Many brokers offer their clients a suite of expert research and customer service aimed to aid and inform their investing strategy at every turn. However, if you’re an investor who is comfortable picking and managing your own investments, and puts a premium on low fees and a no-frills experience, a discount brokerage is what you’re looking for.
Just because you’re confident enough in your acumen to pursue the self-directed investing approach doesn’t mean you should settle for just any brokerage. Below, we’ve compiled a list of the best discount brokers in the business by looking not just at their fee-per-trade, but also ease of use, account minimums and other factors that help separate these players from the rest of the pack.
We regularly review the latest discount broker offerings — we’ve evaluated 20 different ones in this round — and have selected our top choices. All of the discount brokers on this list may well be worth considering, with those at the top scoring the best in our methodology.
To determine our list of the best discount brokers, we focused on fee per trade, account minimums, other account fees, ease of use and diversity of securities. See our methodology article for details on how we created our rankings.
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This mainstay of the brokerage world manages to combine the low fees and account minimums of a discount brokerage with the data and research of a full-service outfit. Charles Schwab‘s charges a commission of $0.00 per trade, which is more expensive than some of the discount brokerages on this list.
This trading premium buys you access to reams of reports and data to help you invest wisely, as well as prescreened lists of socially responsible ETFs if you’re into socially responsible investing. For those pursuing a self-directed trading strategy, Charles Schwab makes it easy to access SEC reports and market data without having to go find them elsewhere. In addition, they offer very strong customer service resources.
Charles Schwab highlights:
Just like any pizza can be a personal pizza if you have the willpower and the appetite, Fidelity can be one of the best discount brokerages on the market should you choose to approach it as such. While Fidelity offers a wealth of options for investors willing to pay for personalized advice, it also makes for a decent discount broker experience, at a low $0.00 per trade.
Fidelity offers an array of the usual suspects when it comes to investment products, from mutual funds and ETFs to stocks and bonds, but should you change your mind about Fidelity after setting up an account, the brokerage won’t penalize you for pulling your money out, as there are no fees for account transfers to another brokerage.
Interactive Brokers is the discount broker favored by professional day traders, and even many investment firms and hedge funds. It offers a fee structure designed to minimize the amount you pay for a maximum trading size. But don’t expect access to the same research you get with some of the other brokers on this list. You won’t have SEC filings, mutual funds reports and earnings reports at your fingertips to help you decide on your investment strategy. There’s also an annual fee with this account of $10 assuming the value of your account is $100,000 or less.
Interactive Brokers’ pricing structure is slightly complicated, featuring both tiered and fixed rates, with either available for any trade, depending on your needs. Tiered pricing is really only useful for customers who trade more than 300,000 shares per month, with a minimum charge of $0.35 per trade and a maximum of 1% of the total value of the trade. If you trade fewer shares than 300,000 shares a month, Interactive Brokers charges $0.005 per share, with a $1 minimum charge per order and a maximum of 1% of the total value of the trade.
Interactive Brokers highlights:
Online-only bank Ally has also carved out a presence for itself in the investing space, and Ally Invest makes for an attractive option to those shopping for a discount broker. Depending on how active you are with trading, the commission charged is either $0.00 per trade or $0.00 per trade for customers with more than 30 trades per financial quarter or with an account valued at $100,000 or more. Ally Invest doesn’t offer quite as extensive a list of commission-free ETFs compared with its competitors, providing a little over 100 different funds for investors to play with.
Ally Invest highlights:
The online-only Firstrade distills the idea of a discount broker to its essence — it charges zero fees per trade, but also lacks most of the bells and whistles you’d find at other discount brokerages. That’s not to say Firstrade leaves you in the dark completely, as you still have access to mutual fund reports and research from Morningstar. But its customer support service doesn’t seem to include any actual humans, just chatbots, and its ease of use suffers in comparison with other discount brokers. Still, it’s hard to beat a $0 fee!
You may be wondering what the hitch is. How does Firstrade make money? The company says its primary source of income is from interest generated on its credit balances and margin balances, like how a bank makes interest on deposits and mortgage income. It also receives income from “routing venues and shares execution,” which is a complicated way of saying stock exchanges pay them for trading volume.
This discount broker charges per share traded, rather than a flat fee for the entire trade. For stocks and ETFs valued at $1 per share or more, Zacks Trade charges $0.01 per share traded. It does require you to generate at least $3 in commission per trade. Stocks and ETFs valued below $1 per share are charged 1% of the total trade value (with a minimum of $3 required). In short, the fee structure is set up to encourage investors to trade more shares than they would with a flat fee per trade structure, and that makes Zacks Trade a great pick for those who want to trade a lot of stocks.
Those investors who aren’t comfortable with trading at such a high volume may want to look at the other discount brokers on this list. There’s also the matter of the $2,500 minimum required for a Zacks Trade account — a high enough number to scare off some investors looking for a low-cost discount brokerage.
Zacks Trade highlights:
The biggest trade-off for using many discount brokers is that you lose access to the expertise and advice available with full-service brokers. Most discount broker accounts are tailored to self-directed investors, making them best for traders who have extensive investment knowledge and experience, or for those who are pursuing a low-risk strategy such as investing in low-cost, low-risk index funds.
When discount brokerages first appeared, there was a clear distinction between the minimal level of research and market education they provided, and the feature-rich experience of traditional, full-service brokers. Today, many discount brokerages offer their investors research materials and tools comparable with any other broker, making price-per-trade and tailored investment advice the main differentiators between discount and full-service brokers.
First, you need to understand the fee structure. Does your candidate discount broker charge a flat fee per trade (like Charles Schwab and Ally Invest)? Do they charge a per-share fee with a maximum fee ceiling (like Interactive Brokers and Zacks Trade)? Depending on how often you want to trade, this can make a big difference in what you end up paying.
Consider account minimums: Few of the brokers listed here don’t have any, but that’s not always the case. A discount brokerage charging pennies per trade may not be right for you if it requires an account minimum of $25,000.
You also want to look at the diversity of securities you can invest in. Most discount brokers offer the usual lineup of stocks and ETFs, but some more exotic asset classes may not be as commonly offered. If you’d like to dabble in international stocks, check out Zack Trade. Need a full list of socially responsible funds to choose from? See Charles Schwab.
In almost every case, discount brokers are self-directed accounts. You call all the shots when it comes to picking and choosing your investments. A robo-advisor takes that burden off your shoulders entirely: The app asks you to choose an investment strategy or a portfolio type, and the app’s trading algorithm automatically allocates and manages your investments. You sacrifice the control and freedom you get with a discount broker, in exchange for the “set it and forget it” approach offered by a robo-advisor. Which is better depends on your needs.
Below is the list of all the brokers considered for inclusion in this story. Brokers were evaluated based on fee per trade, account minimums, other account fees, ease of use and diversity of securities.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.