Making the decision to invest is the easy part. Next comes the harder task of selecting the right brokerage firm. With so many options in this saturated market, it can be difficult to figure out where to even begin.
From ease of use to its customer service, there are many factors to consider when selecting a brokerage firm. But since the goal of investing is to make money, one of the top things you need to look into is the fees each firm charges.
This post explains how to think about online brokerage fees and how some of the top brokerage firms in the market stack up.
Comparing Fees for the Top Brokerage Firms
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
1. TD Ameritrade
TD Ameritrade is more than just a place to open savings accounts. It’s one of the most robust online stockbrokers on the market, offering a high-quality and user-friendly trading platform backed by robust customer support, an abundance of data, and competitive prices. If you’re not too thrilled about the idea of picking your own stocks, you’re in luck: TD Ameritrade also provides a robo-advisor service.
Fees
- Minimum deposit: $0
- ETF trade fee: $0
- Mutual fund trade fee: $49.99
- Options base fee: $0
- Options per contract fee: $0.65
- Futures per contract: $2.25
- Stock trade price: $0
- Broker-assisted trade fee: $44.99
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2. Charles Schwab
Schwab is another leading broker that’s known for its outstanding customer support and superior online trading platform. Schwab makes it easy enough for beginners to navigate their platform and also provides tools enough for serious traders. They also offer commission-free trading and a great mobile experience. If you’re interested in robo-advisor support, look into Schwab Intelligent Portfolios.
Fees
- Minimum deposit: $0
- ETF trade fee: $0
- Mutual fund trade fee: $49.95
- Options base fee: $0
- Options per contract fee: $0.65
- Futures per contract: $1.50
- Broker assisted trades fee: $25
- Stock trade price: $0
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3. AllyInvest
Ally Invest offers low-cost trading with $0 commissions and no account minimums, making Ally a competitive provider with a world-class platform offering a variety of research tools. The only downside to Ally is that there are no branches. But this helps keep costs low and enables the company to pump more resources into its services. Plus, if you open a savings account with them, you’ll end up with higher interest rates. It might be worth the tradeoff.
Fees
- Minimum deposit: $0
- ETF trade fee: $0
- Mutual fund trade fee: $9.95
- Options base fee: $0
- Options per contract fee: $0.50
- Futures per contract: NA
- Broker assisted trades fee: $20
- Stock trade price: $0
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4. Fidelity
If you’re looking for a broker with wide access to mutual funds, Fidelity is a great option. The company provides an abundance of charting data, zero-fee index funds, and commission-free trading. It also has an integration with Coinbase. So, if you invest in cryptocurrency through Coinbase, it’s possible to connect your account and keep track of all your investments in one place.
Fees
- Minimum deposit: $0
- ETF trade fee: $0
- Mutual fund trade fee: $49.95
- Options base fee: $0
- Options per contract fee: $0.65
- Futures per contract: NA
- Broker assisted trades fee: $32.95
- Stock trade price: $0
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5. E*Trade
E*Trade is a full-service broker providing access to over 4,500 mutual funds as well as U.S. stocks, options, ETFs, and more. The company offers reasonable account fees and is another brokerage that’s known for offering great customer support. They also offer Core Portfolios, which offers a mix of low-cost ETFs for automatic diversification and low-cost management.
Fees
- Minimum deposit: $0
- ETF trade fee: $0
- Mutual fund trade fee: $19.99
- Options base fee: $0
- Options per contract fee: $0.65
- Futures per contract: $1.50
- Broker assisted trades fee: $25
- Stock trade price: $0
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6. Merrill Edge
Merrill Edge is a brokerage service for Bank of America customers who are looking for a great trading experience, backed by a robust support system with branch locations. Merrill Edge offers roughly 4,300 locations across the country, providing opportunities for face-to-face assistance when it’s required. Merrill’s competitive pricing, low fees, zero commissions, and intuitive platform also make them a great option for bargain-seeking investors.
Fees
- Minimum deposit: $0
- ETF trade fee: $0
- Mutual fund trade fee: $19.95
- Options base fee: $0
- Options per contract fee: $0.65
- Futures per contract: NA
- Broker assisted trades fee: $29.95
- Stock trade price: $0
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7. TradeStation
TradeStation is a platform for active traders — or people who place large volumes of trades. It offers commission-free trading, advanced research tools, and access to a robust community of investors. You can also find a variety of investments through TradeStation like ETFs and options, as well as stocks and mutual funds.
Fees
- Minimum deposit: $0
- ETF trade fee: $0
- Mutual fund trade fee: $14.95
- Options base fee: $0
- Options per contract fee: $0.50
- Futures per contract: $1.50
- Broker assisted trades fee: $50
- Stock trade price: $0
Do Brokerage Fees Matter?
One of the top offers that you’ll see when browsing for a brokerage firm is $0 commissions, which can seem pretty enticing. However, if you look a little deeper, you’ll find that stock commissions don’t matter all that much in the grand scheme of things.
This is because most traders don’t actively trade. In fact, the average brokerage investor places fewer than 20 trades per year. So, if you only buy a handful of stocks per year, the money doesn’t amount to all that much. And overall, you’re probably going to be a better investor — and end up paying less in taxes — if you’re not moving in and out of stocks quickly.
If you’re a day trader who’s constantly buying and selling stocks, commissions matter a lot more.
That’s not to say you should overlook platforms that don’t charge trading fees. After all, every dollar counts. But you should never base your brokerage selection on a marketing offer or a statistic. Always look deeper into the company to see whether they align with your needs and offer a first-class experience.
