Best Online Stock Brokers for 2021
Want to buy shares of stocks like Apple (AAPL), Facebook (FB), Disney (DIS), or Uber (UBER)? If so, you will need an online broker account.
Choosing an online stock broker is one of the most important decisions you will make as an investor. This guide aims to introduce online trading and break down the best online brokers available today.
Table of Contents
The top picks for the best online stock brokers in 2021
- Etoro – Best offering and copy trading service
- WeBull – Great Selection of Markets
- Degiro – Low trading fees (free stock and ETF trading). Superb desktop trading platform. Great customer support.
- TD Ameritrade – Best for overall and beginners
- Fidelity – Best market research experience
- Charles Schwab – Best for IRA accounts
- E*TRADE – One of the Best web platform
- Interactive Brokers – Best for professionals
- Merrill Edge – Best rewards program
- Robinhood – Excellent Stock Trading App
- TradeStation – Best platform technology
- Ally Invest – Free stock and ETF trading. Outstanding research. Great customer service
- SoFi Active Investing – Commission-free US stocks and ETFs. Great trading platforms and research. US and international stocks
- Cash App – Low trading fees. Wide range of products. Many great research tools
- Firstrade – Low-cost, well balanced, and all-round easy-to-use stock broker
eToro is popular for its easy-to-use copy-trading platform where traders can copy the trades of investors across over 2300 instruments, including exchange-traded securities, forex, CFDs, and popular cryptocurrencies. It also offers 0% commission stock trading.
Risk Warning
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70%-85% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Webull offers a unique community experience and easy to use trading platforms that will satisfy most young investors, and offer 0% Commission stock and ETF trades.
TD Ameritrade delivers the ultimate package for investors, including $0 trades, fantastic trading platforms, excellent market research, industry-leading education for beginners, and reliable customer service. This outstanding all-round experience makes TD Ameritrade our top overall broker in 2021.
Fidelity is a value-driven online broker offering $0 stock trades, industry-leading research, excellent trading tools, an easy-to-use mobile app, and comprehensive retirement services. Serving over 30 million customers, Fidelity is a winner for everyday investors.
Founded in 1973, Charles Schwab is a full-service brokerage with over $3 trillion in total client assets. As a low-cost leader offering $0 stock trades, Charles Schwab provides investors excellent stock research, quality trade tools, and professional planning for the future.
Founded in 1982 as one of the first online brokerages in the United States, E*TRADE understands what investors need to succeed in the market. E*TRADE highlights include $0 trades, two excellent mobile apps, and the Power E*TRADE platform, which is great for options trading.
While Interactive Brokers is not well known for its casual investor offering, it leads the industry with low-cost trading for professionals. Through the Trader Workstation (TWS) platform, Interactive Brokers offers excellent tools and an extensive selection of tradeable securities. Excellent for professional traders - IBKR offers customers an arsenal of 63 different order types, the most in the industry by a landslide. Margin rates are also the lowest in the industry, across the board.
While Firstrade is easy to use and terrific for Chinese-speaking investors, its overall offering struggles to stand out against brokers who also offer $0 stock trades.
Backed by parent company Bank of America, Merrill Edge delivers $0 stock and ETF trades with fantastic research and customer service. Better yet, for current banking customers, Merrill Edge's Preferred Rewards program offers the best rewards benefits across the industry. To open an account with Merrill Edge, you do not have to be a Bank of America customer. That said, it is far easier to reach the minimum combined account balance to earn all sorts of perks under the Preferred Rewards program
As a trading technology leader, TradeStation supports casual traders through its web-based platform and active traders through its award-winning desktop platform, all with $0 stock and ETF trades. TradeStation 10 is a desktop-based, downloadable trading platform for online trading that is robust and full of trading tools. In our testing, TradeStation 10 is rivaled only by TD Ameritrade's thinkorswim platform.
For current Ally customers looking to invest in stocks, Ally's universal-accounts experience and easy-to-use website is a convenient solution.
Robinhood is very easy to use; however, now that all online brokers offer $0 stock and ETF trades, Robinhood's lack of trading tools and research leaves it a step behind the competition.
SoFi Active Investing is geared toward young investors getting their start in trading, with commission-free trades of stocks, ETFs, and fractional shares. SoFi also offers cryptocurrency trading. SoFi Active Investing's $0 trading commission and $0 account minimum is attractive to new investors, but a lack of investment choices such as mutual funds and bonds is a drawback for those saving for retirement.
