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Discount brokerages have become the dominant model online. Compared to traditional brick-and-mortar brokerages, the online brokerage business is still in its infancy. Most online brokerages are still deciding their long-term business model in the internet era, making prices particularly volatile. As firms compete for business, prices have fallen steadily downward until recent years when almost all mainstream firms settled on the discount brokerage business model. Of all the options available on the market today, these are the best discount brokerage firms
For professional guidance, work with a financial advisor who can manage your investment portfolio for you.
Understanding the Dominant Discount Brokerage Model
Generally speaking, a discount brokerage is a brokerage firm that conducts trades at a low, or discount, rate. It actually completes each transaction on its own network, unlike trading platforms, which simply communicate buy and sell orders to a third party.
In addition to its low rates, a discount brokerage is generally characterized by its limited services. This firm typically does not offer specific financial planning or trading advice to its clients. They also do not tend to offer portfolio management or other investment services.
However, some discount brokerages do offer these services in addition to their standard accounts for an extra fee. For example, a discount brokerage may offer broker-assisted trading or operate retail financial advisors, but none of these services typically come standard with basic pricing.
The low-service model of discount brokerages is best suited for retail investors. These firms rarely pursue institutional investors or high-net-worth clients because they do not offer the kind of services that those portfolios require.
By now, almost all mainstream online brokerages offer a discount pricing model, along with more advanced services. They often offer their basic platform as a discount brand with premium services available for more sophisticated traders.
In today’s market, the standard discount brokerage pricing model includes free trading for stocks and ETFs, with an extra fee for broker-assisted trades. Options and mutual funds also cost more, with options generally costing $0.50 to $0.65 per contract, while mutual funds range from $30 to $50 per trade, depending on the services you choose.
While firms vary in their offerings for more specialized assets like futures contracts and fees, almost all discount brokerage firms share the same basic pricing model for several types of investments, including stocks, ETFs, options and mutual funds.
Data and Methodology
The apps below are the result of an exhaustive analysis of today’s discount brokerage market. They are listed in order based on their individual composite score, using our exclusive methodology that specifically includes consumer ratings from popular online app stores. We also consider options trading fees, as most other fees for these firms are reduced to $0.
1. Webull
Webull is a robo-advisor that is a great choice for investors who want to take a largely hands-off approach while still taking some direct control of their portfolio. It allows you to trade individual stocks, ETFs and options, but there are no mutual funds
Its mobile app is particularly popular for its user-friendly interface, advanced charting and technical analysis features, giving self-directed investors a more sophisticated toolkit than many budget competitors.
2. SoFi
SoFi has become a notable player in the discount brokerage space because it positions itself as more than just an investing app.
It aims to serve as a one-stop financial hub, offering not only stock and ETF trading but also automated investing, crypto trading, student loan refinancing, personal loans and even credit card products. This holistic approach makes SoFi attractive to consumers who want to consolidate their financial accounts under one roof.
From an investing perspective, SoFi offers commission-free trades on stocks and ETFs, which firmly places it in the budget-friendly category. Additionally, it offers access to fractional shares through its Active Invest feature, allowing investors to start with as little as $5. This feature is especially appealing to beginners or those who want exposure to high-priced stocks without committing to full shares.
With SoFi, investors can access automated investing portfolios featuring low advisory fees, something uncommon among competitors. However, expense ratios on the underlying ETFs still apply.
3. Robinhood
Robinhood is worth discussing on a budget platform roundup because it is largely considered the godfather of no-fee trading. After it began offering zero-dollar equities and ETFs, many other major platforms followed suit.
However, while Robinhood is largely credited with establishing the new standard of budget trading, some may find the platform less robust than its counterparts across the brokerage market.
4. Moomoo
Moomoo is a relative newcomer in the discount brokerage space, and yet it has quickly gained attention, thanks to its zero-commission trades on stocks, ETFs and options.
What sets Moomoo apart is its advanced research and charting tools, features that are usually reserved for higher-cost platforms. Investors get access to real-time Level II market data, as well as in-depth analytics and customizable trading dashboards, all at no extra cost.
While Moomoo is feature-rich, it may feel overwhelming for beginners who do not yet require such detailed data. While its educational resources are still growing, the platform feels less robust compared to competitors like SoFi or Robinhood.
Still, for cost-conscious investors who also want professional-grade trading tools, Moomoo offers an impressive balance of affordability and depth.
