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. Reviews.com’s mission is to spotlight those, and help you find the best one for your investing style.
They 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 they spent a lot of time balancing price with what each site offered. A few of the fees they analyzed include:
-Cost per transaction
Did You Know?
Investments come in multiple shapes and sizes for different levels of expertise.
– 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 the 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
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 paper Money, its virtual trading platform. If you open an account, Options House offers its paper TRADE account to test your strategies.
Buy what you know. The 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.