As more people embrace the convenience of cashlessness, tech companies have made it easier to send and receive money instantaneously from a smartphone. One of these services, Cash App, has been increasing in popularity and offers some unique functions compared with other money transfer options, like investing in stocks, getting special savings with “cash boosts” and buying and selling bitcoin.
2021 Overall Stock Broker Ranking
Here are the Overall rankings for the online stock brokers who participated in our 2021 Stock Broker Review, sorted by Overall ranking.
1
0% Commission
Risk Warning
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70%-85% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
- 15 cryptocurrencies that can be traded 24/7
- Easy-to-use website and mobile app
- Great community for cryptocurrency traders
2
0% Commission
Risk Warning
Trading of stocks and all other investment products involves a substantial risk of loss and is not suitable for every investor. The value of stocks may fluctuate and as a result, clients may lose more than their original investment.
- Commission-free trading in over 5,000 different stocks and ETFs
- No account maintenance fees or software platform fees
- Leverage of 4:1 on margin trades made the same day and leverage of 2:1 on trades held overnight
3
No Bonus
Risk Warning
Investing involves the risk of loss
- Easy-to-use web and mobile platform
- Regulated by multiple top-tier authorities
- No account fees
4
5
6
7
8
9
10
11
12
13
14
15
Are these brokers safe?
Each broker on our list is considered safe. You can be sure none of them is a scam. They are all regulated by at least one top-tier regulator.
However, brokerage companies can also go bust. Remember the collapse of Lehman Brothers? In such cases, it is important to know what happens with your securities and cash. Your funds are usually held in segregated accounts, so even if your broker goes bankrupt, your funds are safe.
If all goes wrong, and for example, the broker can’t pay your back your money, then you have a last resort, the compensation fund of the country where the broker is regulated.
What is a stock broker?
A stock broker is an entity that facilitates the buying and selling of marketable securities like stocks and exchange-traded funds (ETFs). Through a stock broker, you can open a brokerage account, which is a specialized financial account that is designed to hold investments as well as cash.
When you want to buy stock in a company, you can’t simply call up the company and buy shares, nor can you just walk into your local bank and invest. You’ll need a specialized type of account, and that’s where the best online stock brokers come in handy.
What are the different types of stock brokers?
There are two main types of stock brokers:
- Discount Broker
- Full-service Broker
The costs and level of service you can expect from each type is very different, so if you’re looking for the best online stock brokers, it’s important to understand what they are.
Discount broker
A discount broker, also known as an online discount broker, is a company that allows investors to buy and sell investments online. While many discount brokers have valuable features, the actual process of buying and selling stocks is mainly user-generated, meaning that there’s not an actual broker who takes and fills clients’ orders.
Discount brokers are much cheaper than full-service brokers, and most actually offer zero-commission stock trading, as you’ll see in the discussion about costs below. For the vast majority of investors — especially beginning investors — a discount broker is the best choice. In fact, our list of the best online stock brokers for beginners is exclusively made up of discount brokers.
Full-service broker
Think of a full-service broker as an “old-style” broker. This is a firm that operates out of a physical office where an actual person, or stock broker, takes and executes clients’ buy and sell orders. In addition, a full-service broker might provide personalized investment planning services, such as advice on what stocks to buy, tax guidance, and retirement planning help.
While costs have generally come down over the past few decades, full-service brokers are far more expensive than discount brokers. For the most part, full-service brokers are best suited to high-net-worth investors who want a personal level of service when it comes to the management of their investment portfolio.
What type of stock broker do I need?
The best type of broker depends on your personal situation, so no single type of broker will be right for everyone. However, for most beginners, the low-cost structure of a discount broker makes more sense. Plus, discount brokers are becoming more feature-rich over time, with educational resources, stock research, and other valuable features available at no additional cost.
How to pick the best brokerage account
There’s no perfect broker for everyone, but here are some of the important factors to keep in mind as you’re scrolling through our favorite online brokers:
- Cost structure: Most online brokers don’t charge any commissions for online stock trades, but many do have commissions or fees for things like options trading, mutual funds, and other features.
- Account minimums: Some online brokers have no minimum initial deposit requirement, while others require a certain amount of money to get started, such as $500. If you want to get started with a relatively small amount of money (and we certainly encourage you to start investing, even if you don’t have a ton of capital), be sure the online broker you choose can accommodate you.
- Mutual funds: Investing in individual stocks isn’t right for everyone. If you plan to invest some or all of your account in mutual funds, be sure that your broker offers a large selection, and preferably a large number of no-fee choices.
