The Best Online Broker
With a variety of different prices, research capabilities, and hidden fees, how should you go about picking the best online broker? What are the most important factors to consider? Your choice of a broker will differ depending on your investment style and objectives.
Beginner Investor - You are an inexperienced investor and want a user-friendly broker to make long-term investments. What to look for in a broker:
- Commission-free mutual funds and ETFs with low expense ratios
- Customer service (with access to brick and mortar branches)
- Easy to use online interface
- Low account minimums and no account inactivity fees
Do-it-yourself Investor - You are familiar with investing and keep up to date on the markets. You track the performance of your investments and your goals are still long-term, but you take a more active role in managing your portfolio. What to look for in a broker:
- Large variety of low-cost mutual funds and ETFs
- Basic tools and research reports
- Customer service and mobile access
- Low commissions
Active Investor - You trade frequently and look to capitalize on short-term movements in the market. You are an extremely sophisticated investor and have a coherent strategy that actually warrants active trading. What to look for in a broker:
- Low costs (trade commissions, price per option, exercise fees)
- Asset class availability
- Great trade execution (if you are an algorithmic trader) and after-hours trading
- Sophisticated research, data analysis tools and real-time data
Best Broker for Beginners: TD Ameritrade
Easy to use with great customer service
TD Ameritrade is also our pick for best overall broker for new investors because it has consistently high customer service ratings and offers a full suite of trading, research, and educational tools. They offer more than 100 commission-free ETFs and thousands of no-transaction fee mutual funds. For those who value in-person interaction, TD Ameritrade has over 100 branches across the U.S.
Runner-Ups: Scottrade & Charles Schwab
Best Broker For DIY Investors: TradeKing
Provides similar tools and capabilities as larger brokers at half the cost
TradeKing offers similar tools and capabilities as its larger competitors, but commissions are far cheaper at $4.95 per trade. The company has a simple user interface and differentiates itself with an active community forum where investors share and discuss ideas. TradeKing’s research offerings have dramatically improved since its merger with Zecco. An investor looking for a lower-cost version of TD Ameritrade or Scottrade should consider TradeKing. One thing to watch out for is a $50 maintenance fee that TradeKing will slap on any accounts that have both an account balance less than $2,500 and have been inactive for a year.
Runner-Ups: E*Trade & TD Ameritrade
Best Broker For Active Investors: Lightspeed
Cheapest trades, great execution, and no frills
Active traders want extremely low commissions, and Lightspeed provides that with ETF and stock commissions at $0.0045 per share and a $1 minimum per trade. Other deep-discount brokers like Interactive Brokers also have very low costs, but Lightspeed edges them out through better customer service. Lightspeed provides direct access to ECNs and exchanges, which is important for active traders. Lightspeed also has a robust trading analytics platform, but it is very complex and has a very steep learning curve to master. Overall, Lightspeed is a great option for day traders and professional investors who need cheap executions, but if you only trade occasionally or use a buy-and-hold strategy, consider the other options above.
Runner-Ups: Optionshouse and Interactive Brokers
Contributed by Joseph Egoian