Best Platforms for Commission Free Trades
Let’s be honest: You work hard for your money and need to protect it. Nobody likes watching their money go down the drain on things that do not benefit them. Unfortunately for many investors, this happens all the time.
As you begin building your portfolio, it is therefore important to make sure the majority of your money goes toward growth — and not to account management fees and other platform expenses. If you’re not careful, you could wind up paying more than you have to in fees for making stock trades — which, in turn, can stifle the growth of your portfolio.
So, how do you avoid excessive fees when trading stocks? It’s simple: Look for free opportunities from online brokers.or, skip straight to the best platforms
A Beginner’s Guide to Making Free Trades
Most full-service brokers charge a standard commission of between 1% to 2% when facilitating trades. For example, if you purchase one share of a company at $100, a broker may charge a $2 commission for the $100 transaction.
This may not sound like a lot of money. But if you’re buying and selling a lot of stocks, this type of expense can add up to a significant amount over time. As such, it’s important to find ways to minimize commissions so you don’t overpay for basic trading services.
The average investor wastes thousands of dollars over the course of their lifetime on fees that do not benefit them in any way. Brokerages often bank on consumers ignoring or overlooking fees that don’t seem like much. And as long as people keep paying them without caring about pricing, brokers are going to keep charging them.
The best way to avoid this pitfall is to prioritize services that offer free stock trading.
What is Commission-Free Trading?
Good news: Many brokers now offer commission-free trading, enabling you to buy and sell stocks without having to pay a fee every time you make a transaction.
Of course, there are still other fees you are going to have to consider — particularly if you invest in mutual funds, index funds, or ETFs. But if you can access commission-free trading for the bulk of your investments, it will ensure that the majority of your transaction goes towards making you more money — and not the brokerage firm.
The Benefits of Free Trading
As they say, the best things in life are free. With that in mind, let’s take a look at some of the benefits that come with using a free trading service.
More Money In Your Pocket
This benefit is obvious: Avoiding commission fees puts more money in your investment account. Instead of wasting money on fees, you can spend it on other necessities — like food, rent or mortgage payments, and personal health.
This is important for investors who are just starting out in the market and may be struggling to make monthly payments. Investing is not easy — especially when you are planning for retirement. It’s hard to plan ahead years down the road when you can barely put food on the table.
You can also use the money that you save on free trading to invest more in stocks for short- or medium-term growth, and in long-term retirement savings plans — like 401ks, IRAs, and Roth IRAs. Putting more money away for savings today can go a long way in retirement planning.
Enforce a Lean Lifestyle
Prioritizing a service that avoids unnecessary fees can help you reinforce this mentality in other areas of your life. You’ll start to notice fees and expenses in other things as well, like phone bills, cable bills, and utility bills. The more expenses you can eliminate, the more wealth you can preserve over time.
Best Brokers for Commission-Free Trading
Here are some popular online brokers offering commission-free trades for investors.
Schwab has one of the most robust online trading services on the market, and you can use the company to open either a brokerage account or retirement account. Schwab offers a wide range of investment products including stocks and exchange-traded funds (ETFs), among other things. Best of all, online stocks, mutual funds, and ETFs are commission-free with Schwab.
Schwab also lets you manage cryptocurrency on their platform now too, so you can use it to oversee your Bitcoin transactions.
Learn More: Charles Schwab Review
Robinhood is a leading mobile trading service offering commission-free trading for investors that delivers a dashboard of user-friendly tools via a robust mobile app.
Robinhood is also running a promotion where you can receive your first stock for free when you sign up for a new account. The fintech startup also lets you buy fractional shares and also enables you to trade stocks before their IPOs.
Learn More: Robinhood Review
Merrill offers free stock trading and commission-free ETF trades on the Merrill Edge platform. If you want to make options trades, you might have to pay up to $0.65 per contract.
Merrill also offers no transfer or closing fees, inactivity fees, or annual fees for brokerage accounts. However, there is a $49.95 full outgoing transfer fee for retirement accounts.
Learn More: Merrill Edge Review
E*TRADE is another service offering commission-free trading for stocks, ETFs and options. However, options do have a contract fee of $0.65 each, just like Merrill. As an added bonus, there are no minimum trade requirements or inactivity fees to worry about.
Learn More: E*TRADE Review
Fidelity offers commission-free trading for US stocks, options, and ETFs, and margin rates as low as 4.00%, making it a great platform for active trading.
Like Schwab, the company also offers fractional trading which makes investing easier for newcomers. You can purchase small slices of companies and ETFs.
Learn More: Fidelity Review
Vanguard is known for being one of the most affordable brokerage services for investors, offering $0 commissions to trade stocks and ETFs online.
