers a robust research library that incorporates visual slides and interactive media into its market data. Let’s dig into that discount pricing. At $4.95 a trade, Ally Invest’s fee structure is the lowest out there, matched (but never beat) by other players. Those low fees alone make it one of the best discount brokers, but they also have no inactivity charge and only a $50 full outgoing transfer fee. If you’re an active investor, 30+ trades per quarter or $100,000+ balance, you get a discount that takes equity trades down to $3.95. That significant discount makes Ally Invest the cheapest platform for active investors.
We’re not the only ones who think Ally Invest is a remarkable service. Barron’s has rated Ally Invest’s past self, TradeKing, at least 4 out of 5 stars for the past 10 years, and it regularly racked up kudos for its offerings with StockBrokers.com. But in 2017, there was a rash of price slashing from pretty much every top-tier discount broker, and the competition is getting stiffer. Case in point: Fidelity dropped its pricing from $6.95 to match the $4.95 flat rate of Ally Invest, but its perks aren’t quite as accessible for newcomers, and its barrier for entry is higher: You need to fund your account with at least $2,500, and it requires a $50,000 deposit to score the 300 commission-free trades it offers as a sign-up bonus. Vanguard, as another example, charges as much as $20 a transaction if you want to trade stocks or funds by another provider.
May 19th 2017 – Previously acquired by Ally Bank, TradeKing has been rebranded into Ally Bank’s own online trading platform, Ally Invest. Much of their interface, low prices, and offerings have remained the same, but some promotions and discounts are no longer offered. This review has been updated to reflect these changes.
March 16th 2016 – Ally Bank acquired TradeKing. Since then, its interface, trading platforms, offerings, and pricing have remained the same, but we’re anticipating changes to start rolling out by mid-2017.
|Stocks & ETFs||$4.95||$4.95|
|Options||$4.95, plus $0.65 per contract||$4.95, plus $0.75 per contract|
*Fidelity requires a $2,500 deposit to open an account.
Ally Invest One of the most affordable platforms there is, with rock-bottom pricing and excellent tools. Even better — it’s a discount broker that doesn’t skimp on research or customer service.
Trade commission: $4.95
Account minimum: $0
E*Trade Review – Best for Beginners
New investors need two things from their online stock trading platform: an easy learning curve and lots of room to grow. E*Trade has both. Their platform boasts a library of educational videos, articles, and webinars for each type of investor. Once you’ve mastered the fundamentals, read up on market news, reports, and commentary from E*Trade analysts.
The only real drawback to E*Trade: Commission fees start at $6.95. It’s not until investors make more than 30 trades a quarter that the fees drop down to $4.95 that OptionsHouse and Ally Invest off up-front. While E*Trade can’t match OptionsHouse or Ally Invest’s low flat fees, it racks up points for its transparent pricing model. Take OptionsHouse, which E*Trade actually acquired in 2016. OptionsHouse is known for its super-low fees, but buried in the fine print, OptionsHouse says it actually charges $0.0005 per share on penny stocks. Let’s compare the two, imagining you execute 500 transactions in the quarter for about 50,000 shares each. That adds up to about a $500 transaction for a stock trading at 1 cent — pretty modest overall. With E*Trade, there are no surcharges for low-priced stocks and no inactivity or other surprise add-on fees.
For new investors, we also liked TD Ameritrade’s platform, Trade Architect, which walks you through the ordering process as you use the interface. But when it comes to commission fees, TD Ameritrade falls short. Its fees stay at $6.95 per trade, for stocks, ETFs, and options. E*Trade does require an investment minimum for new brokerage accounts ($500), but for most investors, you’ll need at least that much to see real growth.
E*Trade Commission Structure
|First 30 Trades||$6.95 per trade||$208.50|
|Next 470 trades||$4.95 per trade||$2,326.50|
OptionsHouse Commission Structure
|500 trades||$4.95 per trade||$2,475|
|50,000 shares per trade||$0.0005 per share||$12,500|
Even though the flat rates are the same after 30 trades, the per-share fee can really rack up if you’re trading a high volume of low-priced shares.
