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.
Table of Contents
- Best Broker For Free Stock Trading & Free ETF Investing
- Best Brokers For No-Transaction Fee Mutual Fund Investing
- Best Robo-Advisors For Free Passive Investing
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 APP – FREE STOCK TRADING & FREE ETF TRADING
Robinhood is one of the most popular free stock trading apps and has been for quite some time, having surpassed the billion-dollar valuation mark back in 2017. Here are some of the reasons we think it’s one of the best apps out there for those who are interested in free stock trading.
Free With Optional Upgrade
Unlike many apps, Robinhood doesn’t limit your ability to trade while on a free plan. You can buy and sell to your heart’s content using the Robinhood app.
The only difference is that you can’t buy on margin unless you upgrade to Robinhood Gold. However, using margin successfully is an advanced trading concept best left to those who have been making money on investments for some time, so you don’t miss anything significant if you choose not to upgrade.
In fact, the free app allows you to get your feet wet without spending significant money so that you can learn as you go and then upgrade if and when you’re ready.
Easy To Set Up
One of the perks of the Robinhood app is that it is simple to set up your account.
You can do it in a matter of minutes simply by downloading and opening the app.
No Account Minimums
Many trading apps require you to have a minimum account balance, making it difficult to get started if you don’t have a lot of cash set aside for investing.
Robinhood doesn’t have this requirement. You can open an account with any balance (or no balance at all, if you’d like to set up the account now and use it later when you’ve got the cash).
In addition, up to $2,000 of your balance is available immediately upon set-up, allowing you to start trading right away.
A Few Limitations
This service is only available on mobile devices. If you have a Chromebook computer that runs Android apps, you can get around this; otherwise, there is no way to use Robinhood from a desktop.
Robinhood only allows you to trade in taxable accounts, so if you’re interested in mutual funds, futures, or forex, this service is not for you.
But for the beginning trader who is content to trade stocks from his or her smartphone, Robinhood provides you with everything you need at zero cost.
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 – 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.
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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 – 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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