The stock exchange never goes out of fashion, ensuring that stockbrokers are always trending.
However, “stocks” is a whole new, risky world for someone who has just begun to explore it. So, to all those new to investing and who don’t know where to start, I’d probably suggest you seek out a few stockbrokers as step one.
A stockbroker is an expert who handles the entire process between an investor and securities exchange.
As we’ve gone digital over the years, we now have online stockbrokers instead of full-service brokers. And while there are all kinds of online stock brokers available, I’ve gathered the best online stock brokers for beginners to discuss in this post.
Without further ado, let’s begin!
How to Pick the Best Online Stock Broker for Beginners
Before starting with the list of the best online stock broker for beginners, let’s first address the elephant in the room, i.e., how to pick one? Well, the straightforward answer would be – according to your needs.
Many factors should be considered before you sign a deal with a stockbroker. Here’s what you should know before choosing an online stock broker:
- A profound understanding of your goals
- Having an idea about your style (whether you’re an active or passive investor)
- Knowing your “trades of interest.”
- Having information about fees and commission
After you know what you want, it’s vital to know about the kind of online stock broker that will bring you success. Because you’re new to investing and still in the learning phase, you can afford to go for someone who doesn’t bring their A-game to the field.
There is indeed no perfect broker for anyone. Still, there are specific parameters that can help you decide which one is better for you:
- Account Minimums: Go for a stockbroker that doesn’t ask for account minimums, i.e., minimum fees to open a brokerage account.
- Say No to Commissions: Because you’re new to this game and that too with limited cash, it’s better to go for an online stock broker that deals in commission-free trading.
- Not too Costly: It’s essential to go through the cost structures of all the online stock brokers that you’re interested in. Choose a broker that doesn’t charge you for everything.
- Excellent Customer Service: Almost everything is hazy when you’re new to the stock market. You need to opt for a broker that would be available to help with your queries whenever you want.
- Packed with Educational Resources: If you’re a newbie, you need all the help in the world. It would be wise to go for a platform that teaches you how to survive in a stock market.
The Best Online Stock Brokers for Beginners
And now to the heart of this entire post – the best online stock brokers for beginners! I’d be covering the incredibly vital and “must-know-cannot-ignore” online stock brokers that you should know before you begin your love story with the stock market.
Vanguard has to be the top broker in this list of the best online stock brokers for beginners for low-cost index investing and managing exchange-traded funds. It also proves to be an ideal platform for buy-and-hold investors and those looking for an array of retirement plans.
Moreover, there are no account minimums for opening an account here. It doesn’t have some of the lowest expense ratios for ETFs and mutual funds and operates on a zero-trading commission policy.
With Vanguard as your online stockbroker, you can also open different accounts like – Roth IRA, solo 401(k)s, traditional IRA, SEP-IRA, and 529 college savings plan.
It’s easy to operate and relatively simple to navigate, making Vanguard an ideal choice for newbie investors. However, active traders aren’t huge fans of this online stockbroker because of its limited research and how it only offers essential trading services.
So, if you’re either looking to save up for your retirement or like the occasional buying and selling tradition, this is the platform for you!
Looking for the best overall platform mentioned in this list? I’ve just the perfect online stock broker for you.
TD Ameritrade is a trendy online stock broker platform that consistently outperforms most of the others in the competition.
It’s a secret, you ask? Well, it definitely has to be the vast array of educational resources! TD Ameritrade is preferred by beginners and senior investors because it offers hundreds of tutorials, making every step very easy to understand.
You can also ask various questions and clear your confusion if you’re a part of this brokerage platform. In addition, they have a meticulously designed website that offers a premium user experience and a mobile app!
Moreover, TD Ameritrade has investment options for everyone! So, whether you’re new to the stock exchange world or an old player – this platform has everything for everyone!
While it doesn’t have any account minimums or offers 24/7 email and phone customer support, it has some cons. For example, TD Ameritrade isn’t the preferred tool by incredibly experienced investors because it lacks certain features and tools. Furthermore, there’s no concept of fractional shares as well.
SoFi Active Investing
SoFi Active Investing is an online stock broker platform with numerous benefits. While none of the firms discussed in this post are free from any cons, it would be safe to say that SoFi has one of the lowest indexes of disadvantages.
So, when it comes to no account minimums, no trading commissions, and buying fractional shares – SoFi Active Investing offers it all. Apart from these perks, it also has a well-developed mobile app that makes many things easier for many.
