Broker Comparison: Which Online Broker is Right for You?
When it comes to selecting an online broker there are a number of key factors to consider. Among them: fees, commissions, research and platforms. We’ve examined four of the most popular brokers drawn from Barron’s 2019 Best Online Brokers list—Fidelity, Interactive Brokers, E*Trade and TD Ameritrade.
While they each give investors access to different products like stocks, ETFs, bonds and commodities—and all four cut their commissions to $0 back in October—their approach and research differ and their platforms offer a variety of attributes.
Take a look at our comparisons below to help find the online broker that’s right for you.
This Boston-based firm has long had a strong reputation for its mutual funds, but its brokerage business offers investors a wealth of great features, including some of the best research in the business and an easy-to-use platform.
Account minimum: $0. Fidelity did away with its account minimum awhile ago, but like other brokers, had a minimum required initial investment for its proprietary funds. That’s gone now, too, with no minimums required to invest in the majority of its Fidelity Funds.
Commissions: $0. Long-known for low-cost commissions, Fidelity joined its online competitors back in October and eliminated them completely for stock, exchange-traded funds and options. Prior to this, Fidelity slashed nearly all account fees to zero, including the transfer and account closing fees that most brokers charge.
Mutual funds: Investors have over 3,700 no-transaction-fee mutual funds to choose from. Further, Fidelity was the first broker to offer market index funds with no expense ratio. The offerings are comprehensive as well: Fidelity Zero Total Market Index Fund (FZROX), the Fidelity Zero International Index Fund (FZIIX), the Fidelity Zero Large Cap Index Fund (FNILX) and the Fidelity Zero Extended Market Index Fund (FZIPX). An investor using just these no-expense funds could create a retirement portfolio at the lowest possible cost.
Options trading: Fidelity has no base commissions on options, but has a fee of $0.65 per contract.
Commission-free ETFs: All of Fidelity’s ETFs trade commission-free
Research: When you think research, Fidelity is hard to match. The firm has stock intelligence from nearly 20 providers including heavyweights such as Thomson Reuters and McLean Capital Management. For ETFs, there’s research from six providers, and options information from LiveVol. This may be more data than most retail investors want to wade through, but if you need something, chances are Fidelity has it.
Platforms and tools: Fidelity investors can trade via its website or on a mobile app—much like the other brokers. There’s also a desktop platform for active traders. The online platform is fairly easy to navigate and quite comprehensive. The firm’s impressive research can be screened in multiple ways, and its tools to test different investing strategies is based on more than a decade of historical data. The mobile app offers real-time quotes and a scaled-down version of its research.
The Greenwich, Connecticut-based brokerage has always attracted active traders, but since it launched IBKR Lite—its commission-free offering—in October, it’s able to go after an even broader audience of investors with free unlimited trading on U.S.-listed stocks and ETFs. That’s good news for traders who want sophisticated tools at low cost.
Account minimum: $0. Like its main competitors, Interactive Brokers did away with its account minimum, and there are no annual account fees, or fees for transfers, or for closing an account.
Margin rates: Here’s where Interactive Brokers really shines. IBKR clients benefit from extremely low margin rates. For IBKR Pro customers, the maximum margin rate is the benchmark rate plus 1.5%. For IBKR Lite, it’s the benchmark rate plus 2.5%.
Commissions: There are no commissions and unlimited trades for U.S.-listed stocks and ETFs for IBKR Lite clients. But even for more advanced traders who use the firm’s IBKR Pro offering, the commission fees are still low—$0.005 per share. There’s a $1 minimum trade commission and a maximum of 1% of the total trade value. These more active traders can pay $0.002 per share if they trade more than 300,000 shares per month.
Mutual funds: The firm offers over 4,200 mutual funds that carry no transaction fees.
Options trading: Interactive Brokers charges $0.65 per contract with a $1 minimum order.
