Best Online Brokers for Beginners in May 2024 (2024)

Written by

Edited by

Reviewed by

Mercedes Barba

Kenneth Chavis IV

Choosing an online stock broker can be an intimidating process, but it’s an important first step in your investing journey and can help you build substantial wealth over time. While the task of choosing a broker can be daunting, especially when stocks are highly volatile, it’s actually quite simple to get started.

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When you’re just starting out, you’ll probably want a brokerage that includes accessible educational resources, an easy-to-navigate app and website, zero commissions, low fees and attainable minimums — all attractive qualities if you’re getting started. Here are several brokerage options for beginners to consider.

The best online stock brokers for beginners:

• Charles Schwab
• Fidelity Investments
• Interactive Brokers
• Ally Invest
• E-Trade Financial
• Firstrade
• Firstrade
• Webull
• Merrill Edge
• SoFi Active Investing
• Robinhood

Other Options: Top robo-advisors

If getting started is still too daunting and you want a low-cost option that manages a portfolio of investments for you, then a robo-advisor is a great option. A robo-advisor will create a portfolio based on your risk tolerance and time horizon, and you’ll pay a low fee based on how much you have in the account. And it still takes only a few minutes to get started.

Two of Bankrate’s top-rated robo-advisors are Betterment and Wealthfront.

How to choose the right broker for you

Decide what kind of brokerage account you want to open

The first step in determining which broker best suits you is to decide what kind of investing you are planning to do. Ask yourself: Do I want to open a retirement account? Do I need to stay liquid? Do I want to start with a traditional brokerage account and then maybe look into other tax-advantaged options in the future?

The answers to these questions and more will help you narrow down what kind of broker is best for you.

Identify your investing goals

If retirement accounts are your main priority, you might consider Fidelity for their ease and breadth of the retirement space. But if you are interested in trading something more exotic like futures or cryptocurrency, then a broker like Interactive Brokers might be a better fit, as it provides more offerings for advanced investors.

Know the types of investments you’re most interested in

There is certainly no shortage of investment options, but the differences (not to mention tax treatment) among them is vast. The kind of returns you can expect from a bond fund versus equities are very different, as are their time horizons. Options and crypto might be considered more volatile assets than bonds but can also offer higher returns. That said, there are bonds that can hold higher risk (for a higher yield) as well, meaning that it’s crucial to know exactly what you’re investing in, as there’s no one umbrella strategy for any asset allocation.

This holds true of tax treatments as well. Your investment in a Roth IRA, for example, is treated entirely differently from a standalone ETF or mutual fund. Online brokers have an array of educational tools to help inform investors, but also provide personal financial advising services to direct customers to the most suitable investment for their profile. If you want to take it a step further and start trading options for example, that will help in narrowing your search as not every brokerage platform offers these kinds of investments.

Take a close look at fees and commissions

Once you have a clearer idea of your investor profile, you can narrow down your options by looking at different fee structures. While commissions fortrading stocks and ETFs have gone to zero as a basic industry standard, there are still other costs that make a difference from broker to broker.

For example, each options contract traded on Fidelity, Schwab and Merrill Edge costs $0.65, whereas Robinhood and Webull allow options contract trades for free.

The main trade-off with fees will come down to the offerings at each broker and which platform allows you the straightest path to your goals. Minimum balances and broker fees are also something to take into consideration when making your decision. High fees might be worth it if they are accompanied by personalized service that helps you meet your investment goals.

How brokerage accounts work

Brokerage accounts allow you to purchase securities such as stocks, bonds and ETFs and are a great way to save toward your financial goals. A brokerage account might be used to save and invest for a specific financial goal such as paying for a child’s education, or it may just be used to build wealth over time. Brokerage accounts also typically come with a number of additional features such as access to research reports and other tools.

Unlike retirement accounts, you’ll be able to access your money at any time in a brokerage account, but will likely owe taxes on any gains on your investments, depending on your income.

Do you need a lot of money to use a broker?

The great news for investors these days: It’s never been cheaper and easier to get started investing. In fact, lower fees have made online brokerages more investor-friendly than ever. So you won’t need a lot of money to get started on your investing journey.

Virtually every major online brokerage allows you to get started with no account minimum, so you can start off with $5 or $500. It’s also easy to find a broker that offers no-commission trading of stocks and ETFs (and sometimes options), so you won’t rack up fees when buying or selling. With no commission, you can invest tiny amounts and have it all go into your securities.

About the only routine fee that brokers consistently charge is a “transfer-out fee” if you want to move securities to another account. And you’ll only pay that if you do make a transfer of securities, but you won’t pay for any cash transfers.

For these reasons it’s never been cheaper for investors to get started investing in the market.

How much should you start with in a brokerage account?

If you have disposable income remaining after paying your expenses each month, you can start slowly contributing your savings into a brokerage account.

It’s best to start off with what you can afford, regardless of how small, and then start gradually increasing your contributions as you’re able to do so.

Remember that investing is a game best played long, and accrued interest is still accrued interest regardless of how small the principal. Even $50 or $100 (consistently) a month can make a big difference several years down the line.

Is my money safe in a brokerage account?

You may be familiar with the Federal Deposit Insurance Corporation, or FDIC, and that it protects deposits held in FDIC-insured banks in the event a bank fails.

A similar protection exists for brokerage accounts through the Securities Investor Protection Corporation, or SIPC, a nonprofit membership organization that was created in 1970 by federal law. The SIPC protects customers of SIPC-member brokers in the event that the firm fails. Customers are covered for up to $500,000 for all accounts at one institution, including a maximum of $250,000 for uninvested cash.

It’s important to note that the SIPC does not protect you from investment losses, but rather only if your brokerage firm fails financially. So don’t expect a bailout if you see the value of your stocks or bonds decline.

How to withdraw money from a stock broker

Yes, unlike retirement accounts such as 401(k)s or IRAs, brokerage accounts don’t have age limits on withdrawing your money. You’ll be able to access your money in a brokerage account whenever you’d like, but there are a few steps to the process.

First, you’ll need to sell any investments in order to have cash in your account if you didn’t have uninvested cash already. Then you’ll need to transfer the cash to your bank account, which typically takes a couple of days. If you know the day you’ll need the money, it’s best to plan ahead and start the process a few days early. You could also request a physical check from your broker, but that would likely increase the time it takes to get the money in your hands. Keep in mind that money you need soon shouldn’t be invested in long-term assets such as stocks in the first place.

What other resources do you need?

While cost is an important factor in choosing a brokerage, you’ll also want to consider other traits that may improve your experience, such as:

• Research: How much research does the broker offer? Is it in-house work or from third parties? Do you need research on individual stocks or are you looking for funds?
• Education: Many brokers offer a ton of educational resources so you can understand how to invest effectively. Quite a few brokers offer articles and webinars on how to use their advanced products and tools, especially if you’re looking to trade more often.
• Trading simulators: Some brokers offer trading simulators that give you a wad of virtual money and let you use the simulator to try out their platform and test your skills.
• Customer support: If you’re just starting out, you may have a lot of questions, so good customer support can be vital. Check a broker’s availability and see if it matches up with your needs.
• Mobile apps: If you’re looking to trade via mobile, you may want to take a peek at the broker’s app first. While some brokers are mobile-first and known for the quality of their app, almost all major online brokers offer an app that can get the job done.

Those are some of the major features that you’ll want to consider, but you may have other “must-have” features depending on your needs.