The Ultimate Guide To Finding The Best Online Broker

finding the best online brokerWhen it comes to investing, there is no one size fits all approach. This is a problem when you are trying to find the best online broker. Unfortunately no one can claim to be the best online broker for every investor.

Some investors are young and only have a little money to invest. Others are seasoned and have a large amount of money to invest. Then there are active traders and buy and hold investors.

As a result, trying to figure out the best online broker needs to start with knowing where you fall on the investment landscape.

Do you have a lot of money to invest? Do you need a broker to help guide you? Answering these questions are key.

Once you know the answers, then you can scroll through this post to find the best online broker for you.

I’ve also created an online broker comparison chart. The goal is to help you find the right online broker by listing all the features and costs of each broker in a chart so you can quickly compare them against each other.

And if you still need a little help deciding, further down this post, I list 10 important things to think about when deciding on right online broker for you.

 

So let’s get started with helping you to find the best online broker that will fit your needs and goals.

The Ultimate List Of The Best Online Broker That Meets Your Needs

Since there are many categories to choose from, I summarize them all below. You can click the link to be taken to that category and read about who is the best broker for that category. Note that in all cases, I give you my recommendation as well as a runner-up to compare them against.

Best Online Broker Categories

Best Online Broker For Beginners
Best Online Broker For Dividend Investing
Best Online Broker App
Best Online Broker For Passive Investing
Best Online Broker For Active Investing
Best Online Broker For People Scared Of Investing
Best Online Broker For Mutual Fund Investing
Best Online Broker For ETF Investing
Best Online Broker For Those With Little Money
Best Online Broker For Trading Options
Best Online Broker For Those With Sizeable Assets
Best Online Broker For Kids

Best Online Broker For Beginners: Betterment

If you are just starting out investing, you have a ton of options. It comes down to your goals and how you feel about investing.

For first time investors who want to start investing and learn as you go, you can’t go wrong with Betterment. With Betterment, you take 10 minutes to open an account and set up a monthly transfer, along with choosing your goal. That’s it. Now you can spend your time learning about investing in greater detail.

The reason why I recommend Betterment for beginners is simple. They allow you to get started fast and they invest you in a high quality, low cost diversified portfolio. They also rebalance and tax loss harvest your portfolio for you. These are the basic building blocks when it comes to investing.

Since Betterment has these covered, you can take your time learning more about investing. All the while your money is in good hands.

Here is a link to start investing with Betterment today!

Runner-Up: Wealthsimple

Wealthsimple is another great option for beginning investors who want to learn as they go. As with Betterment, they will build a diversified, low cost portfolio for you, along with rebalancing and tax loss harvesting.

The major difference between the two is their fees. With Wealthsimple your first $5,000 invested for the first year is free. With Betterment, the fee is 0.25%.

Here is a link to get started investing with Wealthsimple!

Best Online Broker For Dividend Investing: M1 Finance

Dividend investing is glamorous now because of super low interest rates. You can thank the Fed for this. Everywhere you go, you read more and more about dividend investing. Heck, I even wrote a post about it along with stock recommendations. If you are considering this strategy, which broker do you choose?

My favorite is M1 Finance. The reason is simple. It can cost a lot of money to invest in stocks. Even if you go with the lowest priced online broker, you are still paying a lot of money. This is because to create a diversified stock portfolio you have to make a decent number of trades.

With M1 Finance, you keep costs in check. Instead of paying $4.95 (or more) for each trade you make with other brokers, with M1 you pay nothing. You read that right, with M1 Finance, trades are free.

And unlike with other free stock trading sites, you have access to every stock listed.

The only downside to M1 Finance is you cannot place real-time trades. Trades are made once a day at 9am Central Time. If you are a long term investor, this shouldn’t be an issue.

Click here to get started with M1 Finance.

Runner-Up: Motif Investing

Motif allows you to buy a basket of stocks for $9.95. This is considerably less than all other brokers. As with M1, you can choose the stocks that make up your portfolio. Adding or selling just one holding is possible too for a cost of $4.95 per trade.

The benefit of the paying for trades is that you can get market orders whenever the market is open. But as mentioned, if you are a long term investor, it is better to simply invest than get a specific price.

Best Online Broker App: Acorns

Thanks to technology, you can now invest using an app. Most brokers offer an app for you to trade through but there is one that stands out, Acorns.

Unlike most brokers where you invest a set amount of money, with Acorns, you invest your spare change. The app will round up your purchases and then transfer that amount to your Acorns account.

When your cash balance reaches $5, Acorns will invest the money into a diversified portfolio that you choose from based on your goals.

You can still invest small amounts of money on top of this and even take advantage of free money through their Found Money feature.

I just started using the app and have over $300 invested. My brother-in-law has a balance of more than $1,000 after a year of investing his spare change.

