I started investing when I was 18.
My dad told me about Roth IRAs and we opened an account at Vanguard, which is the broker he used.
Back then, commissions on stock trades were exorbitant. I don’t recall what I paid but I wouldn’t be surprised if it was something like $15 a trade.
As a beginner investor with very little money, I couldn’t afford $15 a trade. It was doing the dot com boom so every technology stock was doing great so $15 a trade didn’t seem all that bad. Eventually, after being lightly toasted on a few stocks (any JDS Uniphase fans out there!?), I just put it all into the Vanguard STAR fund (VGSTX) because it had a $1,000 minimum.
When you’re just starting out, you want an easy to use interface, low or no commissions, no fees, and the willingness to avoid the complex stuff that’s out there. That includes complex financial instruments and complex tools that will only confuse you.
Table of Contents
What We Looked For
We put together this list of the best online brokers for beginner investors because this is the list I wish I had when I started investing.
These are the factors we considered:
- Low or no minimum balance requirements – New investors all share one thing in common, you don’t have a lot of cash. New investors should lean on brokers that have low or no minimum balance requirements because it removes one hurdle. If you have to wait until you’ve saved up $3,000 to open an account, there’s a good chance you’ll spend that money.
- Low costs – It is really easy to find a great online broker that does not charge you for stock trades. The same goes for ETF trades. Since those are the table stakes, you then want to make sure there aren’t any account maintenance or monthly fees.
- Fractional shares – When you’re a new investor without a lot of funds, it’s sometimes nice to be able to buy fractional shares of companies you like. This is a nice to have feature that not many brokers offer.
- Easy to use interface – I’ve used a lot of different brokers in my time and some of them can be very overwhelming to a new investor. That doesn’t make them terrible brokers, it just makes them a bad fit for new investors. And easy to use also means easy to accomplish the tasks you want very easily. It can’t be too simple.
- Makes sense for experienced investors too – At some point, you’ll become more comfortable with investing and you may want a brokerage that offers other services too (with good pricing).
- A Bonus Promotion doesn’t hurt – A lot of brokers, especially the new ones, will give you cash or stock to open an account. This is a very low factor but something to consider.
Best Online Stock Brokers for New Beginner Investors
These brokers are not in any particular order, they are all good for new investors.
Ally Invest
Perhaps I am biased because this is my primary brokerage (besides Vanguard where I hold my Vanguard funds) but Ally Invest was very easy for me to use as a new investor. The pricing has only improved over the years (thank you competition!) and there is no minimum balance required.
One nice perk of Ally Invest is that you can link up your Ally Bank account, which lets you see all of your finances in one place.
- Minimum balance – $0 for self-directed brokerage accounts. Margin accounts require a $2,000 minimum and Robo portfolios require a $100 minimum.
- Costs – $0 for Stocks and ETFs, $0 for Options, $1 per Bond, $9.95 for mutual funds
- Fractional Shares – Not on purchases but you can reinvest dividends into fractional shares (as long as the stock or ETF trades above $4 per share).
- Bonus – They offer a transfer bonus of up to $3,000 if you transfer in a large sum (lowest bonus starts at $10,000).
Visit Ally Invest to learn more ↗
Vanguard
Again, I’m biased because I use Vanguard but they are great for their low cost mutual funds and ETFs.
The interface is also easy to use without a lot of complexity. Vanguard doesn’t offer much in terms of stock picking tools and analysis but there are plenty of those available online for free. It doesn’t have some of the more sophisticated tools like Level II quotes but a new investor won’t need that.
Vanguard offers low cost mutual funds, ETFs, and index funds and that’s what most new investors should be invested in anyway.
NOTE: Fidelity is also a great mutual fund company for new investors. I view the two as interchangeable and I tend to list Vanguard because it’s the brokerage I use. Fidelity is more likely to have an active promotion, but otherwise the two are very similar.