- Features: If all you want to do is occasionally buy and sell stocks, a no-frills stock trading app or platform could be all you need. On the other hand, there are online brokers that offer vast educational resources, access to third-party stock research, live-streamed news, and more. And, if you plan on being a more active investor, some online brokers have more complex and feature-packed stock trading platforms. But it’s important to stress that there is no one best investment platform for beginners — it depends on your needs and preferences.
Types of Brokerage Accounts
There are a number of types of accounts available at brokerages:
- Cash accounts: A cash account is a brokerage account in which a customer is required to pay the full amount for securities purchased, and buying on margin is prohibited. The Federal Reserve’s Regulation T governs cash accounts and the purchase of securities on margin.9 10 This regulation gives investors two business days to pay for securities.
- Margin Accounts: A margin account is a brokerage account in which the broker lends the customer cash to purchase stocks or other financial products. The loan in the account is collateralized by the securities purchased and cash and comes with a periodic interest rate. Because the customer is investing with borrowed money, the customer is using leverage which will magnify profits and losses for the customer.
- Retirement Accounts: Brokerages offer all types of retirement accounts like Traditional IRAs, Roth IRAs, and 401(k)s.
Where can you buy stocks?
While traditional discount and full-service brokers are where most investors go to buy stocks, they’re not the only option. Investors are now flush with options of where to buy stocks with mobile money-related apps now offering a suite of investment services in addition to budgeting and payments tools. Apps such as Acorns and Square’s Cash App are great options for buying stocks and managing an array of money needs.
Many brokers have also introduced Robo-advisor offerings. These are different than a traditional brokerage account in that investors mostly set their portfolio selection on cruise control and let automated algorithms do the stock buying for them, instead of individually picking stocks or working with a financial advisor. The result is a low-cost solution that’s a great fit for hands-off investors.
Trading commissions and account minimums
Trading commissions and account minimums are largely a thing of the past — especially when it comes to our best brokerage accounts for beginners. Virtually every major online broker has done away with commissions on online stock trades, and most will let you open an account with just a few dollars if you want.
However, some still have minimum balance requirements and others may require a minimum amount of money to utilize certain features, such as margin investing. And while most have no commissions for online stock trades, most brokers do have commissions for trading options and mutual funds, among other things. That means it’s worth taking a look at a particular broker’s fee schedule before deciding whether to open an account.
Why commission fees matter
Here’s why trading commissions are so important: Let’s say that your broker charges a $6.99 commission for online stock trades and you have $1,000 to invest. You want to spread your money across a portfolio of five stocks. So, to make your initial investments, you’ll pay nearly $35 in trading commissions. This means that you’re effectively starting out with a 3.5% loss in your portfolio. Plus, you’ll pay another $6.99 every time you add to each one of your stock positions. If you’re planning to build up your portfolio over time, it’s not hard to see how this can rob you of thousands of dollars over the years.
As you can see from the table below, all of our best brokerage firms for beginners offer commission-free stock trading. However, the commissions and fees for other types of trades and services can vary dramatically, so it’s still important to look at the entire fee schedule before deciding on a broker.
BROKER ONLINE STOCK COMMISSION
| BROKER | ONLINE STOCK COMMISSION |
|---|---|
| Etoro | $0 |
| WeBull | $0 |
| Degiro | $0 |
| Fidelity | $0 |
| Charles Schwab | $0 |
| E*TRADE | $0 |
| Interactive Brokers | $0 |
| Merrill Edge | $0 |
| TradeStation | $0 |
| Ally Invest | $0 |
| SoFi Active Investing | $0 |
| Cash App | $0 |
Keep in mind the account minimum
Most major online brokers, including all of the brokers listed on this page, have no account minimum whatsoever. This historically hasn’t been the case, and when I opened my first brokerage account nearly 20 years ago (with one of the companies on this page), I needed $2,000 just to get started.
A low minimum deposit requirement is especially important for beginners or younger investors who may not have a ton of capital available immediately but want to gradually build their first investment portfolio.
As mentioned, all of our favorite online brokers for beginners have no minimum balance requirements to open or maintain a brokerage account, but this isn’t necessarily true for all online brokers. So, if you’re considering one that isn’t on our list, this is an important piece of information to find.
What do I need to open a brokerage account?
The process for opening a brokerage account is similar to the process for opening a checking or savings account. If you’re using an online broker, it should take you about 15 minutes and should involve filling out a few simple forms.