Acorns will give you $5 when you sign up using this link!

Runner-Up: Stash

Stash is similar to Acorns in that you can invest a tiny amount of money using their app. But they don’t round up your purchases. You just invest $5 or $10 on a regular basis, sit back and watch your balance grow.

They do have a Smart-Save feature in addition to your regular investing however that looks at your spending and transfers small amounts to be invested when you have the cash on hand.

To get you off on the right foot, Stash will give you $5 when you sign up! Click here to get started.

Best Online Broker For Passive Investing: Charles Schwab

If you are like me, you are a passive investor. If you aren’t sure if you are a passive investor, you can check out this post to find out.

When it comes to picking the best broker for passive investing, you have to determine what you want to invest in. This will point you in the right direction.

If you want to invest in stocks, mutual funds, and exchange traded funds, then your best option is Charles Schwab.

You can invest in stocks for a rock bottom trade commission. If you want to invest in mutual funds and exchange traded funds, Schwab has a huge inventory of no fee options for both.

And if you invest in Schwab mutual funds or ETFs, you will be paying some of the lowest management fees in the industry.

They are my primary broker and I get exactly what I need in mutual funds and ETFs and never pay a trading commission.

Runner-Up: M1 Finance

If you are most interested in stocks and ETFs, then M1 is a great option. Again, you can invest with no trading commission, regardless of the stock or ETF. And M1 allows you to build a custom portfolio based on the stocks and ETFs you want, or you could use a pre-built model.

To get started investing with M1, click here.

Best Online Broker For Active Investing: Ally Invest

Hands down, the best online broker for active investors or day traders is Ally Invest. They take the title mainly because they merged with TradeKing in 2017. As a result, they offer a wealth of tools and features to make trading simple and fast.

Add in their $4.95 commission for trades and you can’t beat Ally Invest. They will even give a lower trading commission to traders who place a certain amount of trades a month. You just have to call to ask.

You can get started with Ally Invest here.

Runner-Up: E*Trade

E*Trade has been around for a while and knows what traders want and need. As a result, they built their trading platform to cater to the most active investors. With plenty of tools, options and competitive trade commissions, E*Trade is a solid option to consider.

Best Online Broker For People Scared Of Investing: Betterment

If you are scared of the stock market, then the right online broker for you is Betterment. Betterment works because it takes your emotions out of the equation by automating the process. This is the biggest downfall for most investors.

How do they take your emotions out of investing? When you invest on your own, you might get scared to invest because the market has been dropping every day. You fear that putting money into the stock market is pointless since the market is losing value.

But no one can time the market. No one knows when the market will drop or when it will rise. Because of this, you have to keep investing on a regular basis regardless of what the market is doing on a given day.

With Betterment, you invest every month, ignoring what the market is doing. Hence, your fear is under control and you do the right thing. You keep investing more and more money for the long haul.

By automating the process, you don’t have to think about investing. It just happens for you. So while you are deciding whether to invest or not, Betterment already has done it for you.

Your emotions get in the way of investing when the market is rising too. Many investors allow their emotions, in this case greed, to tell them to invest. You cannot listen to your emotions when investing. It won’t work out. You won’t make money over the long term.

Take your emotions out of investing and you will see a better result when you invest your money.

Here is the link to get started with Betterment.

Runner-Up: Stash

The reason I really love Stash is because you learn about investing as you go. This helps you tremendously when it comes to controlling your emotions when the market gets volatile.

The better you understand how the stock market works, the better off you will be over the long run and increase the likelihood of being a successful investor.

Click here to get started with Stash and get $5 in the process!

Best Online Broker For Mutual Fund Investing: Charles Schwab

Mutual funds have been the best option for most investors for over 20 years now. While some mutual funds are great, there are many that charge way too much when it comes to fees.

You will find that many online brokers charge you a fee for investing in mutual funds. But some brokers don’t. For this reason, if you want to invest in mutual funds, your best option is Schwab.

The reason I like Schwab is because you can invest in over 3,000 mutual funds for free. While that number is great, I love their in-house Schwab mutual funds.

Most are index based, so management fees are low. So low they compare to and often are cheaper than Vanguard.

Also, they allow you to get started investing in Schwab funds with a measly $100 and invest as little as $1 going forward.

When I was first starting out, I was investing $25 a month. It was all I could afford but I loved the option of putting my money to work.

Fast forward to today, and that $25 a month really grew and compounded. My investment value is years ahead of where I would be if it wasn’t for that monthly investment.

Runner-Up: Vanguard

I love Vanguard. They offer a ton of great mutual funds and charge some of the lowest management fees in the industry.

The only thing that I don’t like is that you need $3,000 to start investing in a fund. Granted you could invest in the Star Fund for $1,000 but for some investors just starting out, that is too much money.

