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Updated: August 5, 2020 9:39 AM ET | Originally published: April 14, 2020
Money

The best online stock trading platforms make it easy for investors to seamlessly trade stocks, bonds, exchange-traded funds (ETFs), and more without charging a fortune for the privilege. In fact, many online stock brokerage firms let you make certain trades for free, while some let you get started without a burdensome minimum account balance requirement. Most of the best online stock brokers even offer powerful investing tools that can help you become a better investor and money manager over time.

Which online stock trading platform should you use? That really depends on whether you’re an active trader, a passive investor, or somewhere in between. You’ll also want to figure out how much hand-holding you need. If you’re an experienced investor who wants to trade stocks without any help, there are stock trading platforms that let you do exactly that. On the other hand, if you’re new to investing and want some advice along the way some firms offer expert customer support in addition to stock-picking tutorials and educational resources.

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Remember, however, that trading stocks is risky and there is a potential to both gain and lose money. What’s more, years of academic research has shown, your chances of outperforming a low-cost index fund are slim. If you plan to start online stock trading as a hobby, it’s better to set aside a few thousand dollars you can afford to lose, if worst comes to worst, while keeping your retirement savings separate.

Investing During a Pandemic

The emergence of the COVID-19 virus has thrown the U.S. and global stock markets into turmoil. With the high degree of volatility the markets have been experiencing over the past months, and which will probably continue for the foreseeable future, you may be wondering how best to navigate the stock market during a pandemic.

Don’t Let Emotions Guide Your Investment Strategy

One of the biggest problems with the markets today is not having a clear idea of when the pandemic will be over. “Uncertainty has been driving our volatility because A), we don’t know how long this thing is going to take,” says Peter Krull, CEO and Director of Investments for Earth Equity Advisors. “ And B), the response from the administration has been lacking direction.”

Uncertainty can lead to fear, and fear can lead to making decisions that may not be the best in the long run. Just because the market drops significantly over a period of days doesn’t mean you should sell all your assets at once. Take time to analyze, review your investment goals, and then take action if it’s in your best interest. If it isn’t, there’s nothing wrong with staying put.

For example, if you’re close to retirement and are invested in stock, you may want to move towards more stable equity funds to prevent a further loss of assets. If you’re young and retirement is a long way off, you can afford to ride out the volatility and wait for the markets to recover. And they will recover. The Great Recession of 2008 has been followed by close to ten years of record gains.

Stay the Course When Investing

So where does this leave investors today? Despite this uncertainty, investors have for the most part stayed away from panic selling. According to a survey commissioned by Betterment of 5,005 respondents currently investing in stocks, 78% of investors have stayed the course, leaving their money in their portfolios. Of the 20% of respondents who did withdraw money, about half did so to cover necessary expenses while the other half did so to prevent further losses.

Investors with Fidelity and Vanguard, two of the largest investment firms, also decided to follow a conservative approach. Vanguard reported most of its activity was investors moving into equities during the first quarter of 2020. Through April 9, only 9.8% of Vanguard investors traded as a response to the decline in the stock market.

Fidelity investors also decided to stay the course for the most part. Despite reporting 401(k) balances being down 19% for the first quarter, total withdrawals represented less than 1% of Fidelity’s total assets, with the median withdrawal amount being $5,500.

Investors Move to Online Brokers

Over the past four months, the volume of online investment activity for most brokers experienced double-digit gains, with investment giants Ameritrade and E*TRADE up by triple digits (144% and 129% respectively), according to CNBC. Betterment has seen a 25% increase in new accounts from the first quarter of 2019 to the first quarter of 2020.

The same report puts the number of new e-broker accounts at more than triple that of a year ago, while net new assets are up 80%. For the most part, investors have taken a conservative approach, resisting the urge to sell when the stock market dropped dramatically in mid-march.

Part of the reason for the increase in online trading volume is the move last October towards $0 commissions for a lot of the more common types of trades. Add to that a pandemic where you can access your online portfolios at any given time, take time to learn more about investing, and have access to expert advisors, and you can see why online brokers can expect to see increasing trading activity.

