You already do practically everything over the internet — from ordering pizza to renewing your driver’s license. So why aren’t you using an online stock broker too?
Maybe the reason you aren’t investing in stocks online has to do with the fact that it can be just plain overwhelming. Just because there are brokers on the net doesn’t mean people know how to use them, which one they should use, or the best deals out there. Investing should be done early and often, but it should be done with a company that you feel comfortable with and that can help you achieve your goals.
Online stock brokers are becoming an essential part of money management in the 21st century. So let’s break down what brokers are the best for beginning investors to use.
Betterment is the best robo advisor platform for beginning investors, with no minimum deposit and low fees... in-depth retirement tools and effective asset allocation... plus, it's possible to receive assistance from human advisors.
- Simple Asset Allocation
- Low Management Fees
- Perfect for Young Investors
- Tax-Coordinated Portfolio
- RetireGuide Calculator
- Not the Best for Higher-Net-Worth Individuals
- Cannot Asset-Allocate With External Accounts
- No REITs or Commodities
Betterment is known for making asset allocation simple and focusing on the end result: having enough money to retire comfortably. And thanks to its low fees and preset basket of stocks and bonds to choose from, you can attain this goal.
As you invest money into the account, Betterment will automatically purchase exchange-traded funds (ETFs) on your behalf, based on your previously set asset allocation. This set-it-and-forget-it strategy is dollar-cost averaging at its best.
You simply choose how much money to invest, how often and what allocation of risk you want your investments to have. That’s it!
Betterment specifically designed its investments to take analysis paralysis out of the equation, so investing becomes incredibly simple. It’s a great option for people who want to set and forget their investments. It invests you in a diverse pool, which lowers your overall risk and gives you the best shot at secure returns over the course of years.
The Acorns app provides a painless way for newbies to begin saving and investing by "rounding up" their spare change and "micro-investing" the difference. However, it isn't built for long-term saving (although it is introducing a new IRA service) and charges hefty fees.
- Painless Way to Save
- Hides the Complexities of Investing
- Start Investing With No Money
- Free for College Students
- Only for "Boosting" Your Savings
- Can Lose Principal
- High Annual Fees
Acorns was designed for new and/or young investors and is a hit with Millennials. It’s a painless way to save and invest in the stock market. Acorns links to your credit card, and when you make a purchase, it rounds up to the nearest dollar and invests the difference. You can also set larger amounts to auto-invest through the app. This two-pronged design means new investors can get a start with small investments.
The fee schedule is also really reasonable. Accounts with $5,000 or more come with a 0.25% fee per year, and accounts are free for college students with a valid “.edu” email address for up to four years from date of registration. Acorns gives you the chance to start investing for free when you start college, which is quite the head start.
TD Ameritrade is a popular online stock broker that features low pricing and no minimum deposit. It also offers a generous selection of commission-free ETFs and educational tools that should make it a hit with new investors.
- Commission-Free ETFs
- Easy-to-Use Interface
- Research and Education
- Short-Term Trading Fees With ETFs
If you want easy investing from a reputable discount brokerage, TD Ameritrade may be right for you. But that’s not to say it’s only for newbies — the broker offers an expansive resource of tools for advanced and beginner investors alike. And you have the option to walk into one of more than 100 TD Ameritrade branches to speak with a representative.
TD Ameritrade offers features that are especially enticing for new investors, such as no required minimum deposit and low costs. There’s a flat fee of $6.95 per equity trade no matter how often you trade and no matter the size of your account balance. Additionally, TD Ameritrade offers 24/7 customer service via phone and email, so newbie investors can get help with their accounts at any time of day.
E*TRADE's entry into the robo advisor space, Adaptive Portfolio makes, sense for existing E*TRADE customers. It offers stellar customer service and a great signup bonus. However, there are better robo investing platforms on the market with smaller minimum requirements.
- Hands-off Management
- Excellent Customer Service
- Brick-and-Mortar Locations
- Generous Bonus
- High Initial Account Minimum
- Higher Management Fee
- No Financial Consultants
- No Tax-Loss Harvesting
As a leader in the investment world, E*TRADE has one of the largest investment inventories available. Once you’re comfortable with moving into more advanced investing options, such as active trading, E*TRADE is the perfect choice.
Since this brokerage firm is a bit more advanced, it requires a $5,000 minimum deposit on all accounts. This is still reasonable for newer investors, but not as low as some of the other brokerage accounts on this list.
Nor is E*TRADE the lowest-priced brokerage out there, but it does have extensive research reports, and the site (along with mobile features) is very easy to use.
Stash is a good microsavings platform for newbie investors, with great educational tools and a low minimum required deposit. Unfortunately, its fees run a bit high, making it costly for smaller accounts.
- More Investment Options
- Low Fees on Larger Accounts
- Low Minimum Deposit
- Delayed Trading Execution
- No Website Access
- Costly for Small Accounts
Stash Invest is a great micro-investing app that can help you get started with as little as $5. When you set up an account, you answer questions as to your risk tolerance, and Stash recommends a portfolio made up of ETFs and individual stocks.
The platform does more, too — Stash offers plenty of in-app and email education to help new investors learn the basics. And for account balances greater than $5,000, the fee is among the lowest we’ve seen: 0.25%.
Stockpile is a great way to get young people interested in stock investing by purchasing fractional shares of stock through gift cards. It requires a low minimum investment and low fees. However, its limitations may turn off more sophisticated investors.
- Low Trading Fees
- Fractional Shares
- No Minimum
- No Annual Fees
- Very Limited Account Selection
- Very Limited Investment Selection
- No Real-Time Trading
- U.S. Residents Only
Stockpile is a bit different from the other stock brokers that we’ve reviewed. It was created as a way to give gift cards good for small amounts of household-name stocks. The gift cards can be purchased through both the Stockpile website and at select retailers, including grocery stores.
But the platform can be used like a regular stock broker, too. And with a fee of 99 cents for each trade, it’s very affordable.
Considerations for Newbie Investors
Investing is one of the best ways to grow wealth in the long term and to beat inflation over the years. Inflation increases between 1% and 3% each year. Take a look at your savings account interest rates; it’s probably less than 1%. That means if you’re just parking your money in savings accounts — rather than investing it — you’re going to lose over the years.
No one can guarantee you a consistently high return in the stock market. Investing does come with some risk. However, looking at the historical returns of the stock market gives us something to work with. The S&P returned at an average annual rate of 8.5% between 1977 and 2016. I’d take a 8.5% return rate over less than 1% any day of the week!
Using this knowledge, you can set personal goals for your money in the market. If you’re looking to beat inflation and grow your money over the course of years, the stock market is a good bet. The more you invest, the more your interest can compound. The earlier you invest, the more your return can compound and the larger your assets can grow. If you haven’t started investing, today is a great day to get started!
Investing is particularly important when it comes to retirement accounts. For money that you’re not going to need for decades, the stock market is the best option for big growth. IRAs and 401(k)s are two kinds of retirement accounts you can invest through.
So before you invest, consider your goals, your timeline and the types of accounts you’re interested in opening.
Younger investors without much cash and with a longer timeline might also consider micro-investing services. Investing small amounts over long periods of time yields big results, so don’t think that you need huge amounts of money to get started.