In our winner's list of the best brokers for beginners, we focused on the features that help new investors learn as they are starting their investing journey. Brokers were selected based on top-notch educational resources, easy navigation, clear commission and pricing structures, and portfolio construction tools. Some brokers also offered low minimum account balances, and demo accounts to practice. Here are our top five brokers for beginners:
- TD Ameritrade
- Merrill Edge
- Charles Schwab
- Fidelity Investments
- Account Minimum: $0
- Fees: $6.95 for stock and ETF trades, $6.95 per leg plus $0.75 for options
Despite slightly higher than average fees, TD Ameritrade attained the top spot because of the firm’s detailed educational platform, its range of product offerings, and the ability to open an account and explore before depositing any money. Beginning traders should get started on TD Ameritrade’s standard web-based interface, frequently referred to as “the green site.” As they grow comfortable with trading, they can move up the features ladder into Trade Architect, and consider jumping into the rich thinkorswim trading platform, which is packed with tools for sophisticated options traders. This is a broker that can grow with you. We also found its demo account, research tools, and mobile apps to be much better than the industry average.
TD Ameritrade also received awards for Best Overall Online Broker, Best for Day Trading, Best for Options Trading, Best Web Trading Platforms, Best for ETFs, Best for Roth IRA, Best for IRA and Best Stock Trading Apps.
Well-rounded set of educational material and resources
Access to everything from commission-free ETFs and mutual funds to options, futures, and Forex trading
$0 minimum initial investment
Commissions were slightly higher than other brokers in the category
Tools are spread across multiple platforms
You must hold the commission-free ETFs you have purchased for at least 30 days, or pay both sides of the commission ($13.90) when you sell
- Account Minimum: $500
- Fees: $6.95 stock and ETF trading
E*TRADE’s higher than average costs are largely offset by robust trading and analysis software. Forex trading and annuities are missing, but E*TRADE’s advanced trading platform, launched in December and called Power E*TRADE, integrates the options trading and education tools via their acquisition of OptionsHouse, and should provide a lot of value to stock and options traders.
E*TRADE also received awards for Best Web Trading Platforms, Best for Options Trading, Best for ETFs, Best Stock Trading Apps, Best for Roth IRAs, and Best for IRAs.
More research and analytical tools than most of the other brokers we reviewed
User-friendly options trading platform
Huge investments in their infrastructure over the last few years
Commissions are higher than some other brokers for infrequent traders
Only frequent traders and those with high account balances can access a specialized support channel
Dividend reinvestment unavailable online
- Account Minimums: $0
- Fees: $6.95 per stock trade. Options trades $6.95 per leg plus $0.75 per contract
With its growing group of financial advisors and a $0 minimum initial investment, Bank of America’s Merrill Edge provides an excellent home base for beginning traders who are either looking for a little more hand-holding, want to start with a smaller account, or both. The firm’s technology focuses on helping clients plan for financial goals, and their “Portfolio Story” experience is a great way to track progress towards those goals. Among other features, the Portfolio Story tracks your investments in terms of environmental, social, and governance ratings.
Recognizing that younger investors prefer to use mobile devices, Merrill has made its desktop and app experiences increasingly similar, making the transition from one to the other much smoother.
Merrill Edge also received awards for Best Web Trading Platforms, Best Stock Trading Apps, Best for IRAs, and Best for Roth IRAs.
Merrill Edge employs financial advisors at more than 2,000 Bank of America locations for in-person service
$0 Minimum Initial Investment
Top-notch education for new stock and options investors
Commissions were slightly higher than other brokers in the category
Large account balance needed to qualify for free trades
Free trades can only be used for stock and ETFs
$5,000 minimum to access Merrill Edge Guided Investing robo-advisory platform
- Account Minimum: $0
- Fees: $4.95 per stock and ETF trade, $0 for Schwab ETFs and $4.95 plus $0.65 per contract for options
Among our top 5 Best Brokers for Beginners, Schwab offers the lowest combination of trading commissions and account minimums. Schwab also offers a wide array of commission-free exchange-traded funds (ETFs) and mutual funds for those who aren’t interested in individual stocks. Those who are interested in stocks and options will find world-class research.