Beyond the math, though, E*Trade and Charles Schwab are very similar. In 2016, Barron’s rated them within one point of each other, and you can trust both these veteran brokers to have the resources, research, tools, and platforms to accommodate penny stock trading and far beyond.
|Stocks & ETFs||$4.95 – $6.95 per trade*||$6.95|
|Options||$4.95, plus $0.50 per contract*
$6.95, plus $0.75 per contract
|$6.95, plus $0.75 per contract|
*Fees drop from $6.95 to $4.95 at 30 trades per quarter
TD Ameritrade Review – Best Trading Platform
TD Ameritrade has been a powerful player in the online stock trading ecosystem for years, and even though its pricing structure is more expensive than some of the other discount brokers, there are many traders who think its best-in-class trading platforms, Trade Architect and thinkorswim, are worth it.
Trade Architect is often in the shadow of thinkorswim, but the web-based platform is streamlined and easy to use, and particularly appealing to beginning investors. It has a tab-based navigation that lets users flip between trading tools and their account overview, plus charts, stock screeners, heat maps, and more. Its Trade Finder feature is an excellent tool for novices, allowing investors to make some selections (think direction, timing, allocation), and then walking them through the ordering process while spotlighting different strategies that map to their selected guidelines. All-up, Trade Architect achieves a good balance of key information without being overwhelming.
Thinkorswim, on the other hand, is designed for advanced investors. It’s a desktop application that gives TD Ameritrade customers free access to tools and features that pretty much any other broker would charge a premium for, including research reports, real-time data, charts, and technical studies. Customizable workspaces, extensive third-party research, and a thriving trader chat room where investors can share strategies and tips are also included. Where Trade Architect keeps information overload in check, thinkorswim is a firehose.
Thinkorswim is a standout especially in options trading, with quick-to-get options-trading tabs (just click “spread” if you want a spread, and “single order” if you want one leg) plus just-in-time links that explain the strategies on the order page. Its Strategy Roller feature lets investors create custom covered calls and then roll those positions from expiration to expiration. There’s also a fully functional mobile app.
The flipside to such robust platforms is cost. Even though TD Ameritrade lowered its fees in 2017 from $9.99 to $6.95, pretty much every other major discount broker slashed its prices too — Fidelity, for example, dipped from $7.95 to $4.95. That means TD Ameritrade remains one of the more expensive options out there, even with over 100 commission-free ETFs. That said, it continues to be one of the largest trading platforms in the world, with nearly $740 billion in assets, and has ranked as the best platform for novices by Barron’s five years running. Since it acquired Scottrade, our favorite platform for beginners, in 2016, we can predict it will continue getting better and better over the coming years.
|Stocks & ETFs||$6.95 flat rate||$4.95 flat rate|
|Options||$6.95, plus $0.75 per contract||$4.95, plus $0.75 per contract|
TD Ameritrade TD Ameritrade hosts Trade Architect and thinkorswim, two of the best-known platforms in the industry, and available to anyone with an account.
Trade commission: $6.95
Account minimum: $0
Promotion: 60 days of commission-free trades with $3,000 deposit
OptionsHouse Review – Best for Active Traders
If you already have a firm handle on your investment strategy and want to maximize your profits, OptionsHouse is excellent. What it lacks in some of the investor education features that competitors like E*Trade and TD Ameritrade can claim, it makes up for with its low-cost, streamlined trading platform.
OptionsHouse’s biggest draw is its pricing structure: $4.95 plus $0.50 per contract, with absolutely no minimum to join or to maintain an account. A single-leg options contract is $5.45 all-in. Even better, the low prices apply to futures and stock trades as well, giving you a cost-effective way to manage your entire portfolio. (Who wants the hassle and cost of multiple brokers for multiple things?)
Along with competitive pricing, OptionsHouse has one of the most accessible platforms around: clean design, loads of information, and truly user-friendly tools. Trigger Alerts lets users set up their accounts to automatically purchase an order based on a particular scenario. For example, you can set an alert to buy any number of shares of one stock if its direct competitor falls by a certain percentage. When that’s triggered, you get an alert on any device that lets you confirm the purchase or ignore in one simple reply. Tools like tradeLAB help dissect options spread, with green smiley faces for the statistical probability of making a profit, and red frowns for a loss. OptionsHouse also offers a “dime buyback program” that makes it easy to close any short options without paying commission fees.
