Your online stock broker is your gateway to investing, so it’s not a decision to take lightly. When picking a brokerage, it’s essential to consider your unique investment needs and compare costs, available investment options, account types, and how well the stock broker works for your investment style. Any of these online stock brokers could be a great fit for your investing and trading goals.
Category: 3. Best online stock brokers
Even with the best broker-implemented security measures in place, your account can never be completely safe without your cooperation. It would be best if you took the necessary precautions to protect yourself:
- Install good anti-virus and anti-spyware programs on your computer. This will be your best protection against viruses, malware, spyware, and other online threats. It’s also important to make sure your security programs are regularly updated.
- Use strong passcodes. Most people create passcodes that are user-friendly. There’s a strong preference for passcodes that are easily remembered. Even worse, many users employ the same passcodes across several financial websites. Rather than using easy-to-remember passcodes, create the type that makes no sense at all.
- None of the words or numbers in an effective passcode should be easily connected to you personally. That means don’t use family names, street addresses, or common numbers, such as your phone number or your date of birth. Use a mix of both uppercase and lowercase letters, numbers, and symbols. It will be less convenient for you, which is exactly why it will be much harder for hackers.
- Participate in two-factor authentication. This adds another layer beyond your passcodes. Many financial institutions make two-factor authentication available to you. It would be best if you always took advantage of it. It requires you to enter a verification code after entering your passcodes. Your trading app will send you the code by either email or text, and you then type that code to gain access to your online account.
- Guard your account information. Be aware of who’s around when you’re logging into your account. Never leave your computer unattended when you’re logged in. Log out of your account immediately after you’re finished. And never leave account documentation where anyone else might find it.
Virtually all online stock brokers maintain strong security procedures to protect you while you’re accessing your account. As well, companies and security experts regularly monitor the online environment for new threats. Most threats, old and new, will be stopped by your broker’s security measures.
Common broker security measures include:
- Secure sockets layer (SSL) encryption. This typically includes the use of a 128-bit key to encrypt and decrypt data files. In fact, 128-bit encryption is generally considered unbreakable. It would require a massive computation that could take thousands of years to break.
- Secure servers. Encrypted data is stored behind secure and monitored firewalls, in fully secured facilities.
- Two-step authentication. This feature is an additional login step, over and above your passcodes. It would be best if you took advantage of this step — see below.
- Automatic logout. Your account is set up to automatically log out of your secure session following a period of inactivity. For example, after 10 minutes of inactivity, the platform may ask you if you wish to continue. If you don’t respond, it automatically logs you out of your account.
- System monitoring. The financial institution regularly monitors its entire system for potential security breaches and other threats such as malware, fraudulent apps, and phishing schemes.
Unfortunately, there are several risks involved when you trade stocks online, just as is the case anytime you engage in any internet-related activity. Some of the more common ones include:
- Identity theft. What’s not always fully appreciated is the degree to which identity theft is an inside job. It makes perfect sense. People inside an organization have access to your information. When you trade stocks online, the potential is real for an insider to compromise one of your most valuable asset accounts.
- Computer viruses and malware. Often the main purpose of viruses and malware is to install spyware on your computer. Thieves can use this to gain access to your passcodes and other information. One way they do this is by installing spyware that enables them to engage in keylogging. This allows thieves to track your keystrokes, giving them access to valuable information.
- Data breaches. There were a record 1,862 data breaches in 2021. That represents an increase of 68% over 2020. To make matters worse, major financial institutions are a treasure trove of valuable information which makes them a gold mine for cyber hackers.
- Phishing schemes. Thieves have become adept at duplicating official-looking documentation from different financial institutions. In fact, they can copy a webpage or email with exact precision. You can receive a convincing-looking email from what looks like your online broker. But it’s really just a copy, directing you to log into your account by clicking a link. But the link doesn’t go to your online broker. It goes to a duplicate webpage that’s designed to collect your passcodes. Your real account then becomes immediately vulnerable.
Generally speaking, it’s safe to trade stocks online. But that doesn’t mean you’ll never be affected by threats. Online stock brokers are doing all they can to minimize those threats.
But as a responsible online trader, you also have to do your part to implement your security measures. Review your broker’s security measures, implement your own, and use common sense when trading, and you should come out unscathed.
Choosing the right stock broker for you depends on your particular trading style and goals. So we’ve compiled these factors to help you choose:
- Cost Per Trade — Be sure to investigate all costs. Don’t get tempted to the lowest commission per trade. Look at fund fees if you’re investing in ETFs or mutual funds, as well as any hidden fees like for assisted trades.
- Minimum Initial Investment Required — Choose an online stock broker with no required minimum or one that requires only a few hundred dollars to start investing.
- Types of Retirement Accounts Available — Confirm what kind of accounts they offer before you sign up. Do they offer an IRA, a rollover IRA or just traditional taxable accounts?
