Plan for tomorrow with these online brokers. Choosing the right brokerage account is the key to reaching your financial goals and building the right foundation.
Fortunately, you have plenty of options to consider when you are looking for your online broker.
This is excellent news because you can be more selective and ensure you are using a broker that fits your investment needs. However, there is also a downside.
Since there are so many options, it can be daunting as a beginner or investing noob to know where to start and which platform is best for you.
But don’t worry! Below I’ll cover the best brokerage accounts to consider, which will hopefully help you make a more informed choice!
What is a Brokerage Account?
A brokerage account is an investment account that will allow you to buy and sell various investments like stocks, bonds, mutual funds, index funds, or ETFs. It’s also an account that can hold cash, so you have money ready to go to work for you when you are ready to invest.
Types of brokerage accounts
When you look at opening a traditional brokerage account, you will typically have two choices when you pick your broker: an individual brokerage account or a joint brokerage account.
Individual brokerage account: This is the standard account that most people use, where you open a brokerage account in one name and are the only account owner attached to that account.
Joint brokerage account: If you open a joint brokerage account, you will be opening a shared account with two or more individuals. Typically, you’d open a joint brokerage account with your spouse, but you can also open one with your child, other family members, and even business partners. There is more info and pros and cons with this account type.
What can you do with a brokerage account?
Utilizing a brokerage account is a great way to help you accumulate wealth, save for a large purchase in the future, and invest for retirement outside of your 401k or IRA.
When you open a brokerage account, you have more financial options for your money than, say, a savings account at your bank.
You can buy and sell stocks, mutual funds, ETFs, and other securities.
Get access to investing tools, research, and experts to help you.
It helps you reach bigger financial goals than letting your money sit in a bank.
When should you open a brokerage account?
You should open a brokerage account when you have savings goals five years or more away but might not be for retirement. This account can be a great companion to your emergency fund, elevating your overall financial health.
And since a traditional brokerage account is taxable, make sure you have your emergency fund built and max out your retirement accounts first. That way, you are financially prepared and are ensuring you are investing for your future retirement.
Opening a traditional brokerage account can also be a great way to put more of your money to work, especially as you earn more or have leftover money to invest. It’s how you can ensure to become wealthy and live a more comfortable life.
So Which Brokerage Account is Best?
The challenge with choosing the right brokerage account is that many offer similar features, services, and price points for trades and accounts.
In the last few years, the financial industry had some disruptors shake up the market, forcing some of the original players to match. This is great news for you, the investor. But like I said earlier, this can make it difficult to choose the right broker or confuse you.
Below is a list of the best brokerage accounts:
- Charles Schwab
Charles Schwab is one of the best online brokers out there. They offer a wide range of low-cost index funds and ETFs, and this year dropped their trade commission fee to better compete with some new fintech companies (like Robinhood).
Their platform is relatively easy to use. But like anything, it takes some time to get up to speed. However, once you’re familiar, it’s easy to set up a sound index investing strategy with Schwab.
- 0.02% lowest fee for an ETF or index fund
- $0 commission per trade
- SWTSX – Schwab Total Stock Market Index Fund (0.03% expense ratio)
- SWISX – Schwab International Index Fund (0.06% expense ratio)
- SWAGX – Schwab U.S. Aggregate Bond Index Fund (0.04% expense ratio)
Vanguard is a favorite of mine and a pioneer in index fund investing. Also founded in the 1970s and developed by John C. Bogle, the father of index funds. Vanguard is the original and arguably the best place to buy index funds.
While they don’t have the absolute lowest fees or sexiest online platform, they have a long history of being a trusted broker for index investors. Plus, their costs are still pretty dang low.
- 0.04% lowest fee for an ETF or index fund
- $0 commission per trade (with Vanguard funds)
- VTSAX – Vanguard Total Stock Market Index Fund (0.04% expense ratio)
- VTIAX – Vanguard Total International Stock Index Fund (0.11% expense ratio)
- VBTLX – Vanguard Total Bond Market Fund (0.05% expense ratio)
It seems that Fidelity has slightly fewer index fund options than Vanguard and Schwab, but that’s not always a huge deal, especially if you are building a simple three-fund portfolio.
They do offer funds with 0% expense ratios. That’s right, 0%!
That is something that neither Schwab nor Vanguard offers at this point. However, it could change in the future, with prices becoming more focused on these online brokers.
- 0.00% lowest fee for an ETF or index fund
- $0 commission per trade (with Fidelity funds)
- FNILX – Fidelity ZERO Large Cap Index Fund (0.00% expense ratio)
- FZROX – Fidelity ZERO Total Market Index Fund (0.00% expense ratio)
- FZILX – Fidelity ZERO International Index Fund (0.00% expense ratio)
One of the newer brokerages on the block is Webull, which has quickly started establishing itself as a top contender in the investing space. The company began in 2017, so it has a short track record and offers some great things for investors.
Webull was built as a mobile-first platform, and they offer commission-free trading of stocks, ETFs, and options. You can open individual brokerage accounts or an IRA, plus you can even trade cryptos. The downside is that they do not offer index funds at this time, but they have a great selection of ETFs.
