No Fractional Shares
Perhaps the biggest drawback to Ally Invest is the absence of fractional shares trading. That’s a process by which you can purchase slivers of whole share prices, rather than paying for a whole stock.
The lack of fractional shares means a person with $100 to invest would be limited to just two shares of a $50 stock. If the investor wants to buy one stock at $50 and another at $75, she would have to add an additional $25 to her account to make it happen.
If fractional shares were available, she would be able to spread her $100 investment across 20 different stocks, by purchasing a 1/10th interest in each company, if the average price per share was $50.
This inability means a small investor will be better served by opening an account with a broker offering fractional shares.
Limited Self-Employed Retirement Account Options
If you’re self-employed and looking for retirement plan options, Ally Invest offers only a traditional or Roth IRA account. But if you’d like one of the more generous self-employed plans, like a SIMPLE IRA or SEP IRA, Ally Invest does not offer these options for the self-employed.
Ally Invest also doesn’t offer a solo 401(k), though they’re hardly the only broker in the field not offering this plan.
If you’re looking for a broker with options for self-employed individuals and small business owners.
No Free Mutual Fund Trading
While many brokers of hundreds or thousands of no-transaction-fee (NTF) mutual funds, Ally Invest doesn’t offer any. Instead, it charges $9.95 per trade on its entire menu of no load mutual funds. It should be noted though that Ally has one of the widest selections of mutual funds you’ll find at more than 12,000.
So if you’re looking to make a one-and-done mutual fund purchase that you’ll hold onto for the long haul, Ally Invest could be worth considering. But it’s a bad choice if you’re wanting to dollar-cost average into a specific fund (or funds) on a repeated basis.