To help expedite the process, make sure you have these available:
- Social Security number (SSN): Not only is your SSN used for identity verification purposes, but your broker needs this information to prepare year-end tax forms. If your account earns interest, receives dividend payments, or sell investments resulting in a profit (or loss), there may be tax implications.
- Driver’s license or other forms of ID: If you don’t have a driver’s license, you can typically use another state-issued ID or a U.S. passport to verify your identity.
- Funding method: The easiest way to fund a new brokerage account is by an ACH transfer from your bank account, so be sure to have your bank information handy if you plan to use this method. Alternatively, you can mail a check or wire money, and your broker might have other funding options as well.
Can I Withdraw Money From a Stock Broker?
Withdrawing your money from a brokerage is relatively straightforward. When you have money in a brokerage it is generally invested into certain assets. Sometimes there is cash left on the side that is in the account but not invested. This excess cash can always be withdrawn at any time similar to a bank account withdrawal. The other money that is invested can only be withdrawn by liquidating the positions held. This means selling the assets that you purchased like stocks, ETFs, and mutual funds. Once sold, you can withdraw that cash.
How to invest in stocks
So now that we went through the fundamentals and got to know the brokers and the basics a bit better, how do we start?
There are many ways to benefit from a rising stock market. No matter if you want to invest in household names like Microsoft, speculate in rising stars like Tesla, or invest in gold.
This 5-step guide will help you get on the right track:
- Make a stock investment plan
- Choose an online stock broker
- Open and fund your account
- Buy the stocks
- Regular review
After this short introduction let’s look at each of these steps in more detail.
No 1 – Make a stock investment plan
The first step before you make stock investments should be making a plan, which involves several basic questions you should think about.
The three main factors you need to consider before investing in stocks are:
- Goals: What are your objectives? What is your timeframe?
- Time: How much time do you plan to spend on this activity?
- Risk: Are you OK with high risks or do you prefer to worry less?
Knowing the answers to these questions will put you on the right path to invest in stocks. It will help define which kinds of products and stocks are the best fit for you based on your investment goals, time commitment, and risk profile, or whether stocks are for you at all.
Are stocks for you?
Last, let’s look at whether stocks are the right investment for you, or if you should focus on other types of products.
Regarding risk, a good rule of thumb to follow is this: If your stocks are down 20% in a week, how badly would that affect you? If that is too much and you don’t think you would be able to handle it, then stay away from stocks and invest instead in some less risky assets, such as short-term U.S. government bonds, for example. If, however, you would be OK with this kind of short-term loss in the hope of long-term gains, then go ahead, stocks might be right for you.
Diversify your portfolio
- Risk: If you put all of your savings in just one or two stocks, and the company you selected goes bust, you could lose all your invested money.
- How to manage it: Diversify your investment portfolio. This practically means buying many different stocks and not putting all your eggs in one basket. The ideal number of stocks in a portfolio ranges somewhere between 5 to 30.
Alternatively, you can also invest in ETFs or mutual funds, which are a natural, simple form of diversification. Read more about ETFs here.
Another popular method to decrease risk in your portfolio is to invest in gold along with regular stocks. Read more about how to invest in gold or buy stocks of gold mining companies here.
No 2 – Choose an online stock broker
If you’ve decided on what type of product you want to buy to invest in stocks, you need to open an account at a stock brokerage firm. But which one? Today there is a wide array of choices available for all kinds of brokers, be they traditional brick-and-mortar companies with offices, or online broker firms. Each brokerage has its own strengths and weaknesses, different fee structures, product offering, trading platform, research and learning tools, and so on, so the choice can be a difficult one.
Avoid investing with scam brokers
- Risk: Unfortunately, there are many scams online “brokers” out there trying to steal your money. When you see ads for binary options trading or automated investment algorithms that generate outstanding returns, start to get very suspicious. In these cases, the best thing to do is to ignore these ads.
- How to manage it: When investing in stocks online, go with our selection of safe, verified brokers. We have an active account with the brokers we selected and we test them regularly.
No 3 – Open and fund your account
Once you’ve selected the right stock broker for you, you need to open an account. This account will handle all your money, as well as all of your investments, such as stocks, funds, bonds, etc. The account opening can usually be done online and may take anywhere from a day to several days. You will also need to fill out various identification forms, so have your documents ready.