Robo-Advisors Grow During the Pandemic

So-called robo-advisors, online applications that provide financial and investing advice with little or no human intervention, have also seen a surge in users, especially during the early stages of the pandemic as the countrywide lockdown made access to traditional means of investing more difficult. As a result, some automated brokerages saw new accounts increase by as much as 300%.

The advantage of a robo-advisor is that you can easily set your investment goals and the trading platform will take care of the rest, moving assets automatically to ensure you meet your goal. By cutting out the human advisor, investors can save money on fees as well.

While robo-advisors may initially not have had the prestige of traditional brokers, the line between the two is quickly becoming blurred. All the major brokers, such as TD Ameritrade, Charles Schwab, Fidelity, and Vanguard have come out with a robo version of their trading platforms, with great success. Ameritrade’s automated service, for example, saw a 150% increase in new accounts year-over-year, during the first two quarters of 2020.

Likewise, more robo-advisors, like Betterment, offer customers access to a personal financial advisor if they want to be more involved in the decision making process, in addition to offering traditional banking products like checking and savings accounts.

Take a Cautious Approach

Whether or not you decide to invest during a pandemic will depend on your financial situation. If you have a retirement or investment fund and you can comfortably continue to make contributions, do so. “Absolutely make contributions,” says Krull. “The idea is always to buy low, sell high, Right? So this is that buy low time.”

There are also plenty of opportunities to be found in the stock market during hard financial times. Technology companies have for the most part managed to escape the March market crash. Other sectors such as retail or energy (think oil) haven’t fared as well. “When you look at investing, you have to look more selectively at the economy,” says Larry Adam, Chief Investment Officer of Raymond James. He points out that within each sector there are going to be some industries that will be struggling while others could be doing very well. By being selective you may be able to find the right opportunity for your investment goals.

However, you shouldn’t feel obligated to invest during this time either. Again, whether you decide to put money into the stock markets will depend on your financial situation. You shouldn’t invest money that you’ll need to pay for other obligations or that you’ve been saving for a specific use, like college expenses. As Krull and Adam both point out, you should tread lightly and make sure you can handle the volatility that’s likely to continue. “Make sure that your portfolio is consistent with your risk-reward profile,” said Adam.

However, if you are thinking of investing and are wondering about which online stock trading platform to go with, you’re in the right place. We recently compared all the top brokerage firms to find out which ones were the best in terms of their ongoing costs, investing options, tools, and more.

Important Things to Know About the Best Online Stock Trading Firms

  • Active traders who want to save money over the long haul should look out for online stock trading platforms that allow certain trades for free.
  • Know that most successful investors prefer passively managed index funds rather than actively trading stocks, since even most professional investors fail to outperform index funds in the long run.
  • Keep in mind that some brokerage firms are best for experienced investors, while others are ideal for newer investors who need some help. Several of the top online stock trading firms who made our list even let you work with a financial advisor to craft your investment plan.
  • If you want full service investing help, make sure to look for what we call “robo-advisors,” which are basically online platforms that aim to help manage your money as a traditional financial advisor would. With a robo-advisor, you may get some additional perks like tax-loss harvesting, automatic rebalancing, and more.
  • Don’t forget to calculate your anticipated costs with each of the investing firms below. Some with a more robust set of benefits charge an annual fee based on how much you have invested, which can be worth it if you want access to expert advice.

The Best Online Stock Trading of 2020

Ready to trade stocks? It’s smart to compare all the top stock trading platforms before you open an account. To help with your research, we compared an array of top stock trading platforms to find the best online options for different types of investors.

  • E*Trade:
  • TD Ameritrade:
  • Charles Schwab:
  • Fidelity:
  • Vanguard:
  • Betterment:

Best Online Stock Trading Reviews

While our study breaks down the top online stock trading options of 2020, you’ll still want to compare them to determine which one might offer the trading options you want the most. Read a summary of each of our top picks below:

E*Trade:

As a pioneer in online trading, E*Trade provides a large variety of investment options, from simple brokerage accounts for investors new to the market to advanced investing and trading options for those with more experience. There are $0 fees for on-line U.S. listed-stock, exchange-traded fund and options trades, making it easy for new investors to start building their portfolios.

Options contracts do still cost 65 cents per contract, which represents the premium paid to the contract writer, and which is on a par with most online brokerages. E*Trade will lower that sum to 50 cents per contract for those making 30 or more trades per quarter. With E*Trade Mobile and Power E*Trade Mobile an investor can not only trade stocks and options on the go but also get access to live Bloomberg TV, customized stock screening, and third-party research among other services.