Barron’s named OptionsHouse “Best for Options Traders” and gave it a 4.5 out of 5 stars overall, and a perfect 5 for its mobile performance. Whether you prefer to trade via desktop, tablet, or mobile, its customizable interface seamlessly transitions between all three — though, admittedly, customers seem to love or hate the app.
Beginners to the more advanced world of options may feel more comfortable with the resources and education that E*Trade and TD Ameritrade excel at, including on-demand videos that show each click of a trade, webinars on strategy, and in-person tutorials at physical branches. (Since E*Trade acquired OptionsHouse in late 2016, we can anticipate a merger of tools, services, and support that will help OptionsHouse grow here, although it hasn’t happened yet.)
OptionsHouse does fall short in mutual funds — it charges $20 per trade, as opposed to Ally Invest’s $9.95 — currency trading, and commission-free ETFs, but for the active trader who know what they’re doing, it’s one of the best platforms available.
|Stocks & ETFs||$4.95||$6.95||$4.95 – $6.95 per trade*|
|Options||$4.95, plus $0.50 per contract||$6.95, plus $0.75 per contract||$4.95, plus $0.50 per contract* $6.95, plus $0.75 per contract|
*Fees drop from $6.95 to $4.95 at 30 trades per quarter
OptionsHouse An options-first broker that leads the competition in both price and platform. It stands out for having no minimum to join or to maintain an account.
Trade commission: $4.95
Account minimum: $0
Promotion: $1,000 commission-free trades with $5,000 deposit
Fidelity Review – Best Research & Tools
If there’s a way to slice and dice the market, Fidelity has thought about it. Its platform wins for user-friendly design, plus there are tons of educational resources for deeper research. If you’re a do-it-yourselfer who enjoys geeking out over data and analysis, Fidelity’s tools will help take the guesswork out of finding funds and nosing out strategies.
We admired Fidelity’s platform that lets you explore your options with a slick and intuitive design, complete with color-coded rankings and charts that call out what’s important. You can sort stocks by size, performance, and even criteria like sales growth or profit growth. Want to sort ETFs by the sectors they focus on, or their expenses? Done. There’s even a box to check if you want to only explore Fidelity’s commission-free offerings. A few other discount brokers do offer screeners, but none match the depth and user-friendliness of Fidelity’s.
When it comes to research, Fidelity is pretty much in a league of its own. The intellectually curious can dive into research from more than 20 providers, including Recognia, Ned Davis, and McLean Capital Management. Fidelity’s Learning Center featured videos are organized by topic – including not just the concept, but also how to apply those concepts to your own investments using the Fidelity platform. It’s a powerful way to learn investing techniques and immediately put them to practice.
Fidelity’s accolades keep stacking up. Kiplinger’s 2016 Online Broker Survey ranked Fidelity best overall against seven other major brokers. Investor’s Business Dailyranked Fidelity among its top five brokers based on site performance, research tools, and customer service. Barron’s 2016 Online Broker Survey compared 16 platforms, and awarded Fidelity with the top overall score of 34.9 out of a possible 40.0, stating, “Fidelity Investments made it to the top this year due to the variety of trading and investing tools, and the quality of its trade execution.”
Better yet, Fidelity dropped its commission fees from $7.95 to $4.95 in February 2017, making it competitive with other historically low-cost platforms like Ally Invest and OptionsHouse.
That said, some of Fidelity’s advanced tools are only available to high-volume traders (for example, charting with Recognia requires a significant 120 trades per year to use, and its Active Trader Pro requires 36 trades per year). TD Ameritrade stands out in contrast by offering its premium tools to anyone with an account. With that said, even Fidelity’s basic tools are high-quality enough to make it a top pick.
Fidelity Industry-leading research from over 20 providers make this the go-to broker for do-it-yourselfers who want to dig deep into the data.
Trade commission: $4.95
Account minimum: $2,500
Promotion: 300 commission-free trades with $50,000 deposit
Did You Know?
Investments come in multiple shapes and sizes for different levels of expertise.
