If you want to buy stocks, options, mutual funds, or ETFs, you’re going to have to use some sort of broker and online brokers, at least for the individual investor, are definitely the way to go. They have cheaper fees and commissions, offer analytical tools, and have made it almost too easy to buy and sell stocks. This article [presents 5 brokers that] I have either used, tried, or seriously considered myself and is intended as a jumping off point for you to do your own research and find what broker offers the best fit for your own investing style.
A guest post by (YourPortfolioSpreadSheet.com/blog/) which has been edited ([ ]) and abridged (…) for a faster and easier read.
Best Feature – Free trades
When I first found Robinhood I knew I would never look back – and I haven’t. It’s the only broker I have found with completely free trades and a user-friendly interface. It doesn’t come with all the bells and whistles of a few others out there, but if you’re a value investor that shouldn’t matter. Let’s face it, you should not rely on the technical tools of any brokerage site anyways. If you perform your own research and analysis…and do not enjoy paying fees/commissions, then Robinhood is for you.
Remember, as an investor, you must count these costs against your overall returns and, even though you should keep the buying and selling to a minimum, these fees can add up. It is a mobile-only platform right now and does not offer options, but they are an innovative team (Apple Design Award Winner) and are constantly adding features and improving their product. I use Robinhood as my broker and I highly recommend it. I’ve never had an issue with them and anytime I place an order I usually get a better price than I asked for.
- Simple Interface
- Constantly improving
- Limited tools
- No options
Best Feature – Cheap commissions
Outside of Robinhood, this online broker has the lowest fees and commissions out there. I actually used this service until I found Robinhood and generally liked the platform and interface. OptionsHouse has a lot of tools and features, but is able to keep commissions down at a flat rate of $4.95 a trade. They also have a mobile platform, but I often found it clunky and difficult to use, but that’s just me (many folks actually love it). It is much more of an interactive experience with the use of graphs, charts, and analysis all within the platform itself. If you couldn’t tell by the name, it’s also an excellent broker for option contracts as well…Option trades are also $4.95 plus $0.50 per contract, prices that are basically unrivaled as of this writing. With all that said, make no mistake, the low fees and plentiful features make OptionsHouse a great broker for the individual investor.
- Cheap trades
- Multitude of tools
- Difficult interface
- Lack of analysis
3. Interactive Brokers
Best Feature – Competitive pricing models
I feel Interactive Brokers is a lesser known platform for the individual investor. This is mainly due to it being glossed over by the generic discount broker ratings, but it’s one you should know about. As an investor, you should always be looking for the lowest commissions and Interactive Brokers offers just about the most competitive rates out there. Standard fees run $0.005 per share with a $1 per trade minimum. For instance, if I bought 200 shares of company A for $50, commission fees would be 200 * $0.005, or $1.00 (also meets the minimum requirement for a trade). Options are also dirt cheap with no base fee and only a $0.70 per contract commission. Interactive Brokers has been named the best online broker by Barrons now for the 4th consecutive year.
Despite all of these features and accolades, I still recommend Robinhood and OptionsHouse over Interactive Brokers. All in all, it’s a difficult platform to learn, inactivity fees, as well as minimum fees, exist, and there is a $10,000 minimum account balance to sign up. I wouldn’t recommend this platform to new investors, or even casual investors, for these reasons. However, if you have enough experience and can understand the software then it’s not a bad deal. It’s also great for those interested in international markets as well.
- Attractive pricing
- Happy customers
- Complicated platform
- $10,000 initial funding
- Inactivity fees
Best feature – Trade execution
Currently, I use two brokerage accounts — Robinhood and Vanguard. However, I only use Vanguard because of my Roth IRA account, for reasons I’ll detail. Vanguard’s fees and commissions are not extremely friendly for the individual investor. If you have less than $50,000 in the account, they charge $20 a trade (your first 25 trades are $7), if you have $50,000 – $500,000 – $7/trade, and greater than $500,000 – $2/trade. As you can see, their pricing model favors those with significant funds, which may be great for retirement accounts, but there are better options for (the majority of) personal accounts.
That being said, Vanguard is much more than the mutual funds and ETFs they are often associated with. You can buy stocks and bonds through their brokerage services, as I do using my Roth IRA account, just like any other online/discount broker and I have been pleasantly surprised with this service. Their trade execution is top notch, always delivering a better price than asking, and they offer several research features, including an excellent stock screener I use all the time. Vanguard also has an air of respectability and trustworthiness surrounding their name, and after using their services, I definitely agree. Their customer service is top-notch, the best of ANY company out there, and not just in the investing world. They also offer options accounts as well.
- Trade execution
- Customer service
- Higher commissions
- Favors larger accounts
- Best suited for Vanguard funds/ETFs
5. TD Ameritrade
Best Feature – Think-or-swim platform
TD Ameritrade has been around a long time and is a highly respected name in the industry, and rightfully so. However, it would be my last option on this ranking due to one thing and one thing only, commissions. I actually like just about everything they have to offer, including the research tools, quality customer service, and simple interface, but the $9.99 a trade commission (options are $9.99 plus $0.75/contract) is too high for me. To their credit however, there are no hidden inactivity fees or any minimum account balances required.
While I said I only use 2 brokers as of now, I would consider TD Ameritrade solely based on the think-or-swim platform. As I mentioned earlier, options can be a fantastic way to decrease cost basis and earn returns on current investments, and the think-or-swim software is hands down the simplest and best platform I have seen. If you’ve ever looked at options before, you know they can be a tricky, and sometimes, confusing way to invest. I believe think-or-swim makes it much easier. They also have a paper trading feature to let you practice before you start but, despite think-or-swim and the several other great attributes of TD Ameritrade, the commissions are simply too high to use as of now.
- No account minimum
- Excellent interface
- Great customer service
- High commissions
- Better options
Please comment below and share your thoughts on which brokerage accounts you use and what you like, or dislike, about them. Suggestions are always welcome, so if you want to include a different broker or express your opinion on my current line-up, please comment!…