For those who may need more guidance, there are managed portfolios with annual management fees starting as low as 0.30% of assets invested. E*Trade also offers checking and savings accounts that allow you to transfer funds between all your accounts without paying any fees. If you’re looking for mutual funds, E*Trade has over 9,000 mutual funds to invest in, 4,400 of which are no-load, no-transaction fee funds. There are also six different types of individual IRAs, and five IRAs geared towards small businesses.

On the downside, while high volume traders can take advantage of the lower commissions for options contract trading, investors who aren’t as active won’t be able to take full advantage of this benefit. There is a $19.99 transaction fee for mutual funds not on the no-transaction fee list, and brokerage accounts require a $500 minimum to open which, although not a large amount, is higher than other brokers offering $0 minimum opening balances.

NOTE: E*Trade has been purchased by Morgan Stanley, with the deal expected to be finalized by the end of 2020. For the time being, both companies will continue to operate independently.

Summary of benefits:

  • A large variety of investment options
  • $0 fees for stock, ETF and options trades
  • Managed portfolios with low starting fees
  • Lower fees for highly active traders

TD Ameritrade

TD Ameritrade is one of the largest online stock trading platforms with over 11 million client accounts, and offers investing options that some other platforms don’t. Aside from the standard brokerage accounts with $0 commissions on online U.S. and Canadian stock, ETF and options trades, TD Ameritrade also offers free Forex trading in 21 currencies and the opportunity to purchase IPO stocks either on the primary market if Ameritrade is part of the seller group or on the secondary secondary market. Investors interested in adding cryptocurrencies to their portfolios will be able to thanks to TD Ameritrade’s investment in ErisX, a company that offers access to cryptocurrency spot and futures contracts.

With TD Ameritrade you can use the web platform to access all your trading information as well as their educational, research and planning tools. Create Watch lists and receive alerts that track the price, volume and position of stocks on your list. These tools are also available on their mobile app, allowing you to track your investments and make trades from anywhere. The thinkorswim platform, also available for mobile, allows experienced investors to run simulations before actually putting money into a trade.

TD Ameritrade offers over 13,000 mutual funds, with several hundred of no-transaction fee funds to choose from. Where TD Ameritrade could do better is with no-load mutual funds, where commissions are as high as $49.99, much higher than many other brokers.

Summary of Benefits:

  • $0 fees for stock, ETF and options trades
  • Ability to trade in Forex and cryptocurrency
  • Web and mobile platforms available
  • Advance analytical and stock tracking tools

Charles Schwab:

Investors opening a brokerage account with Charles Schwab can do so with no required account minimum and enjoy $0 online stock, ETF and options trading and management fees, although there is a standard 65-cent per options contract fee. You can also invest in traditional, Roth and Rollover IRAs with zero fees for online equity trades. Through Schwab’s Global Account you can trade stocks in 12 foreign markets, again with a $0 account minimum. Schwab offers self directed trading options but will also provide automated trading as well as planning and investment with an expert advisor at no extra charge.

Schwab also offers multiple trading platforms. Basic trades can be done at Schwab.com or on the StreetSmart mobile app, while those interested in options trading can use the StreetSmart Central platform. For investors looking for a customizable mobile option, StreetSmart Edge allows them to create multiple trading layouts, track and monitor buying power, use a variety of trading tools, and livestream CNBC, among other features. Another product soon to be available for Schwab customers is the Schwab Stock Slice, which will allow investors to purchase portions of an individual stock share for as little as $5.00 per slice.

Schwab also provides its investors with multiple research tools, including not only their own equity ratings but also reports from Morningstar, Credit Suisse, and Market Edge among many others. Real time news and access to earnings reports as well as market commentary by Schwab’s in-house experts help provide up-to-date information on market trends.

The company also offers some traditional banking features, such as saving and checking accounts, home loans (via Quicken Loans) and an ATM with unlimited fee rebates worldwide. However, the interest rates paid on the Schwabs High Yield Investor Checking and Savings accounts tend to be lower than those of other online banks, and any cash you may have that is not invested, such as dividends or interest, is swept into a regular low-interest bank account. If you link an investment account to one of these savings or checking accounts, you may be required to keep a minimum cash balance in the bank account. If you don’t have enough, Schwab could sell some of your securities without prior notice to restore the minimum balance.

