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When you decide to invest, it’s very likely you’re going to use an online stockbroker or trading platform.
Millions of households in the United States have an account with an online trading service.
In some situations, you might all of your trading decisions on your own and hand-pick your investments.
Another option with online stockbrokers is to use one of the automated portfolios, which will invest your money according to your goals and individual factors like your age.
There are certain advantages of online trading and stockbroker platforms, and a few disadvantages as well.
One of the biggest disadvantages is the fact that you don’t have the personal advice and guidance that comes from working with a traditional brokerage firm.
A lot of online brokers have worked to overcome that disadvantage by offering options to speak directly with an investment professional along with offering professionally managed portfolios.
General advantages of online stockbrokers include cost-savings, convenience and accessibility.
So what are the usual features of online brokerage platforms, how do you compare them, and what are the best options for 2020?
How to Choose an Online Stockbroker?
Before going into the details of the best online stockbrokers and their unique features, it’s good to have an overview of exactly what to look for in one of these platforms.
Some of the factors you can use as a basis of comparison include:
- What is the cost per trade? Cost per trade is one of the primary factors to look at as you choose an online broker because it’s an easy way to compare platforms that might otherwise look very similar. However, you can’t just look at the cost per trade. Other costs factor into the equation as well. You need to look at all of these and make sure you’re not going to pay hidden fees that will erode your earnings. Fees to look out for include account maintenance fees and commissions (although that’s really only a concern for active investors, which most newcomers aren’t). Are there commission-free options available?
- What types of investment options are available? If you’re a newbie to the world of investing, you may be most interested in mutual funds and exchange-traded funds (ETFs), since these give you the ability to diversify your portfolio easily and with minimal trading knowledge. You might also want to look for platforms that offer options such as stocks, bonds, and maybe even futures. Even if you’re just starting and you want to stick with something like ETFs, it can be good to know you have more choices as your investment knowledge grows.
- How much do you have to invest upfront? Most platforms will have a minimum initial investment, although how much that is can vary quite a bit. If you’re new to investing and you don’t have a lot of money to put into an account, this can be a big factor to help you decide on a platform. There are brokers that don’t require any minimum initial investment too.
- If you want it, is direct investment advice available? The platforms that do offer the option to receive full advisory services usually offer it at a higher cost.
- What is the process to deposit funds? Most online brokerages will let you use either a check or a linked account to make deposits. Some people opt to deposit a set amount weekly or monthly into their investment account, so will this be a simple process with the online broker you choose?
There are certain safety and security protections that any online broker should have.
These include being members of the Financial Industry Regulatory Authority (FINRA), which is a securities regulator.
Brokers don’t provide insurance against losses with investment accounts, but if you’re also going to use a broker that has savings accounts or other types of deposit accounts, they should be insured against losses.
You will also want to look at the security standards a broker has in place to protect your personal and financial information.
The Top Online Stockbrokers for 2020
With the criteria above in mind, the following are the best online stockbrokers for 2020, and some features of each that make them a compelling option.
Robinhood is an excellent trading platform if you want something simple and low-cost.
Robinhood is a mobile platform, app-based stockbroker and when you sign up for a new account, you automatically get a Robinhood Instant Account.
This is a margin account, so you receive access to instant deposits and after-hours trading. When you open this account, you don’t have to wait for funds to process.
Also available is the Robinhood Gold Account, and there’s the Robinhood Cash account, which is a low-level account with commission-free trading, but it doesn’t have access to instant settlements or deposits.
Robinhood was initially created as a way to allow everyone to have access to financial markets, instead of just the wealthy.
Robinhood provides trading on ETFs and cryptocurrency, although it doesn’t support mutual funds and bonds.
There are no fees, there are no commissions on trades, and there is no account minimum.
Fees and Other Things to Know
Robinhood charges no fees at all and has no minimum initial investment requirement.
What’s Great About Robinhood
Along with no fees, Robinhood has a simple, easy-to-use interface and it’s great if you’re comfortable with a mobile platform.
There are cons, however.
One of the biggest drawbacks of Robinhood is the fact there are no mutual funds or bonds. There’s limited customer support, and currently, account types are limited, and there are no retirement accounts.
Acorns is a mobile app that takes your spare change from purchases and then invests it for you.
Acorns integrates two popular concepts—robo-investing and automatic savings. With Acorns, you turn on something called automatic Round-Ups. Then, the app takes the change from your purchases and invests it.
You can choose from the Acorns Core or the Acorns Later Account.
Acorns Core is a micro-investing account using spare change. Your change is added to a diversified, research-backed portfolio. More than $1 billion has been invested through Acorns Core.
Acorns Later is a retirement option. Acorns will recommend an IRA based on your needs, and then it’s updated to keep up with your goals. With Acorns Later, you can set up an automatic Recurring Contribution to grow your account.
You can also combine Acorns Core and Acorns Later for $2 a month.