Tips for Selecting the Right Brokerage
As you can see, prices can be pretty similar from broker to broker, which can make it difficult to figure out which is best for your unique needs. With that in mind, here are some additional things new investors should consider when selecting a brokerage firm.
Prioritize customer support
Imagine it’s 9:45 a.m., and you have spent the last 15 minutes trying to log into your brokerage account. You’re frustrated and need to speak with an agent. Will you be able to get through to someone for real-time support? Maybe so, maybe not. It all depends on whether your broker prioritizes customer service.
Not all brokers offer great customer support. And this is a problem because there may be times when you need quick access to agents for troubleshooting or if you have a question about a trade in your account. Make sure to read customer reviews and get a sense of what it’s actually like to work with a specific broker before you sign up for their services. If you don’t, you could wind up disappointed.
One thing to keep in mind is that just because a broker offers little to no brick-and-mortar locations doesn’t necessarily mean they don’t prioritize customer service.
Believe it or not, sometimes these brokerages can offer even better customer support to make up for the lack of physical branches. Online brokers sometimes have more resources to pump into service and support because they don’t have to pay for real estate and associated expenses — meaning they can hire more agents and offer stronger overall support.
Mobile experience is key
If you’re the type of person who likes to trade on the go, then you should prioritize a broker’s mobile app. Make sure that the trading app is user-friendly, enables on-the-go trading, and contains useful data and trading tools designed to help you make informed choices.
Mobile trading is not something that all brokerage firms prioritize.
Be skeptical about offers and incentives
As mentioned above, be wary of offers like $0 commission fees. Almost all brokers offer this now, and in the greater grand scheme of things, it doesn’t mean all that much.
You should also be careful of brokers offering free stocks as an incentive to sign up for their platform (e.g., Robinhood). Sometimes you can get lucky and win a high-value stock, but oftentimes the stocks you receive aren’t great. At the end of the day, you need to pick a platform because you like it. Don’t be wowed by any gimmicks.
For the best results, make sure you sign up for a platform because you like using it and feel comfortable trading on it. A free stock or promotion is a marketing ploy — not a feature.
Frequently Asked Questions
Do you need a brokerage firm to trade stocks?
Buying stocks is not quite as simple as calling a company and placing an order. To facilitate a trade, you need to go through a brokerage firm like Schwab or Fidelity.
A brokerage firm basically acts like a marketplace where you can buy shares of publicly traded companies and manage all of your investments from one location. They make investing safer and easier for consumers by giving you visibility into your portfolio and a variety of tools to help make informed trades.
Can you use more than one brokerage firm?
There is no limit restricting the number of brokerage firms you can use. You can use one brokerage firm or you can use several — keeping your retirement funds in one place and your options trading account in another, for example.
Just keep in mind that using multiple platforms can make it difficult to stay on top of all your various investments. If you use more than one brokerage firm, keep a spreadsheet detailing your accounts so that you don’t lose track of anything. This is important for recordkeeping and tax purposes.
Do brokers support cryptocurrency?
Not all brokers support cryptocurrency, but some now do. For example, Schwab is a company that lets you see how your cryptocurrency is performing. More brokers will likely start adding support for cryptocurrency over the next few years as the alternative asset makes its way deeper into the mainstream. For now, it’s still somewhat of an emerging system.
If you want a safe and reliable cryptocurrency platform, look into an established provider like Coinbase or Kraken, both of which are headquartered in the United States. Be wary when selecting a brokerage firm for your crypto investments as there are many scams out there.
As a disclaimer, cryptocurrency is a highly volatile market. Do your research before putting money into a coin so that you know how it works and its overall value. Cryptocurrency is largely unregulated and countless investors have lost money in this market.
What is asset allocation?
Asset allocation is the process of spreading money around into various investments within a portfolio.
When you open a brokerage account through a company like Fidelity or Schwab, you’ll need to then determine which types of accounts you want to open. For example, you can open a taxable brokerage account or an IRA for tax-advantaged retirement stock trading. From there, you can select a variety of different financial products like stocks, exchange-traded funds, mutual funds, and index funds.
Always make sure that a brokerage firm supports the type of trading you want to do. For example, not all firms offer options trading, and not all offer mutual funds, either. Among the ones that do offer mutual funds, prices tend to vary. If you want a low-cost mutual fund provider, you may want to look into Vanguard funds.
Are ETFs expensive?
ETFs are generally one of the more affordable types of securities that you can buy. For example, they are typically automated and therefore have very low expense ratios — no paying for a fund manager who might or might not make up his fees with improved performance.
Always make sure to research an ETF before investing so that you have an idea of the operating expenses and commission fees you will face.
Is online trading secure?
Most online brokerage firms today offer standard security features — like full encryption and Secure Socket Layer (SSL) protection. However, it’s a good idea to look into each individual provider to get a sense of their commitment to protecting customer accounts and eliminating fraud.
To make sure you’re making a smart choice, check their data breach history and make sure they offer multifactor authentication for secure login. You might also want to look into biometric security, which is another feature that can help protect your account against cybercrime like identity theft.
The Bottom Line
With so much on the line, it’s better to thoroughly review a brokerage firm before signing up. Once you’re in, you’re in, and you might not be going anywhere else for a while. Since fees and the overall customer experience can vary significantly from broker to broker, it’s best to do your due diligence and pick a firm you feel comfortable using — and one that aligns with your needs.
When it comes to selecting a brokerage firm to work with, there’s no right or wrong answer. You know your circumstances better than anyone else, and only you know which features are priorities. Research your options, take your time and don’t feel the need to jump in overnight. I’m confident you’ll make the right choice.
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