- Minimum balance – $1,000 for their funds ($3,000 for Admiral shares)
- Costs – $0 for Stocks, Mutual Funds, ETFs, Bonds, and Options ($1 per contract). Their mutual funds also charge no fee if you sign up for electronic statements (otherwise $20). A few of their mutual funds charge a purchase & redemption fee of 0.25% to 1% to discourage trading.
- Fractional Shares – Not yet but they were piloting a test program letting some investors buy fractional shares of some ETFs.
- Bonus – They do not offer a bonus.
Visit Vanguard to learn more ↗
E*Trade
E*Trade is one of the oldest discount brokers and it’s a testament to the service that they’ve been around so long. They’d been acquired by Morgan Stanley in 2020 but maintained nearly everything that made them popular.
E*Trade boasts the same commission structure as many other discount brokers – no fees on stocks, options, and ETFs. $1 for bonds (online secondary trades) and $0 for no-load, no transaction fee funds.
They have 24/7 customer service via phone, email, and chat – a nice feature if you really want to speak to someone. They also have quite a few local branches that are temporarily “closed” for walk-in customers due to Covid but you can call them to make an appointment.
- Minimum balance – $0
- Costs – $0 for stocks, mutual funds, ETFs, many bonds, and options (65 cents per contract).
- Fractional Shares – Not on purchases but you can reinvest dividends into fractional shares (as long as the stock or ETF trades above $5 per share).
- Bonus – They offer a new account bonus when you transfer in at least $5,000 (you get $50).
Merrill Edge
Merrill Edge is the self-directed arm of Merrill Investing, which is now part of Bank of America. As you’d expect with a broker on this list, you get unlimited free trades of stock, ETF and options trades plus no minimum balance required.
They also have 24/7 customer support via phone, chat and email – plus you can get an appointment with someone at a local Bank of America.
Another nice perk is that you can get a new account bonus based on the amount of assets you transfer or deposit into the account – up to $750 right now.
- Minimum balance – $0
- Costs – $0 trades of stock, ETF and options (65 cents per contract).
- Fractional Shares – No, Merrill Edge does not offer fractional shares.
- Bonus – They offer a bonus of up to $750 with the lowest bonus of $50 when you transfer in $5,000.
Visit Merrill Edge to learn more ↗
TD Ameritrade
TD Ameritrade rounds out our list – expect $0 commissions on stock, ETF, and options trades (65 cents per contract) plus no minimums. My wife uses them for her Roth IRA.
Much like some other brokers, they have 24/7 customer service via phone, chat, email, and social media. Best of all, they also have hundreds of branches so you can go in to meet with someone if you’d like.
The interface feels a little dated but still very effective, plenty for the new investor and experienced investor alike. It does have lots of free tools too, so you can do analysis as well if you’re interest.
- Minimum balance – $0
- Costs – $0 trades of stock, ETF and options (65 cents per contract). No annual or inactivity fees.
- Fractional Shares – No, TD Ameritrade does not offer fractional shares.
- Bonus – No bonus available.
Visit TD Ameritrade to learn more ↗
Notable Exclusions
You may have noticed that I excluded a few very well known brokers and seem suitable for new investors. Some of these you’ll find listed prominently on our best brokerage promotions page because of how aggressively they try to win new customers.
Not every brokerage that I skipped was skipped for this reason. For example, I think Tastyworks is a great brokerage but it’s best for active traders who deal quite a bit in options and futures contracts. I don’t think new investors need to dabble in options or futures.
But I’m sure you noticed I skipped a few notable names. On the whole, this new breed of brokerage is perfectly fine from performance perspective – they tick all the checkboxes.
But they may be unsuitable for new investors because of how much they try to entice new investors into financial products that don’t benefit them. They benefit the brokerage (notice how many brokers don’t charge for stock and ETF trades but they do charge contract commissions on options trades?).
This is how you end up with stories about a 20-year-old “trader” who took his own life. It’s incredibly sad.
While I don’t put all the blame on the platform for what happened, I also can’t recommend them for someone just starting out on their investing journey either.
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