Also, they have a robust trading research platform to help you make better investment choices.
Robinhood gets a slight edge over Schwab because of the simple and intuitive platform. That, combined with free trading, is hard to beat!
Though, it does offer a bare-bones platform. This helps keep it easy to navigate, but if you’re looking to do robust stock research, you’ll likely need to do that outside the Robinhood app.
Important to note here as well is that simple is not always better when investing. Robinhood makes stock trading very easy, almost like a game. Which it certainly is not! You should make all trades carefully and only after doing diligent research.
The Best Automated Options (Robo-Advisors) for Beginners?
If you are just getting started with investing or might be looking for more automated options, there are some other brokerage accounts you might want to consider as a beginner.
Below is a list of the best brokerage accounts for beginners:
- M1 Finance
- Ally Invest
Many people would like to invest but aren’t interested in always learning or tinkering with their portfolios. One option is M1 Finance, which makes investing easy with its automated account management and portfolio options.
You can choose over 80 custom profiles to invest in, own fraction shares of stocks or ETFs, and create investing and rebalances schedules so you don’t have to log in constantly. There are a few account options, too, like an individual brokerage account, joint brokerage account, an IRA, or a Trust.
M1 Finance doesn’t charge commissions or markups on any trades, no platform usage fee, and no fees to deposit or withdraw from your bank. However, there are some miscellaneous fees to pay attention to for specific actions.
Robo-advisors generally win out on ease of use, plain and simple. Especially with Betterment, which offers a clean and easy-to-navigate interface. Plus, once you answer their upfront questions, they manage your investments for you. It doesn’t get much easier than that!
Though, Betterment does come with a cost – a 0.25% management fee. That fee adds a high cost to your investments, so you must be sure that the simplicity that Betterment brings to your life is worth the extra cost!
- 0.25% management fee
- 0.03%-0.25% range of fees for ETFs
- SCHB – Dow Jones U.S. Broad Stock Market (0.03% expense ratio)
- VOE – CRSP US Mid Cap Value (0.07% expense ratio)
- SCHF – FTSE Developed ex-US (0.06% expense ratio)
Stash Invest, or just Stash, has quickly risen the ranks as one of the best investing platforms for beginners and beyond. You can invest in fractional shares of funds and stocks with as little as $1. The company will also help you balance and provide portfolio recommendations tailored to your needs.
Stash offers three account plans for investors that will cost $1 to $9 per month (pending your selection). Each plan offers features beyond your investments, giving you more control of your money.
You can also invest in a brokerage, traditional IRA, or Roth IRA retirement account.
Many love and utilize Ally Bank for their online banking needs in the personal finance industry. But you might not have realized they also offer investment options and services.
Ally Invest offers Self-Directed Trading and Managed Portfolios, which have some differences.
Self-Directed Trading is stocks, bonds, mutual funds, and ETFs, commission-free stocks, commission-free ETFs, and commission-free options trading.
Managed Portfolios: Robo-advisor that you can start with just $100. No advisory fees, annual charges, or rebalancing fees, and 30% of your portfolio is set aside as an interest-earning cash buffer. Monitoring and automatic rebalancing of portfolio, ETFs, and various portfolio choices to pick.
Blooom is a unique robo-advisor, mainly focusing on 401(k)s. They don’t offer a variety of funds themselves, but they connect to your existing 401(k) provider to provide optimization tips and potentially even manage your account.
Blooom offers two levels of service:
- A Free 401(k) Health Check-Up: Blooom can hook up to your 401(k) to review your account and provide recommendations on how to optimize your investments
- Paid Ongoing 401(k) Management: Blooom offers ongoing 401(k) management, so you can take a more hands-off approach and let them take the wheel
- Free 401(k) analysis
- $10/month flat fee for ongoing 401(k) management
What The Blooom Free Analysis Provides:
- Diversification recommendation
- Fee check-up – ensuring you are in the lowest fee funds possible
- Obvious watch-outs, like being invested in company stock
- Retirement tracking snapshot
Are brokerage Accounts Worth It?
Pending your current personal finances, opening a brokerage account can be a great option. These allow you to save money and invest in helping you reach a future goal (like saving six figures).
Here is what makes brokerage accounts worth opening:
No withdrawal limitations or penalties like 401ks or IRAs
You can take money out anytime without paying fees.
You can invest as much as you want with no account restrictions.
There can be more flexibility when you pay taxes, pending when you sell
Can earn a tax break from any loss on losing investments
Remember, the downside is that you will typically have to claim any capital gains as taxable income with a brokerage account. However, funds and ETFs are more tax-efficient that might be interesting for you to invest in.
More Articles from the Wealth of Geeks Network
This article was produced and syndicated by Wealth of Geeks.
Featured Image Credit: Unsplash.
Robyn is a millennial mom with a passion for personal finance. She has her MBA and has been studying Personal Finance on her own for as long as she can remember.
She has always been “into” personal finance but got inspired to start her blog after a period of extended unemployment. She says that experience really changed the way she viewed her relationship with money and the importance of accessible personal finance education. Read more at A Dime Saved.