In addition, you can use Vanguard to access a wide range of leading index funds that come with minimal expense ratios. Index funds are a great way to access stable, long-term growth.
Learn More: Vanguard Review
Of course, these are just a few of the leading online brokerages offering commission-free trading.
Tips for Using Free Trading Services
As you can see, there’s no shortage of brokerages offering free trading services. However, there are some important things to consider before you start using them.
Always Read the Prospectus
The Securities and Exchange Commission (SEC) requires investments to offer a disclaimer providing details about the offering to the public. This is called a prospectus and it’s a critical document to read before investing in any security.
Free trade offers can be a hook from investment companies to get you to agree to their platform. However, investments like mutual funds and ETFs may come with fees of their own. Before you start investing, look at the fund’s expense ratio to see how much of the fees are being allocated towards growth (e.g., active fund management vs. transaction fees).
Watch Out for Additional Fees
In addition to trading fees and expense ratios, it’s also important to consider other fees that the brokerage firm may charge. For example, brokers may charge separate fees for management, advisory, or other brokerage services.
They may also charge annual fees or penalize you if you don’t make enough trades over the course of a year.
Be Careful About Promotions
Watch out for promotions that attempt to get you on a platform, like free trading options or other gimmicks. Pick a platform because you like using it — and because their other expenses align with your goals and preferences.
The user experience and daily trading costs are far more important than any promotion you receive for signing yourself or a friend up. Take my word for it.
Be Selective about the Platform You Use for Trading
Make sure to spend some time vetting financial platforms so that you end up with a service that meets your needs. Not all platforms are created equal, and the last thing you want is to end up parking your hard-earned money somewhere you don’t like.
With that in mind, here are some things to look for in a trading platform.
Data Visualization Tools
Make sure the platform makes it easy to visualize information in charts and graphics to track performance over time. You shouldn’t have to leave the platform and use Google to find basic financial data about a trade or fund. This should be a dealbreaker when searching for a platform.
Security should be another top consideration when selecting a brokerage service. The platform should use a variety of security measures — like full encryption and multi-factor authentication during sign-on.
Be careful of using platforms that appear to treat security as an afterthought. The last thing you want is to wind up losing money from hacking and having to deal with trying to recover it.
Finally, test the platform to see how it feels moving between different screens and placing trades. You should feel comfortable accessing information and making financial transactions. If the platform isn’t intuitive on a desktop or a mobile device, you may want to use another service that is.
Frequently Asked Questions
Do all brokers offer free trades?
Though more and more of them have moved to commission-free trades in recent years, not all brokers offer free trades. That said, you should look beyond free trade offers to understand how brokers are charging you for their services.
In some cases, it could make sense to use a broker that charges you for trades if they have other competitive offerings that match your needs. Shop around and find a broker that aligns with your strategy.
Is a deposit account an investment?
A deposit account is a secure savings account, meaning it’s used for storing money safely and not investing. When you open a deposit account, you don’t have to worry about market volatility. Your deposits will be safe during unexpected downturns — until you invest them in securities.
What does FDIC-insured mean?
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to safeguard consumer deposits from bank failures. The FDIC protects deposits up to $250,000. While some investments are FDIC-insured, others aren’t. Do your due diligence and read the fine print before determining whether a certain type of investment is comfortable for you.
What is a broker-dealer?
A broker-dealer is a firm that buys and sells securities on behalf of customers. Most U.S. brokerages today act as both principals and agents.
How does FINRA protect consumers?
FINRA is an independent organization that oversees brokers and broker-dealers in the U.S. FINRA serves to protect consumers from fraudulent practices.
Is options trading a good idea?
Options trading involves signing a contract that gives you the right to buy or sell assets at a fixed price for a certain period of time ranging from a day to a few years. Options trading is risky because prices can change unexpectedly over time, leading to potential financial losses for investors.
Investing in options is an easy way to go broke if you don’t know what you are doing. As such, it’s best left for experienced investors who know the ins and outs of the market.
The Bottom Line
Free trading is a great personal finance strategy that can help you minimize expenses and grow your investments over time. If your goal is achieving financial independence, it’s vital to minimize expenses whenever possible.
By using free trading from the providers listed here, you can put more money into your investment accounts instead of giving it away to brokers in the form of fees and expenses. Over time, the savings can add up to a significant amount.
Best practices call for being selective about the platforms you choose to make trades on and to make sure that the brokerage firm you work with has all of the necessary elements to position you for success — like strong security, low fees, and a strong user experience.
By partnering with the right broker, eliminating as many unnecessary fees, and being patient, you can build a solid portfolio and a strong financial future.