Charles Schwab also received awards for Best Overall Online Brokers, Best Web Trading Platforms, Best for International Trading, Best for Options Trading, Best for Penny Stocks, Best for Roth IRA, Best for IRA, Best for ETFs, and Best Stock Trading Apps.
Commission-free exchange-traded funds (ETFs) and mutual funds
Commissions are lower than other brokers in the category
A wealth of information created by highly rated research analysts and news sources
Waivable account minimum
The sheer number of features and reports available can feel overwhelming
Schwab maintains transaction history for just 24 months online
Several different trading platforms which make it hard to keep track of everything
- Account Minimum: $0
- Fees: $4.95 per stock/ETF, $4.95 plus $0.65/contract per options trade
Fidelity offers a wide range of trading capabilities, research, and education opportunities that can help the new investor grow. They offer 265 commission-free ETFs, which are a big help when getting started. With over $2 trillion in assets under management, Fidelity is a massive broker with the ability to use its scale to deliver excellent customer support, and low trading costs.
Fidelity also received awards for Best Overall Online Brokers, Best Stock Trading Apps, Best for ETFs, Best for Penny Stocks, Best for Roth IRAs, Best for IRAs, Best for International Trading, and Best Web Trading Platforms.
Superior trade routing algorithms
No longer requirements for their Active Trader Pro platform
Calculators to help new traders avoid entering orders that might be rejected due to inadequate buying power
Fidelity is doing a lot of work "under the hood" to avoid the outages that plagued them in 2017 and 2018
Features spread across several platforms
Platform instability: Fidelity’s site crashed during several trading surges in 2017 and 2018. The firm is working to improve its infrastructure, though.
Low balance fees for some mutual funds
What Is a Stock Broker?
A stock broker is a firm that executes buy and sell orders for stocks and other securities on behalf of retail and institutional clients. Different stock brokers offer varying levels of service and charge a range of commissions and fees based on those services. The most commonly referenced stock broker firms are discount brokers.
Do You Need a Lot of Money to Use a Stock Broker?
Fortunately, little money is necessary to start a brokerage account. Many discount brokers are offering anywhere between $0 and $500 account minimums, making it easy for anyone to get started.
What You Need to Open a Brokerage Account
Make sure you have the following details handy when you're ready to start the process:
- Date of birth
- Social security number (or taxpayer identification number)
- Telephone number
- E-Mail Address
- Driver's license, passport information, or other government-issued identification
- Employment status and occupation
- Annual income
- Net Worth
Trading vs. Investing
Generally, when people talk about investors, they are referring to the practice of purchasing assets to be held for a long period of time. Investors hold their assets for the long term so that they may reach a retirement goal or so their money can grow more quickly than it would in a standard savings account accruing interest.
In contrast, trading involves buying and selling assets in a short period of time with the goal of making quick profits. Trading is typically seen as riskier than investing and should be avoided by the inexperienced and those new to the stock market.
Discount Brokerage vs. Full-Service Brokerage
There are different types of brokers that beginning investors can consider based on the level of service and cost you are willing to pay. A full-service, or traditional broker, can provide a deeper set of services and products than what a typical discount brokerage does. Full-service brokers can give their clients financial and retirement planning as well as tax and investment advice. These additional services and features usually come at a steeper price.
If you are looking for a cheaper, more hands-on approach, a discount broker is a better choice. Discount brokers offer low-commission rates on trades and usually have web-based platforms or apps for you to manage your investments. Discount brokers are cheaper, but require you to pay close attention and educate yourself. Luckily, most discount brokers provide educational resources to help you learn to trade and invest.
How to Pick a Stock Broker
To choose a stock broker you must ask yourself a series of questions. These include: Am I a beginner? How much can I afford to invest right now? Am I a trader or an investor? What kind of assets would I like to invest in?