Like TD Ameritrade, it also has a library of educational resources and provides coaching services. Moreover, it’s a friendly platform for active trading, so anyone interested in this area can check out SoFi Active Investing.
However, those interested in retirement savings shouldn’t consider this brokerage platform. Continuing with its cons, it doesn’t offer a variety of accounts. In addition, it doesn’t allow buying or selling of options and mutual funds.
Robinhood is playing a clever game – it’s simplifying the route to financial markets. This online stock broker platform has developed a very easy-to-use and highly optimized mobile app for this to be true. Because of this, most of the new investors go for Robinhood rather than other platforms.
However, it doesn’t prepare the investors for a better future in the stock market. They don’t provide their members with coaching services or anything that significantly hinders their growth.
It offers perks like cryptocurrency trading, fractional shares investing, no account minimums, and zero commissions. And as for the cons, Robinhood doesn’t have advanced features or tools to fuel the progression of the investors. It has also faced recent trading restrictions and doesn’t support fixed-income investments and mutual funds.
Despite all these negative factors, Robinhood continues to be one of the best online stock brokers for beginners because of zero commissions and simple-to-understand investing experience.
It wouldn’t be wrong to state that Merrill Edge is the best online stock broker for beginners who are members of the Bank of America. Its premium research services, outstanding customer services, and commission-free trading make it one of the top choices of newbie investors.
Apart from investments in stocks, mutual funds, ETFs, stock bonds, and offering trade options, Merrill Edge also provides vehicle investments. Moreover, since it is linked to the Bank of America, you can also access your account without paying an ATM fee!
Harboring a variety of brokerage accounts and discounts on bank products and bonus credits are some of the other benefits I love about this platform.
But unlike its competitors, Merrill Edge isn’t a very highly optimized trading stockbroker. Also, if you borrow money from margin accounts, you’re likely to pay high-interest rates. Along with this, it also restricts you from trading future options and cryptocurrency.
Do you want to put your investments on cruise control and live your life without worrying about the stock market? If yes, then Acorns is the perfect stock broker platform for you!
Because of its incredibly modern approach, Acorns is preferred by many beginner investors who are still trying to learn. However, when talking about its pros, it would be notable to mention that Acorns also offers UGMA/UTMA accounts for kids!
Furthermore, it’s easy to use and offers easy investing with full automation. However, because there are no human financial advisors, it becomes difficult for many people to use Acorns. Another factor that puts it at a disadvantage is that it’s expensive, making it not that preferable for investors with a small amount.
Fidelity does a great job making the entire “stock” process incredibly easy. Thus, in my opinion, it wouldn’t be wrong to include it in the list of the best online stock brokers for beginners.
It offers commission-free trading of ETFs, stocks, and options trades and very reliable and excellent customer service. Furthermore, it has extensive research data, making it super simple for all newbie investors to learn how to become better.
As if this wasn’t enough, Fidelity also came up with an excellent mobile app that is incredibly easy to use and navigate. Whether international trading or fractional shares investing – this online stock broker platform doesn’t disappoint!
Number 8 of the best online stock brokers for beginners is E*TRADE.
With 3-computer-based versions and 2-mobile-based versions, each suitable for a specific type of E*TRADE took “ease” to a whole new level.
E*TRADE for beginners even offers pre-built portfolios to tone down the overwhelming feeling you get when you’re just starting. Whereas Power E*TRADE is a platform for experienced investors with better tools and features to help them excel.
However, a prominent drawback with this online broker is that there’s no access to the international markets. Nevertheless, since it’s easy to use with no commissions, E*TRADE is a top choice for many investors.
When a company offers a “money-back guarantee,” you know they’re not kidding about their work. Such is the case with Charles Schwab, which has rightfully secured its place in my list of best online stock brokers for beginners.
Well-known for its best IRA accounts, Charles Schwab provides a full range of features with excellent customer service, which is to die for. The latter is definitely the area that gives this online stock broker platform an edge.
Moreover, it offers members mutual funds with no expense ratios and fantastic research data. Charles Schwab also has a nationwide network, and maintaining top-notch customer service in such circumstances is genuinely phenomenal.
Furthermore, with Charles Schwab, you can cater to your investment and banking needs in one place. The only thing that puts it at a disadvantage is that it isn’t proficient in cryptocurrency trading.
However, because of its zero-commission trading, a soft area for mutual investors, and incredible Robo-advisors, Charles Schwab remains a preferred choice for many people.