Best Online Broker For ETF Investing: M1 Finance

If you are looking to trade ETFs, then you cannot go wrong with picking M1 Finance. They have hundreds of ETFs that you can trade without a fee.

Even better, if you don’t feel like doing the research to buy ETFs, you can invest in a pre-built ETF portfolio that M1 puts together. They have a wide variety of portfolio’s to choose from.

Click here to start investing with M1 Finance for free.

Runner-Up: Schwab

I had to update this section because the runner up used to be TD Ameritrade. They offered both iShares and Vanguard ETFs without a trading fee.

Unfortunately they removed Vanguard from the no fee platform and only have a few iShares ETFs that you can trade for free.

As a result, I think Schwab is a better choice. You can invest in over 200 ETFs for free and most have low management fees.

Best Online Broker For Those With Little Money: Stash

I recommend most investors with a small amount of money to invest start out with Stash.

It is simple to get started, they offer pre-built portfolios for you to invest in, and you can invest as little as $5 at a time.

Once you have more money to invest, you can continue investing with Stash or transfer your account to another broker. But many people will be fine staying with Stash for the long term.

As a bonus, when you open a new account, Stash will give you $5! Click here to get started!

Runner-Up: Acorns

This was a close race as each did something the other didn’t. Acorns invests your spare change which I love, but Stash teaches you about investing as you go, which is why I gave it the recommendation.

Nonetheless, Acorns is a great option. You really can’t go wrong with either one.

To invest with Acorns and get $5 for opening your account, click here.

Best Online Broker For Trading Options: Ally Invest

If you want to trade options, there are options for you as well – no pun intended. Your best bet is to look into Ally Invest. By far, they offer the lowest cost for option trading.

As of this writing, an option trade will cost you $4.95 plus $0.65 per contract.

On top of being the lowest priced options broker, Ally Invest has other great features too.

First, they have tons of resources to help you with options trading. This is great for both new and seasoned options traders.

Second, they have a great trading platform. Over the years, they have acquired other firms to improve their offerings. They didn’t waste money trying to develop something when another company is already doing it. They just bought that company instead.

To get started investing with Ally Invest, click here.

Runner-Up: E*Trade

E*Trade has a solid platform for trading options. Before TD Ameritrade bought Scottrade, I would have recommended Scottrade.

TD Ameritrade is a decent option, but the user interface is confusing and lacking in my opinion, which is why I recommend E*Trade instead.

Best Online Broker For Those With Sizeable Assets: Vanguard

There are those investors who have a decent amount of money to invest. For these investors, Vanguard takes the cake.

Now when I say sizable, I mean around $50,000 or more. Why Vanguard? With that amount of money you can take advantage of Vanguards Personal Advisor Services. For a small fee (just 0.30% annually), you get a personal advisor.

While many of the robo-advisors are good, Vanguard is better in this regard because you are talking to a human and have some say into how your money is invested.

Runner-Up: Charles Schwab

Schwab offers roughly the same thing that Vanguard does for those with sizable assets to invest. The main differences are that with Schwab, you only need $25,000 for their Intelligent Advisory Service.

Additionally, the annual fee is 0.28% which is roughly the cost of the Vanguard. With one-on-one consultation and the proven track record of Schwab, this is a solid choice.

Best Online Broker For Kids: Stockpile

Hands down, the best online broker for getting your kids interested in investing or even having a loved one buy your kids stock is Stockpile. They make the process simple and easy with their gift cards.

Instead of the grandparent needing to jump through hoops to set up a custodial account, they just buy a gift card and the kids can set up their own account, with their parents help.

And kids can continue to invest in stocks without a gift card for just $0.99 a trade.

You can click here to get started with Stockpile.

Runner-Up: Stash

Aside from Stockpile, there are a lot of options when it comes to kids investing. I like Stash because of the simplicity of the app and the fact that you can invest with small amounts of money.

It would be easy for your kid to invest $5 from her allowance and then see it grow over time on the app. Add in Stash educating investors about the stock market and you can’t go wrong with this option.

Here is the link to get started and get $5 in the process.

10 Things To Consider Before Picking The Right Online Broker For You

So now that you have an idea of the different online brokers and what they offer, you need to make a decision. As I mentioned at the beginning, I can’t tell you which one to pick. You have to decide.

But I can help you keep some things in mind when you are trying to decide.

#1. Learn about the history of the broker. This is key. Some brokers have made acquisitions to offer better service and products for clients. They would be a firm you want to consider if they fit your needs.

If you find that an online broker has a lot of complaints, you may want to look elsewhere. The best place to check for complaints is with FINRA Broker Check.

#2. Don’t Let Price Be The Only Factor. While paying the least is ideal, it shouldn’t be the ultimate decision maker for you. Sure a firm might have rock bottom pricing but what are they lacking in other areas? Inconvenient customer service hours? A poor website?