Summary of benefits:

  • $0 fees for stock, ETF and options trades
  • Ability to invest in foreign markets
  • Variety of research tools
  • Invest on your own or with an investment expert at no extra charge

NOTE: In November 2019 Schwab announced the purchase of TD Ameritrade. For the purposes of this article we have evaluated them separately as they are still operating independently. The two companies are expected to start merging in the second half of 2020, a process that will take between 18 and 36 months to complete.

Fidelity

Since the 1980s Fidelity has been known for its actively managed mutual funds, and to this day they continue to be a large part of the company’s offerings. Because they are managed, these funds tend to have relatively high fees associated with them, as opposed to passively managed funds. However, in the last decade Fidelity has followed the industry trend towards low-fee funds and has expanded its products to include a variety of competitive alternatives.

As with all online trading platforms, Fidelity provides investors with commission-free U.S. Stock, ETF and options trades. Fidelity also offers no account fees or minimum balances when opening a retail brokerage account or an IRA. In fact, Fidelity does not charge fees for low balances in mutual funds, or for IRA closeouts, late settlements, reorganizations or insufficient funds. Low fees are what makes Fidelity stand out, offering one of the lowest margin rates (4%) on the market as well as 4 different mutual fund products with zero expense ratios.

Fidelity offers plenty of different ways to invest. If you have a single investment goal in mind, you can either manage the portfolio yourself or use Fidelity Go, a robo-advisor that will help you stay on track. For larger portfolios and a more diverse investing strategy you can choose from three different wealth management plans assisted by personal wealth management advisors. Advisory fees for these management services will range from 0.50% of assets invested per year to a maximum of 1.50%. Fidelity also has 200 Investment Centers around the country to help investors who like a more personalized experience.

Overall Fidelity offers a variety of investment options with some of the lowest fees on the market, making it an attractive choice for many investors. However, given Fidelity’s history, it continues to emphasize its lineup of actively managed mutual funds, which tend to me more expensive than Fidelity’s index funds and those of its competitors like Vanguard.

Summary of benefits:

  • Low fees on almost all products
  • Variety of wealth management options
  • Robo-advisor option for simple investment strategies
  • 200 Investment Centers around the country

Vanguard:

Unique among online trading platforms, Vanguard is not a privately owned company. It is instead owned by shareholders of the funds it manages. What does this mean for the investor? The profits earned by the Vanguard funds are reinvested in the company which, along with the fact that many funds are passively managed with low management fees, means investors get to keep more of their money.

Vanguard’s strong suit is index mutual funds although they do offer active mutual funds, stock trading, CDs, and ETFs as well as a number of IRA accounts. For those who prefer to get professional advice, Vanguard’s Personal Advisor Services pairs a financial advisor with the investor to analyze investment goals and custom build an investment plan. Once approved, the advisor will manage the fund and periodically rebalance it. The investor can access the account online to check on balances, receive quarterly reports, and contact the advisor via email, phone or video chat. Management fees will start at 0.30% of the assets managed and there is a $50,000 minimum required. Fees will be progressively lower as the assets in the portfolio increase.

Vanguard also allows you to transfer funds and ETFs from other companies into their funds so you can manage all your investments on a single platform. Transferring funds from one broker to another can also save you some money, as you don’t have to sell your shares in one fund, pay taxes on the distribution, and then reinvest in another fund.

Summary of Benefits:

  • Company owned by shareholders
  • Lower or no management fees across the board
  • A large variety of index funds

Betterment:

Betterment is a robo-advisor that makes it easy to “set it and forget it” with your investments. In that respect, it may not be ideal for investors who want to actively trade stocks. But that doesn’t mean Betterment isn’t for stock trading, per se. This investing platform just takes the busywork out of the equation for you, letting you pick an upfront investing strategy that runs on autopilot. Betterment uses cutting edge technology guided by the help of financial advisors in order to help you secure the maximum return based on your risk tolerance, investment timeline, and other factors.