As a beginner investor, if you’re looking for a “stock-only” platform, then Cash App is the best option in this scenario. You’d probably need 10 minutes to set up an account and start buying or selling stocks – it’s that easy!
Along with this, Cash App doesn’t charge commissions and even offers investment in fractional shares. However, it can further its performance by dealing with a variety of account types and by improving its research tools.
Nevertheless, because of how easy it is to use, it is worthy of being included in my list of the best online stock brokers for beginners!
Where Can I Buy Stocks From?
Now that you know about the best online stock brokers for beginners, let’s talk about the best place to buy stocks.
So, there are three ways you can buy stocks according to your needs and preferences:
- Investing Apps
- Web-Based Stock Brokers
Let’s look at what each of them offers and how they can benefit you.
Investing Apps Never Go Out of Style
I think you know what I mean by investing in apps. Platforms like Facebook, Instagram, etc., have their applications – why? Because they are easy to use, and you can access everything with just a click. Similarly, all the best online stock brokers for beginners have also developed their apps so that it’s easy for you to buy and sell stocks.
However, buying or selling depends on the type of app. So, for example, Robinhood allows you to buy ETFs and stocks. In contrast, apps such as Betterment would make your portfolio and buy on your behalf.
Robo-Advisors Are the New “Real Deal”
This is what I call living in the future!
Instead of manually going about your buying/selling needs or having an individual do the job for you, many online stock brokers now have Robo-advisors.
As the name suggests, it’s a computerized program that follows an algorithm. All you have to do is feed the information needed to be your very own financial advisor. Betterment, Vanguard, SoFi Automated Investing are some platforms that have robo-advisors doing the job of a dedicated stockbroker.
Since it’s pretty easy to just input the relevant information and let the “robot” do the work for you – according to me, the best online stock brokers for beginners are those that offer this service.
Web-Based Stock Brokers
For those of you who are looking for a straight road – web-based stockbrokers are your best choice!
Web-based stockbrokers are simple platforms with commission-free trading in ETFs and stocks that are hell-bent on making this entire fiasco as easy as ABC for you.
Stock Broker – What About It?
A stockbroker is a middleman (an individual or a firm) that understands your needs and goals. Following, they will handle everything from investments, buying or selling, to purchasing and contributions. In addition, they deal in all marketable securities and act as your financial advisors in the stock market.
You want to invest in the stock market, and you have your goals and the cash. What would be the first step? Getting in touch with a stockbroker – preferably, an online stock broker can solve your problems.
What Are the Different Types of Brokerage Accounts for Beginners?
There are two types of brokers – full-service and discount brokers. Having said that, it’s vital to know that while they are brokers, both of them have their fair share of differences.
A discount broker is a newer concept and is currently more popular than full-service brokers.
As the name suggests, discount brokers work on “discounts,” i.e., they don’t take commissions or provide complete guidance. They are only interested in carrying out buy or sell orders, and that’s it. To put it simply, they wouldn’t be guiding you step by step.
A full-service broker will do everything for you, from researching, advising, and aiding trades to creating portfolios, providing financial services, and many more. They’ll be up for any task related to this “investing business” and do most leg work themselves.
Obviously, since they handle everything for you, they are more expensive than discount brokers and have higher commission rates.
What Type of Stock Broker Do I Need?
Deciding on which broker you should go for depends on what type of investor you are. If you’re an active investor, who is familiar with the ups and downs of the stock market, then going for a discount broker is ideal.
However, if you’re new to this concept and have a long way to go, starting with a full-service stockbroker would be a good choice. Since they are expensive and have increased commission rates, they aren’t really the preferred choice anymore.
What are Fractional Shares, and Should a Beginner Buy Them?
Before buying a fractional share, I think it’s essential to know what fractional shares are.
So, let’s say that there’s a share of a company that you want to buy. It costs $5000 while you only have $1000. How are you ever going to buy this share now?
This is when fractional shares come into play. They are basically a part, a “fraction” of a company’s share, that you can buy because you have a limited amount of money. Because of this concept, many beginners can invest in the stock market without worrying about buying an entire share.
Thus, the best online stock brokers for beginners offer you the option of investing/buying fractional shares.
What Do I Need to Do to Open a Brokerage Account?
Every brokerage has its own set of requirements for opening an account. You don’t need any special permission or documents to get this done, just the basics, and you’re good to go. Here’s what you will need:
- Government-issued ID/ driver’s license
- Personal Information (name, age, address, etc.)
