An online stock broker allows customers to buy and sell stocks through a brokerage account via an online trading platform. An online stock broker can be thought of as a channel to stock exchanges. These brokers charge a commission for every trade. They send your orders to market makers and stock exchanges, who match your order with someone selling.
You can’t buy stock via your bank account, or call the company to buy shares; you have to find the best stock broker.
The brokerage industry has seen a dramatic transformation over the past two decades. This is good news for ordinary investors. You used to need to call a stock broker to place an order to buy stock. This was a complicated process that was costly.
Without a broker, you and I cannot knock on the doors of the stock exchanges to make trades. The stock exchanges we see in movies and TV aren’t actually what they appear to be today. Trading takes place mainly between computers in dimly lit servers rooms in New Jersey, just a few miles away from New York City’s financial district.
Full-service vs. Discount brokers
The terms we use to describe the people and businesses involved in trade facilitation have also changed. Instead of using “stock broker” to describe any brokerage firm or person who deals in stocks, today we divide companies into “full-service and discount brokers,” terms that better describe their actual work.
Brokers at a discount
Discount brokers can be found online. They don’t offer stock pickings or advice. Discount brokers are focused on providing a simple service that allows you to buy or sell stocks (or any other investment type) from your home. Discount brokers don’t have to offer many extras and can charge a very low price for their services. Virtually all online stock brokerages charge $0 for placing a stock trade. This is a great deal, especially when compared to what traditional brokers charge. They also charge low fees on other products and services. Discount brokers often have lower minimum investment requirements, or no minimums at all, making them more accessible for everyone.
Full-service brokers
Full-service brokers are closer to stock brokers in the past than brokerage firms. Full-service brokers often have human brokers that can help you find mutual funds to invest, make a retirement plan , and make trades. Full-service brokers can be expensive because people are more costly than computers. Popular full-service brokers charge a minimum $75 to trade stock. For large amounts of stock, that could rise to $500 or more. A full-service broker may charge you fees equal to a percentage of the amount that you invest when you buy a mutual fund. This could potentially cost you thousands of dollars. Full-service brokers have higher account minimums. Some advisors will only work with clients with assets of $1 million or more.
The lines between these types of brokers are blurring, in fact. Now, discount brokers offer wealth-management services at a fraction of the cost of full-service. This includes the assistance and guidance of a human advisor. Full-service brokers may also offer basic services at a discounted price. Merrill Edge(r), Self-Directed, for example, is the discount brokerage arm at full-service brokerage Merrill Lynch.
The best stock trading platforms
Our top brokerage accounts offer multiple free stock trading apps and educational resources. Here are the top features that we considered when choosing the best online stock brokers and why they are important to you.
- Commissions & fees: Basic, ETF and online stock trades should be completely free. Period. Online stock brokers charge investors $0 in commissions. Some even offer options trading at no cost, which can prove especially valuable to active traders. Online brokerages often charge commissions for mutual funds trades, as well as other services. It’s important to compare fees structures.
- Mutual funds Although most brokers charge a commission for mutual fund trading , most have a list containing hundreds to even thousands of funds and they trade without any commissions.
- ETF investment: The top ETF stockbrokers will have $0 online commissions to ETF investing and they tend to provide access to a wide range of low-cost, branded ETFs. These ETFs, which are often branded by stock brokers’ analysts teams, come with low expense ratios and are managed by them.
- Options investing: An account that is well-rounded in stock brokerage will allow you to invest in stocks, mutual funds and ETFs. Some options trading platforms offer $0 commissions on online options trades, high-quality trading software across mobile, desktop and online devices. However, many options trading platforms still charge per-contract fees.
- Account minimums While many of our favourite online stock brokers do not have account minimums, a few do. Before you choose a broker, make sure you are able to meet the minimum investment requirements if you’re just starting out as an investor.
- Trading platform Stock brokerage accounts offer full-featured, complex online stock trading platforms and software to frequent traders. They also have managed portfolio services from robot-advisors. Others stock brokers have a simpler, more user-friendly approach. Many have excellent investing apps that can be used to purchase and sell stocks anywhere in the world.
- Screeners and research: An important reason to open an online brokerage account, is the ability to get a second opinion whenever you need it. A lot of top brokers offer full-service third-party research, stock and fund screening, so you can find out, for example, what annual fees a fund charges, or help choosing the right fund based on parameters such as price-to-earnings ratio.
How to choose the best stock broker
Your needs will determine which online brokerage account is best for you. These are some things to keep in mind:
- You don’t necessarily need a fully-featured trading platform if you intend to simply purchase and hold stocks .
- You should only buy mutual funds if you are primarily planning to do so. These brokerage accounts have low to no commissions for buying and selling mutual funds.
- You should look for a broker that does not require you to invest minimum amount of money if you are a new investor.
You should compare the fees charged by the top brokerages for trading stocks and bonds, as well as trades made over the phone. Comparing the top investment brokers in our list will help you narrow down which platform offers the features that you are looking for.
Brokerage accounts with the highest fees
There is so much competition among top stock broker companies that consumers can benefit from one of the most important aspects for long-term successful investing: commissions and fees. Brokerage accounts can now offer commission-free online trading of stocks and ETFs. It is becoming more common to receive $ commissions for mutual funds and cryptocurrencies as well as fixed-income investments. Here are some common fees associated with our top picks for the best brokerage accounts.
- TD Ameritrade $0 online Commissions for Stocks, ETFs and Options ($0.65 per Contract)
- Robinhood: $0 Online Commissions for Stocks, ETFs and Options
- Webull $0 online Commissions for Stocks, ETFs and Options
- SoFi Investing: $0 Online Commissions for Stocks, ETFs and Cryptocurrencies.
- Fidelity $0 online Commissions for Stocks, ETFs and Options ($0.65 per Contract)
- Interactive Brokers – $0 online Commissions for Stocks, ETFs and Options ($0.15-$0.65 Per Contract)
- E*Trade $0 online Commissions for Stocks, ETFs and Options ($0.50-$0.65 Per Contract)
- Merrill Edge $0 online Commissions for Stocks, ETFs and Options ($0.65 per Contract)
- Charles Schwab – $0 online Commissions for Stocks, ETFs and Options ($0.65 per Contract)
- Vanguard – $0 online Commissions for Stocks, ETFs and Options (Up to $1.00 Per Contract)
The type of trading that you do with your brokerage account will determine the lowest commission stock broker. Interactive Brokers and TD Ameritrade combine powerful trading software with low commissions. They also offer competitive margin rates. Robinhood, SoFi and Webull have the lowest commission brokerage accounts for stocks, ETFs and options. They don’t charge any commissions.
What is the best mobile stock broker app?
It’s no surprise that many of our favourite online brokers also have the best free investment apps. Some are mobile-focused like Robinhood. Others simply use mobile apps for their customers to trade stocks.
There is no single solution to the question of which mobile app is best for which brokerage firm. A user-friendly app makes it simple to trade stocks and others prefer an app with advanced features that allows for serious traders and active traders. If you plan to trade a lot via your mobile device, it is worth taking a look at the mobile apps of each broker.
Which brokerage firms are the best?
Our list of brokerage accounts you should consider includes many of the best brokerage firms. Below is a list of top brokerage firms as ranked by assets under management in 2022.
- Vanguard: $8.10 Trillion
- Charles Schwab: $6.60 Trillion
- Fidelity: $3.6 Trillion
- Bank of America/Merrill Lynch $3.20 Trillion
- J.P. Morgan: $2.6 Trillion
- Morgan Stanley: $1.30 trilion
- Robinhood: $0.06 Trillion
- Ally Invest: $0.01 Trillion
