It’s the 2020s. Your stock broker isn’t some guy you call on the phone and ask to place trades for you. When you want to invest money, you click a mouse or tap a screen a few times, and it’s done inside your brokerage account without any other person being involved.

Some brokerage firms still set up brick-and-mortar offices in towns all across America, and every day, fewer and fewer people walk in. That’s a beautiful thing, because along with a decrease in the need for human involvement in transactions has come a massive decrease in costs.

In fact, costs are so low and everything is so automated today that the brokerage account you choose hardly matters at all any more. Every one of them gives you access to the same stocks, mutual funds, and exchange-traded funds (ETFs), and your decision about which of those to choose is way more important than which account you do it inside of. However, there are still a few factors worth considering when it comes to your choice of brokerage account.

Photo of dartboard comparing brokerage accounts
Truthfully, you could throw a dart at a board of modern discount brokerages, and you’d end up with a good pick. Don’t let this be a decision that delays your investing.

The Most Important Part of Any Brokerage Account: Fees

In today’s world, the only acceptable commission is zero dollars. Commission-free trading on stocks and ETFs was a new idea when Robinhood came on the scene in 2013. Back then, competitors were still routinely charging $5-10 on every buy or sell order.

Now, unlimited free trading is ubiquitous. Vanguard, TD Ameritrade, Fidelity, Charles Schwab, E-Trade, Ally Invest, and tons of other firms offer it. To be honest, the brokerage companies that still charge trade commissions are probably just betting that their older customers haven’t caught on yet.

As long as you’re not into wild investing strategies involving derivatives or other complex contracts (which we don’t recommend), you can get away with never paying another commission on any transaction ever again. For example, if you’re interested in an easy, long-term investing strategy like entering the stock market via VTI (the Vanguard Total US Stock Market Index ETF), you can do it commission-free at any decent brokerage, so feel free to just pick one and get started right away.

If you’re already more accustomed to investing via traditional mutual funds (the ones with five-character ticker symbols), you might find that the world hasn’t quite adapted to your needs yet. Most brokerage firms still charge commissions on certain mutual fund transactions. Fortunately, there are two easy workarounds.

Suppose you have an account with Fidelity, and you’d like to invest in a mutual fund such as VBTLX (the Vanguard Total Bond Market Index Fund). Normally, trades into this Vanguard mutual fund would incur a fee at Fidelity, but most firms don’t charge fees when investing into mutual funds that they manage themselves. So you could just buy FSITX (Fidelity’s US Bond Index Fund), which has extremely similar holdings to VBTLX, and pay no commissions at all.

The other way around this same problem is to simply buy the ETF equivalent of the mutual fund you’re interested in. For example, VBTLX has an ETF sister fund under the ticker symbol BND, and all ETF trades are always free at any good brokerage nowadays. Problem solved! This is what we do ourselves.

Note that the expense ratio of any mutual fund or ETF will still apply, no matter which brokerage you buy through.

4 Considerations When Comparing Online Brokerages

Now that most brokerage firms meet the most important requirement of offering free trades on all stocks and ETFs, what’s left to look for when comparing brokerage accounts? Are they all the same? Actually, yeah, they’re pretty close. So don’t obsess over this question. But there are a few things you can casually check into.

The first thing to look at is the incentive they’ll offer you for investing with them. Many brokerages will offer cash bonuses for funding new accounts with a certain amount of money. Often, these thresholds are tiered depending on the size of your initial deposit. Honestly, since they’re all pretty similar otherwise, you might consider just picking the firm that offers you the highest incentive — it’s free money! These offers are ever-changing, so try searching a term like “TD Ameritrade account bonus” in Google, and see what you turn up.

Secondly, take a look at their digital interface. Since you probably won’t be dealing with any humans most of the time, looking at a firm’s website is like meeting your broker in the modern era. Make sure you check it out on the device you’ll be using most often. If you’re a desktop or laptop user, evaluate the web interface. If you use a phone or tablet most often, make sure you take a tour of their mobile app.

A third thing to make sure of is that your brokerage account will link seamlessly to any accounting software you may use, like Mint, Personal Capital (affiliate link), or Quicken. It’s typically easier to check this with your accounting software’s FAQ webpage than to ask the brokerage company itself. If you’re a spreadsheet hero who calculates your net worth manually each month, this probably won’t matter to you much.

One last thing to consider are dividend reinvestment and portfolio rebalancing options. If you’re a “set it and forget it” investor like us, these things might be really important to you. The best dividend reinvestment programs are highly configurable and offer fractional share purchasing options so you can stay fully invested at all times, eking out every last percentage point. Personally, we like to handle rebalancing manually, so we don’t worry about that part.

Best and Worst Brokerages — TD Ameritrade vs. Fidelity vs. Vanguard & More

Here are a few of our unbiased, personal opinions on some of the biggest investment companies (at the time of writing this article):

  • Best sign-up bonus offer: TD Ameritrade has consistently had solid intro offers in recent years, but this changes constantly. I’ve also seen good bonuses from Merrill Edge, Ally Invest, and others, too. Make sure to Google around a little before choosing.
  • Best user interface: Fidelity has the cleanest and easiest-to-understand online investment platform.
  • Worst user interface: Vanguard has one of the clunkiest apps and worst online user experiences, although they’re an excellent company overall.
  • Best dividend reinvestment program: Fidelity, TD Ameritrade, and Vanguard all offer easy, free dividend reinvestment on mutual funds, stocks, and ETFs, with support for fractional shares. More firms are adopting this feature all the time, so just ask.
  • Best customer service: We’ve had really good luck with customer service at TD Ameritrade the few times we’ve needed it. They’re also one of the few discount brokerages left with brick-and-mortar branches, if that’s important to you.
  • Best fund offerings: We’re huge fans of Vanguard’s family of index funds. They can be purchased through any brokerage, but if you specifically want to invest in their traditional mutual funds (e.g. VTSAX), they’ll typically only be commission-free when purchased directly through a Vanguard account. If you’re okay with ETFs (e.g. VTI) like us, it won’t matter.
  • Worst brokerage accounts: We tried investing through our bank (Chase) once, and it was a miserable, expensive, outdated experience. As a general rule, banks are a great place to hold your cash, but they’re dinosaurs when it comes to investments. Stick to dedicated brokerage firms, not brands like Chase or Wells Fargo.

We’ve personally had good experiences with Fidelity, TD Ameritrade, Vanguard, and Schwab (and they didn’t pay us anything to say so). While we’ve never done business with Robinhood, Merrill Edge, E-Trade, or Ally Invest, they all appear to be good options too. I’d personally skip traditional banks, and definitely forget about any firm that charges commissions on online stock and ETF trades.

Remember, pretty much all self-directed brokerage accounts will give you access to the same investment choices. So as long as you’re not paying commissions on any transactions, you’re fine. Your actual choice of investments matters way more than which brokerage account you use to invest.

— Steven

Note: We are not professional financial advisors. We’re just a couple of bloggers honestly sharing what has worked for us. Check out our Disclosures page for more information.

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