- Proper Asset Allocation Guidance — Find a broker that offers asset allocation with a minimum additional charge. For example, if you choose a robo advisor, check to see how their portfolios are invested to see if they are diverse enough for your needs.
- Easy-to-use Website — Make sure the platform is easy to use and that all fees are clearly defined. You can read our article on the best investment apps for beginners for some of our favorite picks.
- Direct Investment Advice — Be sure to choose a service that provides a full investment advisory service.
- Access to Investment Research — Find a discount broker that offers research papers for free.
In selecting these investment tools, we had the requirement that they must help:
- Increase your investment returns, OR
- Decrease your expenses, OR
- Improve your asset allocation
We’ve created the following as a shortcut for your investing needs, but this doesn’t mean we didn’t fully test out these services. With most of the brokerage accounts listed, we’ve done an in-depth review. So please also read the full review to find out why these services are on our recommendation list.
Here are a few more online stock brokers that just missed the cut for our “best of” list but may have specific features that appeal to you:
- Ally Invest: Ally Invest offers both self-directed and automated investing and its options trading platform is one of the most advanced and affordable (options trade for just $0.50 per contract) on the market today.
- TradeStation: TradeStation is a top online share trading center for expert, active traders who want a professional-style investment experience.
- Webull: Like Robinhood, Webull supports crypto in addition to stocks, ETFs, and options. But Webull’s trading platform is more advanced and provides an impressive array of technical analysis tools.
- Firstrade: Firstrade offers a little something for everyone, with a wide range of supported investments and account types with very low fees.
- Public: Public.com allows users to trade fractional shares of stocks and ETFs and also supports crypto trading. The platform also has social features like the ability to make your trades “public” and learn from other traders in your feed.
- Vanguard: Vanguard has long been one of the best online stock brokers for passive investors. This is thanks to its low-cost index funds and the rock-bottom advisory fees that it charges for Vanguard Digital Advisor and Vanguard Personal Advisor services.
- Merrill Edge: Merrill Edge could be a great choice for Bank of America (BOA) customers since those with eligible BOA checking accounts can enroll in Preferred Rewards to earn up to a 0.15% discount on Merrill Edge Guided Investing as well as other perks.
- JP Morgan Wealth Management: Investors can use J. P. Morgan Self-Directed Investing for commission-free trading for mutual funds, stocks, and ETFs. The company also has a robo-advisor if you prefer.
What makes it great: SoFi is an excellent website to trade stocks for newly active traders. Any digital native, from Gen X to Gen Z, will likely find it intuitive and easy to use even if they’ve never invested in the past. It makes investing in stocks and ETFs very easy and includes commission-free trades and no recurring account fees.
In addition to a beginner-friendly trading platform, it offers a robo-advisor with no added costs or fees. It also supports cryptocurrency trades and an excellent low-fee banking platform, among other useful financial products and services. The settings for automated, recurring investments are one of the best around, with options for daily, weekly, and different schedules for fractional purchases of any supported stock, ETF, or cryptocurrency.
Potential drawbacks: It supports most common trading and investing needs but doesn’t cover every type. For example, you can’t hold mutual funds at SoFi, and you won’t find every stock on the markets. The types of accounts you can open are also limited compared to some larger online stock brokers.
Commissions and fees: Many users will find the SoFi investing experience completely fee-free, with no commissions and no recurring account fees. There’s a cost for cryptocurrency trades, deducted from orders automatically.
- Easy-to-use trading app
- Almost no costs or fees
- Covers most common investing needs
- Support for cryptocurrencies
- Limited account and investment types
- High cryptocurrency trade cost
What makes it great: M1 offers a suite of tools that are perfect for automated investors, including experts who want to maintain a specific portfolio and beginners who want a primarily hands-off experience. It is also notably fee-free for most investing needs outside of some investment-specific management fees.
The highlight of M1 is its portfolio experience, which is managed using an interface called Pies. You can choose an expert-curated Pie or customize your own. The system works to keep your portfolio balanced to that target allocation, including stocks and ETFs. It supports several popular account types and offers banking and lending products in addition to its flagship investment product.
Potential drawbacks: Some features are limited to M1 Plus program members, costing $125 per year. M1 Plus unlocks a second daily trade window (by default all trades go in one batch in the morning), smart transfer rules, and more favorable rates for banking and loan products. M1 Plus is required for custodial accounts. It only supports a limited set of investment assets, with no mutual funds, cryptocurrencies, or options.
Commissions and fees: M1 doesn’t charge any trading commissions or recurring account fees unless you opt-in for M1 Plus at $125 per year. There are some fees for less-common activities and inactive accounts with a balance of $20 or less.
- Semi-automated investing with portfolio Pies
- Choose expert-curated portfolios or customize your own
- No commissions or ongoing fees for most accounts
- $125 annual subscription is required to unlock all features
- No mutual funds or cryptocurrencies