You can set up a taxable brokerage account through Betterment, but you can also use this platform for a traditional or Roth IRA, or even a Simplified Employee Pension IRA (SEP IRA) account. For a basic investing plan with Betterment, you’ll pay 0.25% per year on your investment balance, and your individual trading costs are included in that amount.

Summary of benefits:

  • Access hands-on investing with the help of cutting edge technology and qualified financial advisors
  • Open a taxable investment account or an IRA
  • Pay 0.25% per year on your investment balance
  • You can also opt to pay 0.40% per year for premium advice and unlimited phone interaction with a team of financial advisors

How We Found the Best Online Stock Trading of 2020

The best online stock trading platforms offer similar features, but that doesn’t mean they are equally suitable for different types of investors. While we considered online stock trading platforms that work best for newer investors and hardened pros who don’t need any help, we focused on firms that scored high in the following categories:

Online Access

Because our study focused on “online” stock trading platforms, we gave preference to companies that let you invest online, had easy to use platforms, and provided the investor with multiple means of managing their accounts.

Low Trading Fees

We only considered online stock trading platforms that charge low trading fees or no trading fees at all. Research has proven time and time again that fees related to investing can drastically reduce returns over the long haul, so we didn’t recommend any platforms that charge burdensome fees or account management fees that don’t come with significant value in return.

Access to Investment Research and Tools

While experienced traders may not put a premium on access to investment research or online tools, newer investors can benefit from this type of help. We gave preference to online stock trading platforms that offer tutorials, educational content, and investment tools that aim to help their customers reach their goals.

Smart Automation Technology

Finally, we considered the kind of technology each platform uses, and we scored platforms that offer automated investing tools quite a bit higher. Even if you’re an active trader, benefits like automatic account re-balancing can help you stay on track with your goals. Platforms that let you set up automatic investments each month were also given preference since automation ensures you invest each month whether you remember to or not.

What to Consider Before You Choose an Online Stock Trading Platform

Now that you’ve seen our top picks among online stock trading platforms, you have some decisions to make. Here are some of the most important factors to consider as you complete your search:

Learn About Trading and the Stock Market

If you’re just jumping into stock market investing, you may not know the different types of trades that can be made or have no idea how many trades you’ll want to make each week or even each year. However, this is one factor you’ll want to think long and hard about before you open a new brokerage account. Learn how to pick stocks before starting to invest. Good resources to use include The Intelligent Investor by Benjamin Graham and Investing 101: From Stocks and Bonds to ETF’s and IPO’s, an Essential Primer on Building a Profitable Portfolio. Use the tools and resources provided by online brokers to learn about different investment strategies. If you do decide to start trading individual stocks on your own, remember to start small and only use money you won’t miss if your investments don’t turn out the way you expect.

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If you’re someone who plans to trade fairly often, you’ll want to go with a platform that offers unlimited low cost or free trades. If you want to invest a lump sum in similar investments each month, on the other hand, you may want to choose an account that lets you select the desired level of risk and asset allocation for “hands-off” investing.”

Neither option is right or wrong, but the type of investor you are can determine the right account for you.

Decide if you want access to a financial advisor

Some of the online stock trading companies we highlighted above let you speak with credentialed financial advisors, while others simply offer investments and managed portfolios chosen by financial advisors and other experts. Either way, you’ll need to think about the type of help you want and whether you want to be able to call or email with any questions you have.

While investing platforms geared to active traders tend to be light in terms of customer service, robo-advisors and other full service investing platforms often let you speak with financial advisors throughout the process. Learning the ins and outs of stock trading is not something that can be done overnight, so access to experienced advisors can be extremely helpful.

Learn to Diversify

Putting all your investment eggs into one basket is never a good idea. Stock markets are cyclical, going through periods of gains and losses. If you only buy stock in one company, even if it’s a blue chip stock, you’ll at some point suffer a potentially large loss. Invest in a variety of companies to help protect your portfolio. However, picking a bunch of individual stocks can be time consuming and requires a lot of research, so your best bet is to look into mutual funds, index funds and ETFs, which already dozens shares of if not hundreds of different companies.

 

Summary: Best Online Stock Trading

Online Stock Trading Platform
E*Trade
TD Ameritrade
Charles Schwab
Fidelity
Vanguard
Betterment

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