Make sure you are getting value for the money you are paying. As long as you are, then the price is acceptable.

#3. Customer Service Is Important. While you don’t think you need help, the time will come when you have a question and need to talk to customer service. Make sure the broker you are considering has great customer service. Otherwise, you will be pulling your hair out trying to get help when you need it most.

Make sure they have convenient hours and have the option to chat instead of calling as well.

#4. Know Minimums And Fees. Many online brokers have a minimum initial investment. Make sure you know this and have this amount of money to invest before you pick on one. Many times the minimum isn’t bad, like $100. But in some cases, like mutual funds with Vanguard and their $3,000 minimum, it can be too steep for some investors.

Likewise, know what extra fees they may charge. Most of the brokers listed here don’t have inactivity fees or other fees like that. I can’t stand those fees. But many do have fees for closing your account and transferring it to another broker.

In some cases the new broker will reimburse you for this charge. But it is best to know this before you even invest with a broker.

#5. Look At All Offerings. While you might be a stock investor now, you may want to invest in ETFs down the road. Make sure whichever online broker you pick, they offer a wide variety of choices. The last thing you want is to have multiple accounts all over.

No broker will be best for every type of investment, but make sure they have a decent offering of the various types of investments.

In some cases, you may even consider the brokers credit card if they have a relationship with a bank. For example, if you open up a Schwab credit card, you get 1.5% cash back that goes into your investment account. That is a good extra to think about.

#6. Take Bonuses Into Account.Many brokers offer sign up bonuses to new investors, like cash or free trades for a period of time. While these are nice, don’t let them be the ultimate decision maker.

#7. Understand Trading Alternatives And Costs. In an ideal world, you will place the trades online yourself. But in some cases, you might need to get help. The brokers listed here don’t charge extra for online trades. But many do charge a fee for phone trades or trades you make with help from customer service. Make sure you know the cost involved.

#8. Play Around The Website. Nothing is more painful than a website that is impossible to navigate. Take some time to check out the websites of the brokers you are considering and see how user friendly their site is.

#9. Check The Site Often. In addition to making sure a site is user friendly, you want to make sure it is stable. Check at various times a day to see if the site slows to a crawl or if it performs just as fast each time.

#10. Know How Cash Is Handled. Odds are you will have idle cash sitting on the sidelines. While interest rates are low now, they won’t always be. Check to see how your cash is invested and make sure you are comfortable with this before deciding on a broker.

Final Thoughts

I hope after reading this post I cleared the air and have helped you to find the right online broker for you and your needs. There are a lot more brokers than the ones I mentioned. But these are the ones I have experience with and feel comfortable recommending to you.

Be sure to take your time and weigh out various brokers so that you can find one you are happy with the first time. I’ve gone through the process of switching brokers in the past. While none of the transfers have been painful, none have been a breeze either.

Once you choose your broker and start investing, be sure to sign up for a free account with Personal Capital.

You can keep track your investments, review your allocation and see the investment fees you are paying. Doing this will ensure you are on the path for reaching your investing goals.

If by chance you don’t have any investing goals outlined, then you need to do this now, before you start investing!

8 thoughts on “The Ultimate Guide To Finding The Best Online Broker”

  1. Good breakdown Jon! Finding the right broker for your situation is huge and one that many don’t consider – they often just go based off of price or the ads they’ve seen on TV. That said, one I’d add – especially for options and active traders is Optionshouse. They recently merged with TradeMONSTER and I have several accounts with them, though haven’t tested it out much since the merger, but I believe they’re slightly better than TradeKing in terms of price – though it’s admittedly not much…maybe by like $.25.

    1. You’re right that most people just look at price and don’t consider what they actually want to invest in and if that broker is the bests option for them.

      Thanks for adding in Optionshouse. I don’t deal in options much and getting options from other users is great!

  2. Excellent overview. I would say I’m a combination of index and dividend investor. Have looked into option trading but the stuff is just over my head. 🙂

  3. Jon, I always like this advice that we should pick a strategy and stick with it and adopt a long-term perspective! Hope you post a related topic on investing for those people who don’t have a lot of money. Nice advice Jon.

  4. I like using Fidelity for my investments. I have a Vanguard and a Scottrade account but still prefer Fidelities interfaces to see how my investments are doing better than any of the others that I’ve tried.

    But I do agree that Vanguard has hands down the best options for low cost index funds, that’s all I actually hold with Vanguard is some Admiral shares just because the costs are so cheap.

    I wonder if I would feel differently if I hadn’t been with Fidelity for 15+ years now. I hope I don’t lean towards them just because I’ve been with them so long.

  5. I like the fact that you give specific reasons as to which broker to choose. Vanguard will always be a favorite, but don’t discount fidelity as they are providing great customer service, and account features many lack.

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