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11 Best Online Stock Brokers for Beginners of October 2020
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When you’re a beginner investor, the right brokerage account can be so much more than simply a platform for placing trades. It can help you build a solid investing foundation — functioning as a teacher, advisor and investment analyst — and serve as a lifelong portfolio co-pilot as your skills and strategy mature.
What are stock brokers?
Stock brokers are people or firms licensed to buy and sell stocks and other securities via the stock market exchanges. Back in the day, the only way for individuals to invest directly in stocks was to hire stock brokers to place trades on their behalf. But what was once a clunky, costly transaction conducted via landline telephones now takes place online in seconds, for a fraction of what full-service brokers used to charge for the service. Today, most investors place their trades through an online brokerage account. (A little lost? Check out our explainers on brokerage accounts and buying stocks.)
When you’re a beginner investor, the right brokerage account can be so much more than simply a platform for placing trades. It can help you build a solid investing foundation — functioning as a teacher, advisor and investment analyst — and serve as a lifelong portfolio co-pilot as your skills and strategy mature.
What are stock brokers?
Stock brokers are people or firms licensed to buy and sell stocks and other securities via the stock market exchanges. Back in the day, the only way for individuals to invest directly in stocks was to hire stock brokers to place trades on their behalf. But what was once a clunky, costly transaction conducted via landline telephones now takes place online in seconds, for a fraction of what full-service brokers used to charge for the service. Today, most investors place their trades through an online brokerage account. (A little lost? Check out our explainers on brokerage accounts and buying stocks.)
Summary of Best Online Stock Brokers for Beginners of October 2020
| Broker | NerdWallet Rating | Commissions | Promotion | Account Minimum | Learn More |
|---|---|---|---|---|---|
$0 per trade | Up to $600 cash credit with qualifying deposit | $0 | on Merrill Edge's website | ||
$0 per trade | None no promotion available at this time | $0 | on Interactive Brokers's website | ||
$0 per trade | None no promotion available at this time | $0 | on TD Ameritrade's website | ||
$0 per trade | Free career counseling plus loan discounts with qualifying deposit | $0 | on SoFi Invest's website | ||
$0 per trade | None no promotion available at this time | $0 | Read review |
on Merrill Edge's website
Merrill Edge
Fees
per trade
Account Minimum
Promotion
cash credit with qualifying deposit
on Merrill Edge's website
on Interactive Brokers's website
Interactive Brokers IBKR Lite
Fees
per trade
Account Minimum
Promotion
no promotion available at this time
on Interactive Brokers's website
on TD Ameritrade's website
TD Ameritrade
Fees
per trade
Account Minimum
Promotion
no promotion available at this time
on TD Ameritrade's website
on SoFi Invest's website
SoFi Active Investing
Fees
per trade
Account Minimum
Promotion
career counseling plus loan discounts with qualifying deposit
on SoFi Invest's website
Want to compare more options? Here are our other top picks:
More resources for new investors
Need some background? Read our guide to how the stock market works.
Unsure of how to build your portfolio? Learn more about how to invest in stocks.
Interested in instant diversification? Understand how investing in mutual funds can help.
Want to join the passive investing revolution? Consider index funds.
Last updated on September 18, 2020
Methodology
NerdWallet's ratings for brokers and robo-advisors are weighted averages of several categories, including investment selection, customer support, account fees, account minimum, trading costs and more. Our survey of brokers and robo-advisors includes the largest U.S. providers by assets under management, plus notable and/or emerging players in the industry. Factors we consider, depending on the category, include advisory fees, branch access, user-facing technology, customer service and mobile features. The stars represent ratings from poor (one star) to excellent (five stars). Ratings are rounded to the nearest half-star.
To recap our selections...
NerdWallet's Best Online Stock Brokers for Beginners of October 2020
Frequently asked questions
It doesn’t take a lot of money to get started; many stockbrokers allow you to open an account for $0. Many brokers also will waive any minimum investment requirements if you sign up for regular monthly contributions of $100 or more. If you don’t have a lot of cash but want to try your hand at do-it-yourself investing, using commission-free exchange-traded funds can be a cost-effective way to begin building your portfolio. (Have $500? Learn how to invest it.)
To buy and sell assets like stocks, bonds and mutual funds, you need to open an investment account through a stockbroker. That account is called a brokerage account, and it holds the cash you’ll use to buy and sell investments, as well as the investments themselves once you own them. (Learn more about how brokerage accounts work.)
If you have a 401(k) or other employer-sponsored retirement account, you already have one kind of investment account. Many investors find it beneficial to open additional stock brokerage accounts when:
Saving for retirement. If you want or need to save for retirement in an account separate from your employer, you can open an IRA. These come in two flavors, a traditional IRA or a Roth IRA. (Read more about the differences here.) One thing to note about both: Contributions are limited to $6,000 a year ($7,000 if you are age 50 or older).
Investing for other goals. If you’re saving for a goal other than retirement — or you’ve topped off your 401(k) and IRA contributions — a taxable brokerage account is a good option. As the name implies, this doesn’t carry the tax advantages of retirement accounts. You will have to pay taxes on any capital gains each year.
On the plus side, you don’t face any of the restrictions for withdrawals that come with tax-advantaged accounts. If you need money in a hurry, a taxable account would be your first line of defense before dipping into retirement accounts and potentially paying early withdrawal penalties.
A brokerage fee is charged by the stockbroker that holds your account. Brokerage fees include annual fees to maintain the brokerage account or access trading platforms, subscriptions for premium research, or even inactivity fees for infrequent trading. You can avoid or reduce brokerage account fees by choosing the right broker. Learn more about investment fees.
The difference between a full-service stockbroker and a discount stockbroker comes down to the level of service and how much you want to pay for that service.
Traditional full-service stockbrokers do more than assist with the buying and selling of stocks or bonds. They often offer a wide array of services and products, including financial and retirement planning, investing and tax advice and regular portfolio updates. But they can charge substantial fees and transaction costs that can erode long-term investment gains.
If you have more money than time, a full-service broker may be for you. For most investors, however, it can pay to look at discount stockbrokers. These brokers allow you to buy investments online through their website or trading platforms. You'll pay less in trading commissions and fees at a discount broker.
Other brokers, called robo-advisors, offer a combination of access to financial planners and automated investing technology. Companies in this category include Betterment and Personal Capital, and they build your investment portfolio for you for a fee. If you want a service to make investment decisions for you, robo-advisors are a good option.
Yes, but it will take more time than getting cash from your ATM, often a few business days. Your broker will need to sell securities (like stocks, bonds or mutual funds) equivalent to the amount you want to withdrawal, so it’s not as simple as removing cash from a savings account.
If you're taking all of your money out — whether transferring to a different stockbroker or cashing out to move to Tahiti — there may be account closing fees.
The rules for withdrawal of retirement accounts like an IRA are different, depending on your age. Most withdrawals carry a 10% penalty before the age of 59½ and will be taxed as ordinary income the year you cash out. (Roth IRAs, which are funded with after-tax cash, are more forgiving of early withdrawals.)
The nonprofit Securities Investor Protection Corporation insures cash and securities up to $500,000, with a $250,000 limit on cash losses. But this protects you only in the event your stockbroker fails. Any losses and gains of your investments carry no protections.