Acorns invests users into ETFs, and every invested dollar is automatically diversified.
Acorns has a Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive Portfolio options. The differences in these are how much weight is given toward large company and small company stocks, real estate stocks, and corporate bonds.
Fees and Other Things to Know
If you’re in college, you can receive free account management from Acorns. You can also get cash back at certain retailers. The flat fee is charged monthly, and it ranges from $1 to $3. If you only have a small amount invested, this can represent a significant percentage of your assets, which is something to keep in mind.
There is no account minimum required to get started with Acorns.
What’s Great About Acorns
Acorns is good for someone who needs automation as a way to save money. A lot of people struggle to save, but Acorns makes it something you don’t even have to think about. You can start investing and saving for retirement with very little money, and since it is so thoughtless, you can take a set it and forget it approach.
Acorns is also unique because they have something called Found Money. With Found Money, Acorns works with hundreds of the biggest companies, and you can get cash back when you use your Acorn linked payment method with those companies.
3. Ally Invest
Ally Invest is from the online-only bank Ally.
Ally Invest offers different options for managed investment, as well as self-directed opportunities.
With Ally’s Self-Directed Trading platform, which is ideal for more experienced investors, you receive access to a wide variety of investment choices. These include stocks and ETFs as well as options, bonds, mutual funds, and margin accounts.
This is a do-it-yourself platform, and it does include market analysis tools and research to support your investment activities and strategies.
The cost for the Self-Directed Trading Platform standard trades on stocks and ETFs is $4.95 a trade.
Options trades are 65 cents per contract, with a $4.95 base.
More relevant to most traders, particularly who are new to the world of investing, is the Ally Invest Managed Portfolio option.
This is robo-investing, also known as automated investing.
Ally recommends a professionally tailored portfolio based on your goals, risk tolerance, and your time horizon.
Ally’s robo-investing technology features automatic monitoring and rebalancing, and you’re investing primarily in diversified ETFs with this option.
Fees and Other Things to Know
The fees with Ally Invest and other important, relevant things to keep in mind include:
- There is an annual advisory fee of 0.30% for all balances
- You can start with a minimum investment of $100
- 24/7 customer service is available
- The commission is $9.95 for no-load funds, which is competitively low in the industry
What’s Great About Ally
What we like about Ally is the fact that the account minimums are low, and the web-based platform is excellent. Ally also strives to be a leader among online brokerages in terms of their research and tools they have available.
The biggest con of Ally invest is that there aren’t any in-person branches if you’d like to go and see someone face-to-face.
Regardless, Ally is a low-cost, straightforward online broker that works well for beginners and advanced traders alike.
Betterment is a robo-investing platform also offering a savings account option. Much of what Betterment does is centered around helping people plan for retirement, regardless of their age or income.
Betterment features what they describe as built-in financial guidance, and they use advanced technology to simplify how people invest.
When you open an account with Betterment, you can invest in different types of funds, and the investment philosophy is called the Betterment Portfolio Strategy, built on award-winning research. The standard portfolio on Betterment takes ETFs from 12 asset classes, and the ETF expense ratio is on average, 0.13%.
The Betterment account philosophy seeks to keep costs low with low expense ratios, and the funds are tailored so they’re tax-efficient.
Betterment also integrates an optimized level of risk, so as an investor, you gain exposure to both domestic and international markets.
There are also customized, curated strategies available from Betterment including:
- Socially Responsible Investing, which increases the weight in stocks that meet certain criteria. This is a unique option for someone interested in low costs and diversification but also having a social impact with their investment choices.
- The Goldman Sachs Smart Beta account is meant to outperform a traditional strategy with a different level of risk, but it still maintains tax efficiency and low costs.
- BlackRock Target Income is a portfolio that’s entirely bonds, and it’s meant to shield investors from the different ups and downs that occur in the market. This portfolio is more for return from income, and it reduces volatility exposure.
There are also two service levels available with Betterment. One is Betterment Digital, and the other is Betterment Premium. There is a difference in fees, and also how much access you have to financial planners.
Fees and Other Things to know
Betterment works well if you don’t have a lot to invest upfront. There is no account minimum for Betterment Digital, and the fees are a flat 0.25%. For Betterment Premium, you do need a $100,000 account minimum, and you’re charged a 0.40% fee.
What’s Great About Betterment
Betterment puts a significant focus on tax-efficient investing.
That’s important because many robo-investing and online investing platforms focus on long-term returns, which Betterment does as well, but they don’t factor taxes into the equation. Taxes can significantly lower your returns, so Betterment is a standout in this area.
Betterment is also the only company that offers what they call automated asset location, which can increase the value of a portfolio by 15% over 30 years. That strategy is also related to taxes.
Betterment is ideal for someone who wants access to retirement accounts too.
If you want to be hands-off, save for retirement and not have to think about your investing or your strategy, it’s tough to find an online stockbroker platform that’s going to offer more than Betterment.
