Best Online Brokers For Free Stock Trading 2018

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The trend towards ever lower commissions costs has finally reached the holy grail level for traders: free stock trading. Some brokers also support no-commission ETF trading and mutual fund investing, so whether you are an active stock trader or a passive mutual fund or ETF investor, you can find a low cost or no-cost way to enter the stock market.

Best Broker For Free Stock Trading & Free ETF Investing

The Robinhood app supports free stock trading and free ETF investing. Setup is easy. Transferring funds is fast. And trading is simple due to the highly navigable interface. However, mutual fund investing, options trading, futures trading and Forex trading is not supported on the Robinhood app. Schwab also offers a low-cost way to invest by providing over 200 commission-free ETFs. Another top-rated broker, E-Trade has over 100 zero-commission exchange-traded funds available.

robinhood logo
charles schwab

 

ROBINHOOD APP – FREE STOCK TRADING & FREE ETF TRADING

Robinhood is a brokerage firm that offers commission-free stock and ETF trading (note ETFs do generally have an expense ratio fee). Robinhood has become so popular among traders that in 2017 it surpassed the billion dollar valuation mark.

For the casual investor on-the-go, Robinhood lives up to its lofty marketing claims of providing a truly free stock trading service via its mobile app. So what’s the catch – how does it make money? Robinhood provides a higher tier service, Robinhood Gold, which lets customers increase their buying power by trading on margin for a fixed monthly fee (the fee increases when more margin is used). This service is completely optional so you truly can enjoy a free stock trading experience using the Robinhood app.

Robinhood earns brownie points with its easy setup. In just a few minutes, you can set up an account, and it is simple and fast to transfer cash into your account. Up to $2,000 is available to trade immediately – a nice feature that many brokers don’t offer.

Beginner traders who can’t meet the high account minimums imposed by some brokers will be pleased to find Robinhood has a zero dollar account minimum.

If you prefer to trade on a desktop computer, you may wish to consider other alternatives because it is only possible to transact on mobile devices using the Robinhood app. Other brokers may be better suited to you if you prefer to invest in mutual funds, options, futures or forex because Robinhood supports free stock trading and free ETF trading only in taxable accounts.

SCHWAB – FREE ETF TRADING

Founder of the Vanguard Group and business magnate, Jack Bogle, pioneered low cost index investing and Schwab has made it easy to buy these funds by providing over 200 no-commission exchange-traded funds. Historically, commissions costs were applied to investors wishing to buy and sell ETFs.

The low cost of investing in exchange traded funds is possible because they are passively managed. Unlike mutual funds which are actively managed and have higher expense ratios, ETFs can save you a lot in fees as time goes by.

Over time, the cost of expense ratios can make a big difference to your net worth. Pay just 0.5% more each year on a $100,000 portfolio growing at an average rate of 8% annually and thirty years later your net worth could lower by as much as $300,000!

Schwab imposes a slightly higher account minimum of $1,000 compared to Robinhood but compared to most brokers it’s a low threshold.

If a wide selection of commission-free ETFs is less important to you than the account minimum, E-Trade, which has a lower minimum (compared to Schwab) of $500 may be a better choice for you. Plus, they still they offer over 100 no-commission ETFs.

Best Brokers For No-Transaction Fee Mutual Fund Investing

Fidelity and TD Ameritrade both offer an extensive range of no-transaction fee mutual funds. Even if you do purchase a no-transaction fee mutual fund, expense ratios still apply so unlike free stock trading, mutual fund investing may be commission-free but a cost still applies to hold the fund (whereas no cost applies to holding a stock).

fidelity investments
 

TD Ameritrade

  • Standout Feature
    Customer Service and Local Branches
  • Commissions
    $6.95 for stock trades; $6.95 + $0.75 per contract for options trades
  • Account Balance Minimum
    $0

 

FIDELITY – NO-TRANSACTION FEE MUTUAL FUND INVESTING

Fidelity is best known as a retirement plan administrator that oversees over $2 Trillion in client assets. But Fidelity also offers a full-service brokerage platform that features an extensive range of no-transaction fee (NTF) mutual funds.

Almost 4,000 NTF funds are available at Fidelity, making them one of the largest providers of NTF mutual funds in the industry with TD Ameritrade a rare exception by offering even more.

TD AMERITRADE – NO-TRANSACTION FEE MUTUAL FUND INVESTING

TD Ameritrade charges a hefty $49.99 fee to clients purchasing non-NTF mutual funds but the good news is it provides an extensive 4,000+ range of no-transaction fee mutual funds, so you can quite easily skirt the high commissions charge.

TD Ameritrade also features an excellent options trading platform, thinkorswim, so mutual fund investors who want to trade actively in the options market or perhaps wish to sell calls against a stock portfolio as part of a covered call strategy can do so easily.

Keep in mind that while the purchase and sale of mutual funds may not cost you a dime, owning mutual funds does come at a cost. Expense ratios are charged at the fund level, meaning that you don’t get charged a separate amount, but you do pay.

Best Robo-Advisors For Free Passive Investing

WiseBanyan and Schwab Intelligent Portfolios offer truly free portfolio management to passive investors who prefer an automated investing solution that is technology-powered over a self-directed portfolio management approach.

wisebanyan logo
 
charles schwab

 

WISEBANYAN – FREE PASSIVE INVESTING

WiseBanyan is a truly free automated portfolio management solution for the passive investor. It claims to be the world’s first free financial advisor and delivers by charging no trading fees, no management fees, no custodial fees, no hidden fees and receiving no kickbacks from mutual funds or ETF funds.

The robo-advisor does charge 0.25% of managed assets for clients who wish to choose its tax-loss harvesting service, which is fully optional.

SCHWAB INTELLIGENT PORTFOLIOS – FREE PASSIVE INVESTING

Schwab Intelligent Portfolios was the first robo-advisor to accumulate over $10 billion in client assets and its zero management fee is a big reason why it has enjoyed such popularity.

The way Schwab Intelligent Portfolios makes money is from the expense ratios of funds used in portfolios. Schwab includes in client portfolios many of its own funds, which it earns revenues on. As a result, it can offer portfolio management at no cost, a benefit few robo-advisor can offer.

Schwab is also highly attractive to passive investors looking for an automated portfolio management solution because it offers the most extensive range of asset classes of any robo-advisor: approximately 20 asset classes and over 50 exchange-traded funds.

On-the-go investors who want to link in with their portfolios via mobile devices can do so easily with Schwab, which offers one of the best mobile trading apps in the industry.

Passive investors who value a tax-optimized portfolio should consider other robo-advisors, such as Wealthfront, but should note that portfolio management is fee-based above certain threshold levels at most robo-advisors.

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