I began my investment journey at the age of 18.
My father introduced me to Roth IRAs, and together, we set up an account with Vanguard, his chosen broker.
At that time, trading commissions were pretty high. While I don’t remember the exact amount, I imagine I paid around $15 for each trade.
Being a novice in the investment world with limited funds, the $15 fee seemed substantial. Given the tech stock surge during the dot-com era, the fee didn’t seem that significant. However, after facing some losses in certain stocks (anyone remember JDS Uniphase?), I moved my money to Vanguard’s STAR fund (VGSTX) because of its $1,000 threshold.
For those just venturing into investing, a user-friendly platform, minimal or no commissions, zero fees, and the ability to bypass intricate financial instruments and tools are ideal.
Our Criteria
We’ve curated this list of the top online brokers for rookie investors, essentially the guide I wish I had in my early days.
Our selection was based on:
- Minimal or zero balance requirements: Most newbies don’t have large funds. Hence, choosing brokers with low starting balances can be a game-changer.
- Affordability: Nowadays, it’s relatively easy to locate a good online broker with zero fees for stock and ETF trades. Additionally, ensure there are no hidden monthly charges.
- Fractional shares: As a beginner, buying part shares of favorite companies is an attractive option, though not widely offered by brokers.
- Intuitive interface: From my experience, while some platforms offer immense value, their complexity might deter novices.
- Relevance for seasoned investors: As you gain confidence, you might seek a broker offering additional features at competitive prices.
- Welcome offers: Some brokers reward new account holders with cash or stock bonuses.
Top Online Brokers for Rookie Investors
(Note: The following brokers are all recommended, presented in no specific order.)
Ally Invest:
Being my go-to broker (aside from Vanguard), I’ve found Ally Invest quite novice-friendly. Their terms have become even more favorable over time. A bonus is the seamless integration with your Ally Bank account.
- Minimum: Self-directed accounts at $0. Margin accounts at $2,000. Robo portfolios at $100.
- Charges: Zero for Stocks, ETFs, and Options. Bonds at $1. Mutual funds at $9.95.
- Fractional Shares: Only with dividend reinvestment for stocks or ETFs priced over $4.
- Bonus: Up to $3,000 for significant transfers (starting from $10,000).
Vanguard:
Though I have a preference for Vanguard, they are renowned for their affordable mutual funds and ETFs. Their platform is straightforward, focusing on essential tools for newbies. I equate Vanguard with Fidelity, another commendable option for beginners.
- Minimum: $1,000 (Admiral shares at $3,000).
- Charges: Zero for Stocks, Mutual Funds, ETFs, Bonds, and Options. Electronic statement users are exempt from mutual fund fees, while some funds might charge a minor transaction fee.
- Fractional Shares: Limited availability, currently under trial.
- Bonus: None.
Public:
As a newcomer in the broker domain, Public stands out by offering a comprehensive investment suite. Besides standard offerings, they deal in crypto and NFTs without charging a crypto commission (though Apex Crypto might).
- Bonus structure: $5,000-$24,999 ($150), scaling up to $1,000,000 ($10,000).
- Minimum: $0.
- Charges: $0 across the board.
- Fractional Shares: Yes, termed as “slices”.
ETrade:
As one of the pioneering discount brokers, ETrade’s longevity speaks for its quality. Recently acquired by Morgan Stanley in 2020, they’ve retained their charm.
- Minimum: $0.
- Charges: $0 for most trades, 65 cents for options.
- Fractional Shares: With dividend reinvestment for stocks or ETFs priced over $5.
- Bonus: Transfer a minimum of $5,000 to get $50.
Merrill Edge:
Under Bank of America’s umbrella, Merrill Edge offers boundless free trades with no starting balance. Also, they provide 24/7 support, and your investments count towards the Bank of America Preferred Rewards program.
- Minimum: $0.
- Charges: Stocks, ETFs, and options at $0. Options contracts at 65 cents.
- Fractional Shares: Not available.
- Bonus: Up to $1,000 depending on the transferred amount.
TD Ameritrade:
Concluding our list, TD Ameritrade offers competitive rates with an extensive support network. Though the interface might seem a tad outdated, it caters to both newcomers and veterans.
- Minimum: $0.
- Charges: Most trades at $0. Options contracts at 65 cents.
- Fractional Shares: Not available.
- Bonus: None.
Notable Absences
I’ve left out some renowned brokers and certain apps. While many of these platforms are reliable, they might push beginners towards financial products that primarily benefit the brokerage, not the investor.
Starting your investment journey requires a conscious approach, not just adding pennies from spare change. Tools like Acorns, which rounds up expenses and invests the difference, are beneficial. Yet, I believe that a more deliberate strategy is crucial for serious investing.
