Individual investors have continued to surge into the market in 2021, with the pandemic playing a key role in giving people the time to take control of their portfolios. Comparing costs has become less straightforward, however, as most online brokers have eliminated the trading fees that were the easiest method of direct comparison. To evaluate brokers in this environment, we focused on the costs and fees left in the pricing schedules and compared these with the value being delivered. Looking at low-costs combined with value still yielded very tight competition, but we found three brokers that cost-conscious investors will find to be excellent deals.

Investing in cryptocurrencies, Decentralized Finance (DeFi), and other Initial Coin Offerings (ICOs) is highly risky and speculative, and the markets can be extremely volatile. Consult with a qualified professional before making any financial decisions. This article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies nor can the accuracy or timeliness of the information be guaranteed.

Best Discount Brokers:

Fidelity: Best Low-Cost Online Broker

4.8
  • Account Minimum: $0
  • Fees: $0 for stock/ETF trades, $0 plus $0.65/contract for options trade
Read full review

Important

On April 26, 2022, Fidelity Investments became the first retirement plan provider to allow cryptocurrencies in the 401(k) accounts that it services. This new cryptocurrency offering will begin with Bitcoin (BTC) and will be available to 23,000 employers that use Fidelity to administer their retirement accounts by the middle of 2022.

Why We Chose It

Over the last year, we have re-evaluated what it means to be our best low-cost online broker. There are online brokers that cost next to nothing to trade on. In the past, that was all it took to walk away with this category, even if the broker had a limited range of assets, a lack of useful tools, or a weak trading platform—and potentially all three as long as the price was low enough. This year, however, we went for low-cost in comparison to the value delivered. This approach to the data ended up with Fidelity (our best overall broker) on top. The winning factors over Fidelity's close competitors were the cash management options on idle cash and the excellent portfolio analysis tools that consolidate outside accounts. If you don't trade large numbers of options and you don’t require futures or cryptocurrency, then Fidelity offers you the most bang for your buck.

Pros
  • Low costs overall and a lack of many common fees

  • Strong account management options, including a sweep program into money market funds

  • Transparent pricing disclosure

  • Excellent execution quality

Cons
  • No futures, commodities, or cryptocurrencies

  • Only available to U.S. residents

  • A high fee ($32.95) for live broker assistance

Interactive Brokers: Best Broker for Low Margin Rates

4.6
  • Account Minimum: $0
  • Fees: Maximum $0.005 per share for Pro platform or 1% of trade value, $0 for IBKR Lite
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Why We Chose It

Interactive Brokers' margin rates fall well below the industry average. The broker's margin rates were the lowest among all brokers surveyed on balances ranging from $10,000 all the way up to the millions. Margin interest for lower than a $100,000 balance is 1.83% for IBKR Pro users and 2.83% for IBKR Lite users. This was the lowest of all the brokers surveyed by quite a bit. You can also apply for portfolio margin, increasing your leverage by lowering the margin required based on overall portfolio risk. If you are trading frequently using margin, Interactive Brokers makes a strong case for being your platform on the margin rates alone. Rest assured, however, that it is also one of the most robust trading platforms out there.

Pros
  • Lowest margin rates of all brokers surveyed

  • Traders can apply for portfolio margin

  • The range of assets and markets to trade in is unparalleled

Cons
  • Pricing is volume-tiered, fixed rate, or free, so finding the right plan takes time

  • IBKR Lite customers cannot use the smart order router.


Interactive Brokers: Best Broker for Fractional Shares

4.6
  • Account Minimum: $0
  • Fees: Maximum $0.005 per share for Pro platform or 1% of trade value, $0 for IBKR Lite
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Why We Chose It

Interactive Brokers was one of the first brokers to really get behind fractional shares, but it repeats as our pick as the best broker for fractional shares because it simply offers more. You must use Trader Workstation (TWS) to trade fractional shares, but once you are there you have access to fractional shares for “U.S. stocks listed on NYSE, AMEX, NASDAQ, ARCA, or BATS, as well as OTC Pink U.S. penny stocks with average daily volume above $10 million and market cap above $400 million.” Non-U.S. stocks are not available as fractional shares, but that is a limitation shared by competitors. The point is that IBKR’s fractional share offerings go beyond the National Market System (NMS) exchanges where most online brokers draw the line. If you are looking to access fractional share trading for the largest pool of stocks, then Interactive Brokers is the obvious choice.

