Investing your money can be exciting and profitable. It can also be complicated and overwhelming for beginners. Opening an online brokerage account removes some of the complexity. Online platforms offer intuitive user interfaces and volumes of educational material that can get you up and running.
What You Need to Open a Brokerage Account
Regardless of the online broker you choose, you’ll need to provide basic information about yourself and other account holders to complete your application. This data includes your date of birth, address, and social security number. You will also have to answer questions about your employment status and your line of work. U.S. residents who are not citizens will need a passport on hand and their visa.
Collecting this information is part of the “Know your customer” process. The questions you answer and the data you submit are part of regulators’ efforts to prevent money laundering.
Best Online Brokerage Accounts for Beginners
The top financial institutions in the field offer brokerage accounts you can sign up for within minutes and start investing immediately. Some of these brokers, like Fidelity Investments, have been around for many decades with a brick-and-mortar presence, while others are more recent and focus solely on online investing and trading.
TD Ameritrade is an online broker that offers online stock trading, investing, and retirement planning. Its focus on educating investors makes a brokerage account from TD Ameritrade appealing to newcomers. The platform uses third-party research from authoritative sources such as the Federal Reserve Economic Database, Morningstar, and the Center for Financial Research and Analysis.
The TD Ameritrade trading platform is intuitive and easy to use. They provide 24/7 support via live chat, phone, text, email, and social media. They also offer meetings with representatives at branches for users who prefer in-person support. The availability of educational material and customer support allows beginners to learn and improve.
While TD Ameritrade has a $0 account minimum, the company charges higher account and fund fees than the competition. This can be a negative for beginners starting with a small budget as fees can eat away at profits. In terms of their costs, TD Ameritrade has free stock and ETF commissions, while the platform charges $0.65 per options contract.
Keep in mind that with TD Ameritrade, your uninvested cash doesn’t automatically move into a money market fund as with some competitors. Also, those looking to benefit from buying fractional shares will have to seek a different broker, as TD Ameritrade does not offer this option.
Founded in 1946, Fidelity Investments has extensive experience in serving retail investors. Fidelity Investments offers $0 trading commissions and no account fees. The investment firm also provides a comprehensive research library and an easy platform for beginners while offering customization for advanced investors and traders.
Fidelity Investments has spent several decades in the mutual fund space, and the company scores highly across all fund categories. The broker’s wide selection of no-transaction-fee funds includes Fidelity Zero index funds.
A Fidelity Investments online brokerage account should be a top priority for investors who want to diversify their holdings through investor-friendly options that offer top index funds without imposing a minimum investment requirement.
Fidelity Investments offers fractional shares for investors with smaller budgets who want to spread their funds across multiple companies’ stocks. However, those looking for forex or options trading will have to search for a different broker because Fidelity does not offer these services. Also, if you plan on using broker-assisted trading, Fidelity’s fee per trade fees are higher than the competition’s.
Interactive Brokers is the most well-rounded online brokerage account a trader can use. Their investment selection is one of the most comprehensive you will find. With over 150 exchanges, beginners have many options for building a diversified portfolio. The broker offers mutual funds, futures, options, and fixed income, and their list of offerings keeps growing over time.
Interactive Brokers has a $0 account minimum for IBKR Pro and IBKR Lite options. IBKR Pro is a platform that offers advanced functionality to seasoned investors, whereas IBKR Lite aims to meet novice traders’ needs.
While the low fees and wide investment selection make Internet Brokers an attractive choice, the platform’s complex interface might not be ideal for casual retail traders. Even the IBKR Lite choice requires a sound knowledge of key financial concepts that may be clearer on competitors’ apps.
If you’re a beginner willing to work through the average-rated iOS and Android apps, Interactive Brokers offers an extensive selection of research and educational material. With reports and fundamentals data from Thomson Reuters and access to Morningstar and Zacks Investment Research, you can progress to intermediate and advanced levels at your own pace.
E-Trade offers a desktop and mobile app with real-time quotes. The broker also offers market commentary and account management. From stocks, bonds, exchange-traded funds, futures, options, and over 4,400 no-transaction-fee mutual funds, E-Trade has one of the largest selections of investment options.
Novice traders can take advantage of E-Trade’s educational resources. The broker offers webinars on topics ranging from technical analysis and portfolio diversification to futures and options trading.
E-Trade has a robot advisor feature for investors to take advantage of. Robo advisors automate your investing by using algorithms to build your portfolio based on your goals and risk profile.
Traders looking to invest in foreign markets will have to pass on E-Trade as the broker only deals with U.S. markets and does not offer forex.
One of the factors that beginners value in an online broker is the ability to provide a low-cost experience. Robinhood is a discount broker and is the most affordable option you can find for the services it offers. The Robinhood platform is easily accessible to even the most inexperienced internet users, as it has a simple user interface.