There are quite a few things to consider when going through this process. To help out with this check out our guide to choosing the right stock broker.
Is My Money Safe in a Brokerage?
All brokerages operating within the U.S. are required to have $500,000 of SIPC protection, which includes a $250,000 limit for cash. This means that any holdings with a brokerage that exceed $500,000 could be lost in the event that a brokerage goes bankrupt or is liquidated. That said, retail investors, especially beginners, are unlikely to have accounts that exceed $500,000. Therefore, there's little cause for concern when it comes to the security of your money in a brokerage account.
Can I Withdraw Money From a Stock Broker?
Withdrawing your money from a brokerage is relatively straightforward. When you have money in a brokerage it is generally invested into certain assets. Sometimes there is cash left on the side that is in the account but not invested. This excess cash can always be withdrawn at any time similar to a bank account withdrawal. The other money that is invested can only be withdrawn by liquidating the positions held. This means selling the assets that you purchased like stocks, ETFs, and mutual funds. Once sold, you can withdraw that cash.
Types of Brokerage Accounts
There are a number of types of accounts available at brokerages:
- Cash accounts: A cash account is a brokerage account in which a customer is required to pay the full amount for securities purchased, and buying on margin is prohibited. The Federal Reserve's Regulation T governs cash accounts and the purchase of securities on margin. This regulation gives investors two business days to pay for securities.
- Margin Accounts: A margin account is a brokerage account in which the broker lends the customer cash to purchase stocks or other financial products. The loan in the account is collateralized by the securities purchased and cash, and comes with a periodic interest rate. Because the customer is investing with borrowed money, the customer is using leverage which will magnify profits and losses for the customer.
- Retirement Accounts: Brokerages offer all types of retirement accounts like Traditional IRAs, Roth IRAs, and 401(k)s.
Terms for Beginners to Know
Anyone who would like to get involved in the stock market should know some basic terminology:
- Stock: A stock (also known as "shares" or "equity") is a type of security that signifies proportionate ownership in the issuing corporation. This entitles the stockholder to that proportion of the corporation's assets and earnings.
- Price-to-Earnings Ratio – P/E Ratio: The price-to-earnings ratio (P/E ratio) is a ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple.
- Market Capitalization: Market capitalization, commonly referred to as "market cap," refers to the total dollar market value of a company's outstanding shares. Market cap is calculated by multiplying a company's shares outstanding by the current market price of one share.
- Dividend: A dividend is the distribution of reward from a portion of the company's earnings and is paid to a class of its shareholders.
- Exchange-Traded Fund (ETF): An exchange-traded fund (ETF) is a collection of securities—such as stocks—that typically tracks an underlying index.
- Bond: A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.
- Mutual Fund: A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors.
- Limit Order: A limit order is the use of a pre-specified price to buy or sell a security. For example, if a trader is looking to buy XYZ’s stock but has a limit of $14.50, they will only buy the stock at a price of $14.50 or lower. If the trader is looking to sell shares of XYZ’s stock with a $14.50 limit, the trader will not sell any shares until the price is $14.50 or higher.
- Market Order: A market order is a request by an investor – usually made through a broker – to buy or sell a security at the best available price in the current market. It is widely considered the fastest and most reliable way to enter or exit a trade and provides the most likely method of getting in or out of a trade quickly. For many large-cap liquid stocks, market orders fill nearly instantaneously.
If you're interested in learning more about the stock market you can check out our guide to investing.
Investopedia’s mission is to provide investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of six months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on their platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting over 3,000 data points that we weighed into our star scoring system.
In addition, every broker we surveyed was required to fill out a 320-point survey about all aspects of their platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of their platforms at our offices.
Our team of industry experts, led by Theresa W. Carey, conducted our reviews and developed this best-in-industry methodology for ranking online investing platforms for users at all levels. Click here to read our full methodology.