Online stockbrokers make it a lot easier for beginners to start investing in the stock market. However, if you are just getting started, it can be difficult to decide which online stockbroker is right for you.
The decision will come down to what kind of investing you want to do. From there, you will want to look at what fees, commissions, and required minimums work for you. Other factors to consider include a website and mobile app that are easy to use and educational resources that will guide you to better understand the various investment products.
This guide will provide an overview of how to choose an online stockbroker that will be right for your unique needs and goals as well as tips for getting started.
An online stockbroker is an online platform that allows investors to manage their investments without using a traditional broker.
With an online stockbroker, you can buy, sell and trade stocks, mutual funds, ETFs, bonds and other securities anywhere you have internet access. Through robust web platforms and mobile apps, you are able to make investments and buy stocks at will. Some platforms even offer automated trading.
Online stockbrokers offer a wide range of features such as real-time quotes, analysis tools, and educational resources to help guide you in your investing decisions.
They are typically cheaper than traditional brokers, provide more flexibility when it comes to managing your investments, and allow you to easily access markets around the world.
Online brokerage companies allow you to make investments through their websites or mobile apps.
You will start by opening the type of investment account you decide you need to meet your financial goals.
Once the account is open, you will need to link it to a bank account that you will use for funding your investments such as a checking account or savings account. Some brokers will also allow you to link your debit card to add money to your account.
In most cases, you will have to wait until the funds transfer clears into your investment account before you can start using them.
There are plenty of online stockbrokers that require no minimum deposit to open an account with them.
For example, Fidelity, SoFi, TD Ameritrade, and Robinhood all have a $0 minimum to get your account set up.
Of course, you will need to make a deposit before you can get any investments started. Some online brokers will offer incentives to new investors such as depositing some money into your account that you can get started with.
The amount of money you will need to start investing will depend on two factors: the type of investment you want to make and your broker.
Some investment platforms allow you to start with as little as $1.
The robo-advisor Betterment allows investors to start with as little as $10. Other investment firms may require minimums that are much higher. For example, Vanguard requires a minimum of $50,000 to start investing.
If you’re investing in individual stocks, the amount of money you need to start investing will depend on the price of the stock. For example, if you want to invest in a stock that is currently priced at $50, you will need at least $50 to buy one share.
There are a lot of variables to consider when choosing an online stockbroker. The platform you choose will depend on your personal financial goals and aspirations, what types of investment products you are interested in, any minimum deposit requirements, costs and fees, and more.
Here are some factors you will want to consider before making your final decision.
The first factor you will want to evaluate is your financial goals. What are your financial goals and how does investing align with those goals?
Are you planning to save for retirement? Did you just have a child and want to open an account to save for your child’s education? Are you trying to save to buy a house? Or are you simply wanting to build some wealth over time?
You will want to think through both long-term and short-term goals so that you will know what kind of investments you want to make.
After evaluating your financial goals, you should have an idea of what kind of investments you want to make.
If you are wanting to save for retirement, you will want to make sure that the brokerage you work with offers IRAs or 401(k) plans. If one of your goals is to save for your child’s education, you will want a broker that offers 529 Accounts.
If you are wanting to invest in mutual funds or individual stocks, you will want to be sure to look for those types of products.
Robinhood disrupted the online trading industry when it launched in 2014 and required no account minimums or trading fees. After Robinhood had 100,000 people create accounts in the first month and reach 4 million accounts by 2018, the industry leaders took notice. In 2019, several major brokerages gave in and began offering no-fee stock trading.
As a result, working with the top brokers in the country is more affordable than ever, but there are still costs and fees you will want to look out for when shopping for an online broker.
These are the most common types of fees and costs you can expect to see:
To know for sure the fees that each company charges, look for their “Investing and Fee Disclosures” that should be easy to find on any online investing site.
One of the elements that helps online trading companies stand out from among the rest is the educational resources they offer. This is something you will especially want to consider as a beginner.
The top online brokers offer the following:
Since all major brokers have online platforms and mobile apps, you will want to research the user experience of these platforms.
Here’s how we recommend going about this:
Reputations matter, and this is especially true when it comes to companies you’re going to trust with your money. Of course, every company is going to advertise themselves as the best, so you will need to look elsewhere for this information.
Here are some the factors to consider:
Most online investors will have some requirements you will have to meet or information you will need to provide in order to open an account, including but not limited to the following:
While the information the brokers request may seem invasive, the companies are required to collect this information in order to comply with government regulations. The main purpose is to help prevent identity theft and prevent terrorists from opening accounts.
Once you open an account with your chosen platform, you will need to fund the account so you can start investing.
Here are some of the ways you’ll be able to deposit money into your account:
Investors in the United States are not allowed to use a credit card to fund an account.
Just like with depositing money, you should be able to withdraw money from your brokerage account through a wire transfer, an electronic funds transfer, or by sending you a check. You may be charged a small fee for a wire transfer.
In order to withdraw money from your stocks, you will need to sell them first.
Since an online broker is going to have so much of your personal information, it’s a good idea to spend some time researching the safety of the platform.
For example, has the company had any data breaches? What happens if the investing firm goes under? Will you lose all your money?
One major feature you will want to make sure you get with any platform is solid customer service. You will want to know that you will
If you are able, take the platforms for a test drive. Not all platforms will allow you to do this, but if they do, definitely take advantage of this feature.
If you want to know more about which investment company to choose, check out our reviews of the following companies:
We independently identify investment companies. The investing companies are evaluated based on six factors that we believe are important for consumers: years in business, product types, customer service availability, Better Business Bureau (BBB) Ratings, and the inclusion of a mobile application and how much functionality it has. Please find a full description of our ratings system here.
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