Online and discount brokers perfect for individual investors↓
With so many options it can be difficult for investors to know which broker is right for them... so I made a list of which ones I like best and why.
Here at YourPortfolio we're all about thinking for yourself, researching for yourself, and investing for yourself. However, if you want to buy stocks, options, mutual funds, or ETFs, you're going to have to use some sort of broker. And online brokers, at least for the individual investor, are definitely the way to go. They have cheaper fees and commissions, offer analytical tools, and have made it almost too easy to buy and sell stocks.
Now, I don't want to create the same generic rankings and annoy you with a bunch of special offer sign ups that you see all over the place. This article is intended as a legitimate resource and a jumping off point for you to do your own research and find which broker offers the best fit for your own investing style. The brokers in this article are only the ones I have either used, tried, or seriously considered myself. I will update the numbers (fees, commissions, etc.) and features periodically as these tend to change over time with so many different brokers in the mix.
Make sure to share your thoughts on which brokerage accounts you use and what you like, or dislike, about them. Suggestions are always welcome, so if you want to include a different broker or express your opinion on my current line-up, please comment!
Best Feature - Free Trades
When I first found Robinhood I knew I would never look back - and I haven't. It's the only broker I have found with (completely) free trades and a user-friendly interface. It doesn't come with all the bells and whistles of a few others out there, but if you're a value investor that shouldn't matter. Let's face it, you should not rely on the technical tools of any brokerage site anyways. If you perform your own research and analysis - ahem... YourPortfolio Software is a great tool (shameless plug) - and do not enjoy paying fees/commissions, then Robinhood is for you.
Remember, as an investor, you must count these costs against your overall returns and, even though you should keep the buying and selling to a minimum, these fees can add up. It is a mobile-only platform right now and does not offer options, but they are an innovative team (Apple Design Award Winner) and are constantly adding features and improving their product. I use Robinhood as my broker and I highly recommend it. I've never had an issue with them and anytime I place an order I usually get a better price than I asked for.
Best Feature - Low Fees
Outside of Robinhood, this online broker has the lowest fees and commissions out there. I actually used this service until I found Robinhood and generally liked the platform and interface. OptionsHouse has a lot of tools and features, but is able to keep commissions down at a flat rate of $4.95 a trade. They also have a mobile platform, but I often found it clunky and difficult to use, but that's just me (many folks actually love it). It is much more of an interactive experience with the use of graphs, charts, and analysis all within the platform itself. If you couldn't tell by the name, it's also an excellent broker for option contracts as well, and hear me out on this.
Options can be a great way, even for a true value investor, to lower cost basis and profit from your current investments in any market. Many greats, even Warren Buffett, have used this strategy to their advantage for a long time. It's much too detailed to get into on this page, but I will create a blog post in the future and link it here. Option trades are also $4.95 plus $0.50 per contract, prices that are basically unrivaled as of this writing. With all that said, make no mistake, the low fees and plentiful features make OptionsHouse a great broker for the individual investor.
Best Feature - Retirement
Currently, I use two brokerage accounts -- Robinhood and Vanguard. However, I only use Vanguard because of my Roth IRA account, for reasons I'll detail. Vanguard's fees and commissions are not extremely friendly for the individual investor. If you have less than $50,000 in the account, they charge $20 a trade (your first 25 trades are $7), if you have $50,000 - $500,000 - $7/trade, and greater than $500,000 - $2/trade. As you can see, their pricing model favors those with significant funds, which may be great for retirement accounts, but there are better options for (the majority of) personal accounts.
That being said, Vanguard is much more than the mutual funds and ETFs they are often associated with. You can buy stocks and bonds through their brokerage services, as I do using my Roth IRA account, just like any other online/discount broker. And I have been pleasantly surprised with this service. Their trade execution is top notch, always delivering a better price than asking, and they offer several research features, including an excellent stock screener I use all the time. Vanguard also has an air of respectability and trustworthiness surrounding their name, and after using their services, I definitely agree. Their customer service is top-notch, the best of ANY company out there, and not just in the investing world. They also offer options accounts as well.
Best Feature - Platform
TD Ameritrade has been around a long time and is a highly respected name in the industry, and rightfully so. However, it would be my last option on this ranking due to one thing and one thing only, commissions. I actually like just about everything they have to offer, including the research tools, quality customer service, and simple interface, but the $9.99 a trade commission (options are $9.99 plus $0.75/contract) is too high for me. To their credit however, there are no hidden inactivity fees or any minimum account balances required.
While I said I only use 2 brokers as of now, I would consider TD Ameritrade solely based on the thinkorswim platform. As I mentioned earlier, options can be a fantastic way to decrease cost basis and earn returns on current investments, and the thinkorswim software is hands down the simplest and best platform I have seen. If you've ever looked at options before, you know they can be a tricky, and sometimes, confusing way to invest. I believe thinkorswim makes it much easier. They also have a paper trading feature to let you practice before you start. But despite thinkorswim and the several other great attributes of TD Ameritrade, the commissions are simply too high to use as of now.