The broker also offers free crypto trading for users who want to dabble in the blockchain space, although it only currently supports seven cryptocurrencies.
While Robinhood offers features that can appeal to many novice retail investors, the platform lacks a series of services that might drive some consumers away. Robinhood doesn’t offer mutual funds or bonds, making it difficult to diversify your portfolio with these safe-haven assets. Furthermore, Robinhood’s customer support is not as extensive as some of the top investment brokers in the space.
Launched in 2017, Ally Invest is a broker that specializes in self-directed online trading. They provide the needed resources for consumers to control their own portfolios.
Ally’s low-cost structure makes it appealing to beginners and seasoned investors alike. Specifically, trading eligible U.S. securities stock is cost-free, and there is no account minimum to discourage novice traders.
Besides the minimal cost structure for customers, Ally Invest offers forex, automated portfolio management, and a host of free tools for investors that focus on technical indicators.
One of the drawbacks of an Ally Invest brokerage account is that your uninvested cash doesn’t earn interest. However, the broker offers instant money movement between your savings and investment accounts with Ally. Furthermore, Ally Invest doesn’t have branches you can visit in person. The company makes up for this by having a very intuitive mobile app and strong customer support that you can access 24/7 through live chat, phone, or email.
Bank of America customers looking to buy and sell stock online will find opening a Merrill Edge account a hassle-free experience. After buying Merrill Lynch in 2009, Bank of America’s products and services became integrated with Merill Edge’s. As a Bank of America customer, you can view your bank account and brokerage account with a single login. You can also transfer money between accounts in real-time.
However, you don’t need to be a Bank of America customer to enjoy the broker’s competitive pricing and extensive research benefits. Merrill Edge provides all its customers with access to webinars, a comprehensive library of educational content, a podcast, free tools, and an innovative Idea Builder tool. This helpful addition assists beginners in finding investments that meet their specifications.
Merrill Edge offers fractional shares, a necessity for novice investors looking to diversify on a modest budget, and has a $0 account minimum. You qualify for Merrill Edge’s rewards program if you maintain a combined balance of over $20,000 in eligible investment and cash accounts.
Charles Schwab accommodates investors of all experience levels. Traders will find the $0 commission for stock, options, and ETFs appealing, while novice investors will appreciate the $0 account minimum. Charles Schwab has a large selection of funds to choose from, with some of the lowest expense ratios on the market.
Several trading platforms available on Charles Schwab’s website are free to use and open to all trading services customers. The broker’s StreetSmart Edge platform puts efficiency at the forefront, allowing users to customize their trading experience. StreetSmart’s advanced features provide charting tools and complex trading options. However, beginners can benefit from the customizable balance bar that allows a quick overview of their finances.
Charles Schwab offers a robust selection of research and data. The firm’s equity ratings add to reports from Credit Suisse, Morningstar, Ned Davis, and several others. You can view earnings reports and real-time news through your account while also receiving access to market commentary from Charles Schwab financial advisors.
Founded in 2016, Webull is one of the most innovative brokers to hit the market in the past 20 years. Webull is not only a top choice for novice investors but also accommodates mobile-first users. The company’s commitment to serving audiences with a preference for mobile environments is evident in the broker’s direct access to dozens of cryptocurrencies.
The company emphasizes its sleek design for desktop and mobile apps while offering an extensive suite of tools for seasoned traders. Options such as in-depth charting, advanced orders, and Level II market data from Nasdaq make Webull attractive to active traders.
While usability and cost structure are Webull’s main advantages, investors will find that the broker lags behind its competition in the scope of offerings. Its selection of bonds and mutual funds is less than stellar. Investors looking to save in an IRA will find it difficult to diversify across assets that usually go to a retirement portfolio.
Webull offers free stock trading and $0 commission options trading, making it one of the best brokerage account choices in terms of cost. Many beginners will find the lack of educational content to be a problem. Webull’s lack of a default fund for uninvested cash will cause some prospective novice customers to think twice before opening an account.
Taking Control of Your Personal Finances
With an online brokerage account, trading the stock market is at the tip of your fingers. You can invest in your favorite companies for the long haul or elect to buy and sell stocks with the expectation of short-term profits. Finding the best online brokerage account for your needs hinges on a few factors regardless of your goal. You may want a brokerage account with minimal fees to accommodate your frequent trading, or you might prefer an easy-to-use app that doesn’t require an expert trading background. Other considerations include the availability of crypto-asset trading, educational material, or in-person consultations.
Whatever your goals are, the experts at Finance is us offer an extensive library of knowledge that can help you avoid mistakes that can be costly to your retirement savings. From savings accounts and credit cards to mortgages and insurance, Finance is us has the information you need.
Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services.