Best Online Stock Brokers for Beginners 2022

Best Online Stock Brokers for Beginners

Are you ready to start investing but not sure where to start? We’ll help you get started with our list of the best online stock brokers for beginners. We’ve also included a guide to explain what to look for in a stock brokers, where to buy stocks, plus what you’ll want to be familiar with as you explore finding the best trading platforms for beginners.

An overview of the best brokerage accounts for beginners
We know that everyone’s financial circumstances and goals are different, so we’ve selected a variety of brokers to help you find the one that meets your needs.

Best for: Managing money under one roof

Merrill Edge is the best choice for investors who want a selection of stocks, bonds, mutual funds, ETFs, CDs and options. Merrill Edge is an especially good option for people who want access to real-life financial advisors, because Merrill is owned by Bank of America and has advisors in many of its branches nationwide.

Trading commissions and account minimums

Trading commissions and account minimums are largely a thing of the past — especially for most stock brokers. Almost no stock brokers or investing app charges a commission fee on basic trading, and most allow you to open an account with a $0 deposit, or just a few dollars.

However, most still require a minimum amount to use more complex features, such as margin investing. And $0 commissions typically apply to stock Broker and ETF trades; Some brokers charge commissions for trading options and mutual funds, among other products. Take a look at the broker’s full fee schedule before you open an account and make sure you understand how you want to invest.

Additionally, note that ETFs, mutual funds, and other types of funds you invest in typically come with their own fees, called expense ratios. This is an expense outside of your broker’s control, but your broker will usually tell you the expense ratio for the funds they allow you to invest in.

Why is commission fee important?

Here’s why trading commissions are so important: Say your broker charges a $6.99 commission for online stock trades and you have $1,000 to invest. You want to spread your money across a portfolio of five stocks.

To make your initial investment, you will pay about $35 in trading commissions. On an investment of $1,000, you’re effectively starting out with a 3.5% loss in your portfolio.

Plus, you’ll pay another $6.99 every time you add to one of your stock Broker positions. If you’re planning to build your portfolio over time, it’s not hard to see how this could end up costing you thousands of dollars over several years.

Keep account minimums in mind

Most major stock brokers do not have an account minimum. Historically this has not happened. When I opened my first brokerage account nearly 20 years ago, I needed to deposit $2,000 to get started.

Low or no-minimum deposit requirements Investors who don’t have a ton of spare capital can start investing early, so you can slowly build your first investment portfolio and reap long-term benefits.

Cash application investment

Best for: Mobile investing and banking

Cash App is not a full-fledged broker, but it may be suitable for beginners who want a simple platform to buy and sell stocks occasionally. Cash App is not a feature-packed investment platform, but it does offer fractional share investing and Bitcoin trading, as well as one of the easiest setup processes in the industry.

What is a stock brokers?

A stock brokers is a trading platform (or person) that facilitates the buying and selling of marketable securities like stocks and exchange-traded funds (ETFs). Through a stock brokers, you can open a brokerage account, a specialized financial account designed to hold investments and cash.

The term is often used interchangeably with “brokerage,” which is technically the name for a business that employs brokers or acts as a broker to facilitate trading.

When you want to buy stock in a company, you can’t simply call up the company and buy shares, and you can’t just walk into your local bank and invest. You need a specialized brokerage account, and that’s where stock brokers come in.

What are the different types of brokerage accounts?

There are two main types of stock brokers: discount and full-service. They each come with different costs and service levels.

Discount Broker

A discount broker is a company that allows an investor to buy and sell securities online. As a customer, you can direct the process of buying and selling stocks or sign up for an account with a robo-advisor that will automate your investments. Many discount brokers have features that help you decide how to direct your trades, but usually no human broker takes and fills your orders.

As their name suggests, discount brokers are much cheaper than full-service brokers and most offer zero-commission stock trading. For most investors – especially the beginner investor – a discount broker is the best choice. That’s why our picks for the best trading platforms for beginners are simply discount brokers.

A full-service broker

Think of a full-service broker as an old-school broker. It is a firm that usually operates out of a physical office where a real person, also called a stockbroker, takes and executes clients’ buy and sell orders. A full-service broker may also offer individual investment planning services, such as stock-buying advice, tax guidance and retirement planning assistance.

Given the cost of human advisors and brick-and-mortar locations, full-service brokers are more expensive than discount brokers. But costs have generally declined over the past few decades as they face competition from stockbrokers, aiming to make investing more accessible and gaining access to tools to automate the work at their end.

Full-service brokers are best suited for high-net-worth investors who want a personalized level of service and dedicated investment portfolio management.

Read Also: Best USAA Personal Loans Review 2022-2023

How to pick the best online stock brokers for beginners

There’s no perfect broker for everyone, but here are some of the important factors to keep in mind as you’re looking for a stock brokers for beginners.

Cost structure: The best brokerage for beginners charge no commissions for online stock and ETF trades (what you’ll generally focus on as a beginner) — but many do charge commissions or fees for more complex moves like options trading, mutual funds, and other products.

Account minimums: Some stock brokers charge a minimum deposit to open an account, anywhere from $5 to $500, and some don’t charge anything at all. We’ve focused our picks on brokers that don’t have account minimums. These low-barrier-to-entry brokerages let anyone get started investing, even without a ton of capital.

Variety of funds: Picking individual stocks isn’t right for everyone, especially beginners. The best stock brokers for beginners offer low-cost exchange-traded funds and no-fee mutual funds to help you invest wisely without a ton of stock market knowledge.

Account options: Within the realm of stock brokers, you can choose between a cash account and a margin account:

• Cash account: You can only spend the money you have sitting in your account.
• Margin account: You can borrow money from your broker to invest with. Trading on margin is a risky prospect, though, and isn’t usually a great idea for beginner investors.

Features and support: If you simply want to stick a recurring amount of money into low-cost ETFs and let your money grow, a no-frills investing app could be all you need. If you’re interested in taking your investing to the next level and learning how to choose individual stocks and direct your portfolio yourself, look for a platform that includes educational resources, research, news, and customer support that’ll help you make smart choices as you learn the ropes — and one that offers more advanced trading features you can use as your knowledge grows.

• Research: Many of the best stock brokers for beginners offer access to research so you can read more about market sectors as well as individual stocks, ETFs, and mutual funds.
• News: Some stock trading platforms for beginners offer news updates so you can keep tabs on companies and happenings in the stock market in general.
• Customer support: You should be able to pick up the phone and speak to a live person who can help you navigate any issues you experience.

Educational resources: When you’re new to investing, you may not be familiar with key terms that are necessary to manage your account. And if you don’t know what a mutual fund is, you probably shouldn’t go out and buy one. Many stock brokers for beginners have an educational resources section loaded with information that can help you learn more about investing and gain confidence.