Commission-free ETFs: For IBKR Lite clients, there are unlimited, free US-listed ETF trades. For IBKR Pro customers, there are 98 commission-free ETFs.
Research: A huge selection of research providers and news services, including Zacks Investment Research, Morningstar and Seeking Alpha. Many are free, with an additional 100 providers available by subscription.
Platforms and tools: Casual traders using IBKR Lite will find the firm’s Client Portal platform just enough for their trading needs. Interactive Brokers’ Trader Workstation has earned its reputation as one of the best trading platforms around for advanced traders, but it’s only available by joining IBKR Pro. It offers standard features such as real-time monitoring, watchlists, and a customizable account dashboard. But an options strategy lab lets clients create and submit simple and complex multi-leg options orders, and compare up to five options strategies at once. There’s also a feature that offers customized notifications about events that could impact a client’s investments.
When it comes to making it easy for investors to access the market, E*Trade has been among the leaders for a long time. The firm’s $0 commissions and superior trading platform is a homerun for active traders. Beginning investors like the strong customer service and an expansive library of educational materials.
Account minimum: $0. This means investors can get started right away.
Stock trading fees: Effective in October, E*Trade did away with its lofty $6.95 trade commission, dropping it to $0 for online stock, options and ETF trades.
Investment choices: Active traders and casual investors can find what they’re looking for. There are futures and advanced options strategies for sophisticated investors, as well as more than 4,400 no-transaction-fee mutual funds. What’s more, E*Trade’s analysts regularly update a list of mutual funds called the All-Star Funds Report with the leading no-load funds and ETFs the firm offers.
Options trading: Although options trades are free, they still carry a contract charge, but that was reduced to $0.65, with a discounted fee of $0.50 for active traders who do 30 or more trades per quarter.
Commission-free ETF: All ETFs trade commission-free.
Research and data: There is a wealth of good, easy-to-understand educational resources for beginning investors, including webinars on options trading, portfolio diversification and technical analysis. There are also in-person events held at E*Trade branches on a regular basis.
Platforms and tools: There’s something for everyone on E*Trade’s three platforms: E*Trade Web, Power E*Trade, and E*Trade Pro. All are free and can be used by all customers, with no trading or account balance minimums. E*Trade Web’s dashboard enables users to track accounts, view market data, make trades, and create watch lists. E*Trade Pro is the desktop platform that provides more sophisticated tools for active trades, and for those really in need of in-depth investing know-how, the firm’s Power E*Trade platform offers more than 100 technical studies, and plenty of options tools.
On November 25, Charles Schwab announced a buyout of TD Ameritrade’s online brokerage. Since the deal isn’t expected to close until the second half of next year, the two firms will continue to operate separately. The merger of the platforms and services is expected to happen within three years. In the meantime, TD Ameritrade offers a variety of platforms, ranging from those for beginners to the most active traders.
Account minimum: $0.
Stock trading fees: In October, the firm cut its commissions to $0 for stocks and ETFs.
Options trading: Options trading is free, but there is a $0.65 fee per options contract.
Investment choices: Over 4,000 mutual funds and a huge selection of ETFs. The firm also gives investors a mutual fund Premier List that’s compiled by Morningstar. It gives independent recommendations for over 45 fund categories. In addition, there are futures products as well as a platform for foreign-exchange trading.
Commission free ETFs: There are 2,300 commission-free ETFs.
Research and data: Free access to research and data—including third-party providers such as Dow Jones, Thomson Reuters and Morningstar—help customers make more informed decisions. The firm also offers free access to screens that let investors make buying and selling decisions based on customized criteria. Social Signals is TD Ameritrade’s one-of-a-kind trading resource that pulls insights from Twitter and puts them together in one place so that investors can discover investment opportunities.
Platforms and tools: The firm has always been known for its powerful trading platforms that cater to investors of all skill levels. Trade Architect is a web platform for beginners providing insights on different asset classes. For advanced traders there is thinkorswim, which provides free tools to perform analyses and test different investment strategies.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.