5. Titan Invest
Titan is unique from any of the other names on this list of the top online stockbrokers because it delivers a hedge fund experience outside of Wall Street that’s far more accessible.
Titan was founded by Clayton Gardner, who worked at billion-dollar hedge funds as well as Joe Percoco, who worked at hedge funds also. Max Bernady is another co-founder who spent time as a software engineer at a hedge fund.
Hedge fund investing is normally seen as something only accessible to the ultra-wealthy with a minimum of several hundred thousand dollars to initially invest. You have to be an accredited investor to have access to hedge fund investing as well, which means you have a net worth of at least a million dollars. Most hedge funds also charge high fees.
Hedge fund investing tends to bring significant returns, so the idea of Titan is to cut out the requirements of hedge fund investing in the traditional sense, but still bring investors many of the benefits.
Titan is described as a traditional hedge fund within a mobile app.
To get started, you download the app and invest a minimum of only $500. Then, Titan’s algorithm will invest your capital in 20 different high-quality of stocks, along with a personalized hedge built around your level of risk tolerance. You still have liquidity, and you can add money when you want, as well as withdrawing money.
Accounts are SIPC-insured up to $500,000, and data is protected using the highest security standards.
However, Titan is not a hedge fund, which is an important distinction to make. With a hedge fund, investors’ money is pooled together and all the investors are viewed the same. With Titan, you have your own account that’s personalized to your goals and risk tolerance. However, Titan invests your capital as an active manager would.
The stocks Titan invests your money in are deemed high-quality by the top hedge funds. Your portfolio automatically updates every quarter, but for the most part, holdings are long-term.
Fees and Other Things to Know
Titan charges a fee of 1% per year, which comes out to around 0.083% a month. If you had an account with an average daily balance of $2,000, according to Titan your monthly fee would be around $1.67.
Titan calculates fees based on the average daily balance of the month before.
There are no added on trading fees, electronic statement fees, or fees or deposits and withdrawals.
What’s Great About Titan
Titan is good because of its flat, transparent fee system but also because it gives a unique hedge fund experience to investors who would never be able to overcome the barriers to entry otherwise. Based on their research, Titan can also deliver great returns as a result of the unique investing strategy.
TD Ameritrade is one of the top-ranked online stockbrokers. It does tend to have higher trading fees than some of the other names on this list, but there’s a lot it has to offer in terms of service and options.
TD Ameritrade has an extensive slate of investment options, including stocks, options, ETFs, mutual funds, futures, and professionally managed portfolios.
Managed portfolios available from TD Ameritrade include:
- The Essential Portfolio is a low-cost, managed portfolio with a low minimum investment threshold. It includes five different ETF portfolios, each of which are linked to a specific goal.
- Selective portfolios are also goal-oriented and these portfolios include both ETFs and mutual funds. Selective Portfolios include automated monitoring and rebalancing.
- Personalized portfolios from TD Ameritrade include tailored investment advice. This is the highest-level premium portfolio option from TD Ameritrade.
With the Essential Portfolio, tax loss harvesting is always available. With the Selective and Personalized Portfolios, it’s sometimes available.
While TD Ameritrade isn’t as mobile-centric as some of the other online stock brokers ranked as the best, they do have the TD Ameritrade Portfolios App which lets you review your performance on the go, and check the balances of all your linked accounts.
When you have a TD Ameritrade, you have access to great customer support and free research.
Fees and Other Things to Know
TD Ameritrade’s fees make it one of the more expensive online brokerages, but this is primarily true if you’re using it for options trading. There isn’t a minimum investment required to open an account and commissions are $6.95 a trade. You can receive 60 days of commission-free trading if you meet a certain deposit minimum.
TD Ameritrade does offer commission-free ETFs (more than 550) and hundreds of no-transaction-fee mutual funds.
If you opt for a managed portfolio from TD Ameritrade, there’s a minimum investment of $5,000 and the advisory fee is 0.30%. For the Selective Portfolio, you must have a minimum investment of $25,000, and the advisory fee varies depending on how much you invest and your portfolio.
For a Personalized Portfolio, the minimum investment required is $250,000, and fees vary.
What’s Great About TD Ameritrade
Across the board, TD Ameritrade tends to rank well. Aside from the high commission, there are a lot of perks that come with this online broker. The large selection of investment options is a big perk, as is the fact that outside of the personalized and tailored portfolios, there is no account minimum.
If you want a lot of support and also research, TD Ameritrade has that as well.
There are so many online brokers that score well in terms of options, accessibility, and affordability.
These platforms range from simple and straightforward managed portfolios to more robust options for self-directed trading.
All of these platforms open up new investment opportunities regardless of your budget or your preferences.
My name is Jason Wuerch and I'm currently located in Madrid, Spain running a personal finance blog called Frugal For Less. My goal is to help everyone and anyone willing to make and save money through easy and simple ways that don't require much effort. Just because you're frugal doesn't mean you have to give up life's luxuries.