*Offers commission-free or transaction-free trading
- Stocks: a portion of a company ownership. The more valuable the company, the more valuable its stock. Unfortunately, the reverse is true as well. Level: beginner
- Bonds: a loan you make to a company or government in exchange for interest and the return of principle at some future date. If your city wants a new stadium, for example, it might issue a bond to pay for it. These investments are rated for safety by third-party companies, with AAA being the least risky. Level: beginner
- ETFs: short for exchange traded fund. These are investment funds that trade like a stock on a stock exchange, but their performance tracks an underlying basket of stocks. They provide diversification within one investment product, so they present lower risk than futures. Level: beginner
- Options: a contract between a buyer and a seller to buy or sell something at a specified price at a specified time, basically as a way to bet on the future price of an investment. Level: advanced
- Futures: short for futures contract. This is an agreement to buy or sell assets, such as commodities or shares, at a fixed price to be delivered and paid for at a later date. If you think you can speculate on next year’s price of gold, this fund is for you. Level: advanced
- Forex: short for foreign exchange. This market is for trading currencies and speculating on what today’s yen, for example, will cost tomorrow. Level: advanced
Cheaper is always better for investors.
Warren Buffett is the best example to hit this point home. In 2008, he bet some hedge fund managers $1 million that they wouldn’t be able to make more money in a decade than a cheap, boring index fund. An index fund has a fixed portfolio of stocks that never change — and therefore don’t accrue a lot of fees – while more complex hedge fund strategies may pivot and rack up big costs along the way.
Buffett is so far ahead that he’ll almost certainly come out the winner when the contest ends in 2018. He’s beating his high-priced peers not because he’s scoring bigger gains, but because he reduced costs.
Let’s say you put $1,000 in a stock and the investment goes up to $1,200. Broker fees can have a big impact on your net returns — that is, your total investment profits after fees.
|$1,000||10%||$10 to buy, $10 to sell||$1,080||8%|
|$1,000||10%||2% of assets, 20% of profit||$1,060||6%|
In order to beat that “two and twenty” fee structure, your investment has to perform really well to offset the additional costs — something that is a lot harder to control in the long term than costs.
A Few Other Fees and Costs to be Aware Of
Broker fees are typically where most costs add up, but your investing strategy can also be a big source of expenses and fees.
The capital gains tax rate favors long-term investments. An investor who buys and sells their stocks within a few months will face a higher capital gains tax rate (25 percent) on their profits than an investor who buys and holds their stocks for a full year (15 percent). If you’re looking at a $10,000 profit, waiting those extra months could make a full $1,000 difference. Granted, there’s a risk to holding an investment, but if you’re close to that one-year cutoff, it might be worth it to sit tight for a few more weeks.
Mutual funds and ETFs come with their own set of fees too. Like broker fees, pay attention to the expense ratio (usually a percentage) of any mutual funds or ETFs you purchase in your account, even if you’re buying them commission-free. These extra fees are another big cost to investors, but they aren’t deducted from your account balance. Instead, these fees show up in the price on the ticker tape. That’s why many high-priced mutual funds’ and ETFs’ value per share doesn’t seem to change over time — any growth is offset by fees.
Also watch out for mutual funds that charge a front- or back-end load for each purchase or sale. These usually range from 0.5% to 1% and can add up quickly.
Play with your own fake money. Give yourself a few thousand in fake money and play investor for a bit while you get the hang of it. “Just start. Even with just a virtual portfolio. Start and then commit to building over time,” says Barratt. “Don’t expect anything major to happen in a short time — build your money muscles by taking risks in a virtual portfolio.” TD Ameritrade offers paperMoney, its virtual trading platform. If you open an account, OptionsHouse offers its paperTRADE account to test your strategies. Outside of actual trading sites, MarketWatch and Investopedia offer simulators to get you started.
Buy what you know. Our experts suggest you begin by looking at your own life. “Buy what you know, where you are. If you can, identify good companies locally,” says Randy Cameron, a portfolio manager and investment advisor with 35 years of experience. “Look for companies you and your friends are talking about, ones with plans to go national.” As for how much time and money you need, “Start with what you have,” he says. There is literally no minimum to get started. You can buy one share of a company if you like.
Don’t check your account too often. The best investors are in it for the long haul. Checking your account too often might make you react to the fluctuations in the market too quickly. Personal finance expert Ramit Sethi has written that you should check your investments, “probably every few months, with a major review every year.” On many sites, you can also set an alert if a stock dives. Other than that, just set a quarterly recurring appointment so you know you’ll handle it at the right time.