Pros
  • Fractional shares for a wide swath of all U.S. stocks

  • Excellent screeners and charting to find equities of interest

  • Robust trading platform and tools

Cons
  • Fractional shares limited to U.S. stocks (a common limitation)

  • The TWS platform may be intimidating for less experienced traders

Webull: Best Low-Cost Options Broker

3.6
  • Account Minimum: None
  • Fees: $0 commission to trade stocks, listed options, and ETFs
Read full review

Why We Chose It

Webull is essentially a no-cost broker, not a low-cost broker. Webull's main advantage in pricing is that it offers free trading on U.S.-listed options—not just stocks and ETFs. The most surprising thing about Webull is that its options tools and charting abilities are robust for a broker that costs next to nothing to trade on. The options tools let you set up and customize common options strategies using different order types and strike widths. If you are looking to trade options at the lowest possible price, Webull is the broker for you.

Pros
  • No commissions on stocks, ETFs, U.S.-listed options, or cryptocurrencies

  • Access to extended hours and pre-market trading

  • Intuitive trading platform with surprising functionality given the low-cost

Cons
  • Platform isn't as robust as some options-focused competitors

  • No access to fixed income, mutual funds, foreign exchange, or futures markets

  • Limited range of tools for portfolio management

Final Verdict

In previous years, winning our low-cost brokerage category was more about having the commission schedule with the most zeros. The main reason we have updated this methodology to also reflect the overall value of the offering is that the low-cost and even the no-cost space is becoming increasingly crowded. This makes the other points of differentiation, including the capabilities of the platform, the quality of the tools and research, and the ease of trading, much more important. We don't recommend these three brokerages equally for all investors, as Interactive Brokers is better for traders, Fidelity is better for newer investors, and Webull is in the middle of the two on that spectrum. That said, all three of these low-cost brokerages deliver incredible value for the money.

How Does a Discount Broker Work?

Discount brokers offer lower commissions than full-service brokers, but they typically don't provide advice or services like tax planning, estate planning, and personal consultations. That means it's up to the investor to research potential trades, place orders, and manage your positions. Discount brokers usually offer at least one trading platform through which trades are researched and executed, and most offer a mobile trading app as well. Discount brokers are suitable for investors who don't require professional advice and prefer to take an active role in their investments. Full-service brokers, on the other hand, are a better option for those who need professional financial advice or support.

Discount Brokerage vs. Full-Service Brokerage

There are different types of brokers you can consider based on the level of service and price you are willing to pay. A full-service, or traditional broker, generally provides 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 overall or a specific fee for accessing an additional service.

If you are looking for a cheaper option and are comfortable with the do-it-yourself approach to portfolio planning and management, a discount broker is a better choice. Discount brokers offer low (or no) commission rates on trades and usually have web-based platforms and/or apps to manage your investments directly. 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.

Pros & Cons of Discount Brokers

Discount brokers can be ideal for those looking to save money. If you are a novice investor and need more hands-on guidance, however, they may not be the right fit for you.

Pros
  • Lower costs

  • No need to worry about biased investment recommendations

  • Access to basic educational resources to help you do it yourself

Cons
  • No advice or guidance

  • Possible hidden fees

  • Less hands-on customer service

What To Consider When Choosing a Discount Broker

When choosing a low-cost brokerage, look for the same features you would want from any broker: a strong industry reputation, up-to-date security standards, solid customer service, reasonable costs, robust trading tools, helpful educational content, and access to the markets you want to trade. If low costs are a priority, review the broker's entire pricing schedule—not just the commissions—to ensure you understand the total cost of trading with that broker. For example, while most brokers no longer charge platform fees, there are a few that still do (and it can be expensive). If you will be trading a lot, it also makes sense to consider the broker's price improvement statistics and payment for order flow practices since both ultimately affect your bottom line.

What Do Brokers Charge to Trade?

Brokers charge a variety of fees depending on the services they offer. Here are some typical fees you can expect at a discount brokerage:

  • Stock Trade Fee (per trade): Typically between $0.00 and $6.95
  • Stock Trade Fee (per share): Typically between $0.006 and $0.01
  • Futures Trade (per contract): Typically between $0.85 and $2.25
  • Broker-Assisted Trade Fee: Typically between $0.00 and $50.00
  • Mutual Fund Trade Fee: Typically between $0.00 and $50.00

Some brokers charge a per-leg fee for options trades, so frequent spread traders might want to look for brokers who only charge a per-contract fee.

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Methodology

Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on its platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting thousands of data points that we weighed into our star-scoring system.

Cost-conscious traders look for brokers with very low fees. This type of broker can also be attractive to more experienced traders who do not need investment advice or analysis. When looking at our top discount brokers, we overweighted the cost categories in our methodology and ensured that trading technology was still an important factor.

Read our full methodology.