Choosing the right online brokerage platform can be a challenging task due to the multitude of competitors in the market. To make an informed decision, conducting thorough research is crucial.
According to Andrew Latham, a certified financial planner and director of content at SuperMoney, the best online brokerage platforms offer a diverse selection of investment options, such as stocks, bonds, ETFs, and mutual funds. Additionally, they should provide user-friendly interfaces and a variety of tools and resources to assist investors in their decision-making process.
One critical factor to consider when evaluating brokerage platforms is the fees they impose. High fees can significantly impact investment returns, so it’s important to look for platforms that offer commission-free trades, have no account minimums, and charge low service fees.
To identify the best online brokerage platforms, we conducted an assessment of 19 brokerage firms. The evaluation encompassed various aspects, including advisory services, educational and research tools, insurance coverage, platform features, portfolio analytics, trading costs, margin rates, customer service, and security.
By carefully considering these factors, investors can find the brokerage platform that aligns best with their needs and maximizes their investment potential.
| BROKER | COMMISSION-FREE STOCK, ETF AND OPTIONS TRADING | PER CONTRACT OPTIONS (FEE) | FRACTIONAL SHARE TRADING |
|---|---|---|---|
| E-Trade | Yes | $0.65 | No |
| Interactive Brokers | Yes | $0.65 | Yes |
| Fidelity | Yes | $0.65 | Yes |
| TD Ameritrade | Yes | $0.65 | No |
| Charles Schwab | Yes | $0.65 | Yes |
| Merrill Edge | Yes | $0.65 | No |
| Ally Invest | Yes | $0.50 | No |
Methodology
In our quest to rank the best online brokerages in the U.S., we conducted thorough research and reviews of some of the largest platforms available today. To achieve this, we designed a digital survey consisting of 74 queries and sent it to each company we examined. Our team of researchers meticulously verified and cross-referenced the survey data by reaching out to the companies directly and conducting extensive online research.
Our selection process involved evaluating the brokerages across 11 major categories, each with specific weightings. These categories included range of offerings, trading costs, account minimum and fees, features, advisory services, insurance, customer service, education/research, security, margin interest rate and cash interest, and portfolio analysis.
Within each major category, we further considered various subcategories, which were combined to derive an overall score. This overall score was then weighted to calculate the final ranking of the exchanges. We used a scale of 0.00 to 1.00 to score the data points, with the highest raw score being 0.82. This score was then converted into a 5-star rating, representing the highest possible score.
To assess the range of offerings, we examined whether each brokerage provided a comprehensive set of investment options, including stocks, bonds, mutual funds, exchange-traded funds, options, forex trading, futures, international stocks, fractional shares, cryptocurrency, and over-the-counter stocks.
In the evaluation of trading costs, we considered several variables, such as stock commission, ETF commission, options commission (with discounts for options trading), futures commissions (fees to open/close), and over-the-counter stock fees (minimum balance required), along with broker-assisted commission.
For the account minimum and fee category, we scrutinized factors like new account bonuses, free ACH deposits/withdrawals, inactivity fees, account closure fees, transfer account fees, domestic wire fees, international wire fees, and deposits made with a bank card.
In addition to these factors, we also examined the insurance protections offered by each brokerage, including Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SIPC) protections, as well as any additional asset protections and insurance coverage.
Our comprehensive approach to evaluation allowed us to identify the top seven brokerages that excelled in different areas across these categories, providing investors with valuable insights to make informed decisions about their investments.
Why other online brokers didn’t make the cut
Many online brokerage platforms failed to rank high due to their limited offerings. Some lacked the inclusion of bonds, mutual funds, options, futures, forex, international stock, crypto, or fractional shares trading. This impacted their overall ranking on our list.
Another reason for low rankings was the absence of value-added features on certain brokerage platforms. These platforms lacked advisory services like robo-advisors, cash management, or professional advisors, as well as educational and research resources.
In addition to limited offerings and value-added features, higher trading commissions and fees negatively affected the rankings of some brokerage platforms. With the rise of zero-commission trading for stocks, ETFs, and options on many platforms, those that continued to charge for these basic services were placed lower in our methodology.
Moreover, brokerage firms that imposed higher fees for other services like account closure, transfers, deposits, and inactivity also received lower scores in our evaluation.
It’s important for investors to consider these factors when choosing an online brokerage platform to ensure they find one that aligns with their needs and preferences. Each platform’s strengths and weaknesses can have a significant impact on the overall trading experience and financial outcomes. Therefore, thorough research and evaluation are essential in making an informed decision.
Final verdict
The top-ranked online brokerage platform in 2023 is E-Trade, according to our methodology. E-Trade has managed to secure the number one position, surpassing its competitors.
One area where E-Trade excels is its diverse range of offerings. While it doesn’t provide fractional share trading, it compensates with a variety of services that cater to different investor needs. This includes broad advisory services and a strong focus on educational and research resources.
Another significant advantage of using E-Trade is its value-added features. Users have access to tools like a portfolio builder, paper trading simulator, and backtesting tools, which can be incredibly valuable for making informed investment decisions.
Perhaps one of the most attractive aspects of E-Trade is its fee structure. The platform stands out by offering zero commissions for stocks, ETFs, and options, as well as charging no fees for account minimums, ACH deposits and withdrawals, inactivity, domestic wire transfer, deposits with a bank card, or account closure. This can lead to substantial cost savings for investors.
Furthermore, E-Trade’s commitment to customer service is commendable. With around-the-clock support available via phone, email, or live chat, users can get help whenever they need it.
Overall, E-Trade is an excellent choice for both beginner and advanced retail investors, thanks to its impressive combination of features and user-friendly interface.
A short history of online brokers
For retail investors in the past, trading stocks involved contacting a broker or financial advisor to get a quote and place an order, which incurred high commission fees. However, the scenario changed dramatically with the introduction of the world’s first online brokerage platform, E-Trade, in 1992. Within just three years, E-Trade generated over 80% of its revenues from trading commissions. This success prompted competitors like Charles Schwab and Fidelity to quickly develop their own online trading services, leading to a significant transformation in the market.
Nowadays, purchasing stocks is a much simpler process. Anyone can sign up for an online brokerage account on various platforms. All that’s needed are some basic biographical and tax details, fund the account, and then search for desired stocks using their ticker symbols. Moreover, these online brokerages don’t limit investors to just stocks. They also provide access to various asset classes such as mutual funds, exchange-traded funds, bonds, options, futures, and even cryptocurrencies. This broad range of offerings has further expanded investment opportunities for individuals.