After opening your account, in order to start investing in stocks, you will need to deposit money to the account, which is also referred to as funding your account. Depending on the broker, this can be done via bank transfer, credit card, or even electronic wallets like Paypal or Apple Pay. Some brokers also set a minimum amount that you have to deposit to start trading, so keep this in mind when making the transfer.
Tip: Open a demo investment account
Many online brokers offer demo accounts, where you can try out how buying and selling stocks works, without risking any of your actual money. These accounts and trading platforms look the same as the live ones, but no actual transactions are carried out on the open market – the deals are only virtual. It’s a useful tool for getting to learn the details of stock trading in demonstration mode, before jumping into the market with your hard-earned savings.
No 4 – Buy the stocks
With your investment strategy ready, and your account opened and funded, all you need to do now is buy the stock that you have selected. Trading platforms usually have a search function to help you with this process. Taking into account how much money you have and the price of the product, enter how many shares you want to purchase and press ‘Buy.’ Congratulations! You have now made your first investment and are the proud owner of the stock.
When placing an order, you can choose from different order types. A market order buys immediately at the current market price, while a limit order allows you to specify the exact price at which you want to buy the shares.
Avoid crappy stocks
Risk: when buying individual stocks, there is always a risk of selecting the wrong ones. This could mean anything from a company that inflates its potential, actually defaults, or just buying overpriced stock.
How to manage this risk
- Learn: This is the tricky part since you need some knowledge and experience to learn which stocks to invest in. The best is to start learning by reading books on investment and taking online courses. There are tons of great books out there, but you can start with Intelligent Investor by Benjamin Graham. This is also the book on investment most recommended by Warren Buffet.
- Gather information: While you are learning, start collecting as much information about your target companies as possible. Read about them, understand their business profiles, start going through their income statements, gain some knowledge about their management or even attend their annual meetings. These will help you get a better understanding of the company and the specific industry.
- Compare multiple: When it comes to pricing, use industry multiples as a benchmark for your target stock. P/E is a basic multiple, but each sector has its own favorite.
No 5 – Regular review of your investments
After the initial purchase is done, you can start building or changing your portfolio by buying new products or selling them in order to reap the profits (or cut losses). This is called portfolio management and is usually a necessary part of investing. Although it is possible to buy just once, lie back, and hope that you made the right choice and you will be a millionaire years later when you retire, it is not the general experience.
For short-term buyers, position management could mean setting up the stop-loss price of where to cut losses and the target price of where you want to sell the shares with a profit.
A good investor keeps an eye on market movements, how economies are doing, which sectors are booming and which are struggling, and adjusts his or her strategy, and makes investment decisions accordingly.
Even if you are a long-term investor, you should review your assets a couple of times a year at least. If you are satisfied, then you can leave things as they are, but if you want to make changes you should. If you are unsure, don’t be afraid to ask for advice, either from an advisor at your online broker, or by doing some research yourself, watching online videos, or educating yourself via investment courses.
Terms for Beginners to Know
Anyone who would like to get involved in the stock market should know some basic terminology:
- Stock: A stock (also known as “shares” or “equity”) is a type of security that signifies proportionate ownership in the issuing corporation. This entitles the stockholder to that proportion of the corporation’s assets and earnings.
- Price-to-Earnings Ratio – P/E Ratio: The price-to-earnings ratio (P/E ratio) is a ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple.
- Market Capitalization: Market capitalization, commonly referred to as “market cap,” refers to the total dollar market value of a company’s outstanding shares. Market cap is calculated by multiplying a company’s shares outstanding by the current market price of one share.
- Dividend: A dividend is the distribution of reward from a portion of the company’s earnings and is paid to a class of its shareholders.
- Exchange-Traded Fund (ETF): An exchange-traded fund (ETF) is a collection of securities—such as stocks—that typically tracks an underlying index.
- Bond: A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.
- Mutual Fund: A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors.
- Limit Order: A limit order is the use of a pre-specified price to buy or sell a security. For example, if a trader is looking to buy XYZ’s stock but has a limit of $14.50, they will only buy the stock at a price of $14.50 or lower. If the trader is looking to sell shares of XYZ’s stock with a $14.50 limit, the trader will not sell any shares until the price is $14.50 or higher.
- Market Order: A market order is a request by an investor – usually made through a broker – to buy or sell a security at the best available price in the current market. It is widely considered the fastest and most reliable way to enter or exit a trade and provides the most likely method of getting in or out of a trade quickly. For many large-cap liquid stocks, market orders fill nearly instantaneously.