- Social Security Number
- Employment status
- Annual income
After you’ve confirmed the details, the broker will open your account. You will have to deposit a certain amount to get the account running.
Your broker might transfer some money to your account and ask you the number to check if things are all set. This will ensure that everything is smooth at your end and working just fine.
IRA – What Should You Know?
As the name suggests, IRA (Individual Retirement Account) are brokerage accounts for retirees. They can make investments, buy stocks, or sell funds through these accounts, just like regular brokerage accounts. The only difference between a standard brokerage account and IRA is that the latter offers tax-deferred growth.
So, any withdrawals, gains, or contributions via a brokerage account will be taxed, whereas IRA offers tax-free transactions. In addition, it is easy to set up and allows you to invest more than a typical brokerage account. Thus, IRAs are an amazing way to ensure that your life as a retiree is spectacular!
Learning the Basics – Trading Commissions and Account Minimums
Before you get super confused, thanks to the stock exchange jargon, I think you should learn the basics first. In this regard, I’ll be discussing two fundamental concepts in the world of stocks and stock exchange so that you know what you’re dealing with.
Let’s first talk about account minimums. As discussed previously, an account minimum is the minimum amount required for you to open a brokerage account. It’s essentially one of the most important and initial steps you have to take before investing or selling.
It’s crucial to know that the best online stock brokers for beginners don’t have account minimums. It’s the most innovative way to draw attention and get investors to work with your firm, especially people who don’t have a lot of cash, to begin with.
Whereas trading commission is the cash generated by your stockbroker whenever you sell an investment. It could either be a percentage or a fixed amount, as discussed by your broker.
It should be noted that a full-service broker would aim for higher commission rates than a discount broker, as they are handling everything for you.
Are Commission Fees Important or Not?
Who wouldn’t want to be rewarded for their hard work?
Stockbrokers do charge some amount for the various services; however, these commissions act as a cherry on top. And everyone loves some extra cash, right?
In my opinion, deciding on a commission fee establishes a healthy relationship between an investor and a stockbroker. For the investor, it shows that they are ready to acknowledge their efforts, and for the stockbroker, it makes them work harder and earn more benefits.
I know that your head will be exploding with questions regarding stockbrokers, their work types, and many more.
To address some of the most frequently asked questions, I have narrowed them down in this section.
What Is a Brokerage Fee?
A brokerage fee is an amount a broker charges for carrying out tasks, transactions, and services. It includes an annual fee, account closing fees, research subscription fees, etc. The best way to minimize these expenses is to opt for an online stockbroker.
Especially for someone just starting out, it’s vital to spend your cash where it’s needed and avoid being extravagant.
Is My Money Safe in A Brokerage Account?
Thanks to Securities Investor Protection Corporation (SIPC), your cash is protected in the brokerage account. Thus, it’d be wise to go for stockbrokers with this certification.
SIPC protects the members of brokers having this certification in case a firm fails. If a firm suddenly got shut down, your cash/investment would be protected and returned to you safely. However, it doesn’t cover your losses when your investment in a stock fails – so that’s a different story.
How Do Brokerage Accounts Operate?
To begin your journey in the stock market, the first thing you’d have to do is open an account – specifically a brokerage account. These accounts work like regular bank accounts. The only difference is that you have the authority to invest, sell, or buy securities.
While you don’t need money to open a brokerage account, you have to fund it as soon as it’s online. So first, you’d have to transfer some amount from your savings account or another brokerage account. After this, you can have your stockbroker purchase or invest in stocks or funds.
Do You Need a Lot of Money to Use a Stockbroker?
Here’s the good news for all the newbie investors – you don’t need to be loaded to work with a broker. Instead, almost all online brokerage platforms now offer no account minimums helping you open up an account in no time.
You’d have to pay them only for a “transfer-out fee,” and that’s it! Investing has been made relatively easy because of these platforms, and I highly advise you to go for one of the best online stock brokers for beginners mentioned in this post.
Can You Cash Out a Stock Brokerage Account?
Of course, why not? You can always cash out a stock brokerage account whenever you want to. You’d have to sell your securities (stocks or bonds) for cash. However, it could take up to a few days, making it more challenging than just drawing money out of your savings account.
And that’s a wrap!
Before diving into the world of stocks, commission trading, stock exchange, stock market, funds, and stocks bonds – it’s better to familiarize yourself with a stockbroker. Online stockbrokers are well-equipped with various features and tools to make your life as a beginner investor quite easy.
Read through this post, decide which online stock broker is best suited for your requirements, and start investing!