5. Ally Invest
Because Ally is also a bank, customers enjoy the convenience of keeping all of their accounts under one roof. Ally Invest may be one of the lesser-known trading platforms, but it still remains a great choice for cost-conscious investors. In particular, its mutual fund fees stand out, as they are some of the lowest available on the market.
Ally Invest appeals to a wide range of investors by offering both self-directed trading and robo-advisory portfolios. The Cash-Enhanced robo portfolio requires no advisory fees, and is automatically rebalanced, making it a solid fit for hands-off investors.
Meanwhile, self-directed traders have access to robust research tools that include streaming quotes, customizable dashboards and technical analysis features.
6. Fidelity
Fidelity is a particularly good choice for investors just learning the ropes. Its platform emphasizes investor education with research tools designed to expand your knowledge. With a choice of either the basic Trading Dashboard or the more advanced Active Trader Pro platform, investors enjoy access to useful tools like in-depth market analysis, stock screeners and independent research reports.
Like many of its competitors, you do not need to worry about investment minimums when opening a brokerage account with Fidelity. And, with the firm’s many retail locations, you can seek in-person advice if you ever need help, although this may come at an extra charge.
7. E*TRADE
E*TRADE offers a streamlined trading interface with a pronounced emphasis on usability.
This brokerage has been one of the largest retail trading operations since its 1980s launch, and that pedigree is evident in the platform’s feel and design. It is no surprise that more sophisticated users are often willing to pay a little more in order to access Power E*TRADE, its more advanced platform.
E*TRADE really stands out for its versatility. The standard E*TRADE web and mobile apps are straightforward and easy to use, making them ideal for beginners. For more advanced traders, Power E*TRADE delivers professional-grade charting, risk analysis tools and real-time data.
The ability to start simple and transition into more complex strategies within the E*TRADE ecosystem is a major advantage for many investors just getting started.
8. Interactive Brokers
Interactive Brokers (IBKR) is one of the most established names in the brokerage world and is often regarded as the gold standard for active traders and global investors.
While it has long been known for catering to professionals, its IBKR Lite offering makes it accessible to everyday investors through commission-free trades on U.S. stocks and ETFs. This places it firmly in the conversation about discount brokerages, while still offering far more depth than most of its low-cost peers.
One of the biggest advantages of Interactive Brokers is its breadth of investment choices. Investors can trade not only stocks, ETFs and options but also futures, forex, bonds and international equities across more than 150 markets worldwide. In comparison, few budget-friendly platforms provide that level of access.
9. TD Ameritrade
TD Ameritrade has long been considered one of the most versatile and beginner-friendly brokerage platforms.
Even after being acquired by Charles Schwab, it remains a household name in discount investing. Like many of its peers, TD Ameritrade offers commission-free trading on U.S. stocks, ETFs and options, making it highly competitive in terms of cost.
What sets it apart is the breadth of resources available for both new and advanced investors. Armed with these educational tools, investors can explore new investing strategies while learning how to grow their wealth over time.
10. Merrill Edge
As part of the Bank of America family, Merrill Edge combines strong customer service options with expansive research tools. In addition to its traditional investment options, this brokerage offers a robo-advisor to help guide your trading.
From a platform perspective, Merrill Edge strikes a delicate balance between simplicity and sophistication. Its web and mobile platforms are straightforward enough for casual investors, while its MarketPro platform accommodates active trades with more advanced charting and real-time data.
Bottom Line
In the last few decades, discount brokerages have become the dominant business model among online trading platforms, which is great news for investors. The relative newness of this model, boosted by evolving technology and industry competition, is likely to bring more developments in the coming years. Although it can be difficult to tell these firms apart at times, these best brokerage accounts are a great place to start when laying out your investment strategy.
Tips for Investing
- No matter what trading tool you use, there’s no substitute for well-planned trading. A financial advisor can help you be more informed about certain trades or they can handle the entire portfolio management for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Whether you’re considering getting started with investing or are highly experienced, an investment calculator can help you figure out how to meet your goals. It can show you how your initial investment, frequency of contributions and risk tolerance can all affect how your money grows.
- You don’t need to choose on price alone! In fact, when selecting an online broker there are five things that any investor should make sure they pay attention to.
Photo credit: ©iStock.com/airdone, ©iStock.com/Orientfootage, Etrade.com, TDAmeritrade.com, Fidelity.com, Schwab.com, Webull.com, Ally.com, MerrillEdge.com, Vanguard.com, TradeStation.com, Robinhood.com, ©iStock.com/Drazen_