Choosing the Best Online Brokerage Companies


choosing the best brokerage companies

So you are ready to invest but don’t know where to start? First, you will need to open an account with a brokerage account. Choosing the best online brokerage companies seems difficult but it doesn’t have to be.

There are many to choose from and a lot of them offer great features that will meet your needs. The important thing is to do your homework once, open the account and start investing.

The first thing we need to do is determine what you want to accomplish with your investments. We will look at different types of investors and show how some brokers are better than others for each person’s individual needs.

Next, we’ll look at fee structures and deposit requirements. Some companies require a certain amount of money to open an account while other companies charge different fees for opening and closing trades.

Lastly, we’ll look at how much control you want to have over your investment. Some people want a company that will help them make investing decisions. Others want to choose all investments on their own.

Still, there are those that want it all done for them so they can just sit back, relax, and benefit from passive income.

Well, let’s get started! We have a lot to talk about!

What type of investor are you?

what type of investor are you?

This may seem like a difficult question to answer but I will simplify it for you.

Are you the type of person that wants to choose stocks and turn them for quick profits? If so, you are interested in being a day trader or swing trader.

Are you someone that wants to buy stock and let them sit there for 5, 10, 20 or even more years? If so you’re probably a “Buy and Hold” Investor.

Most of the time, people fall somewhere in the middle of these two extremes.

I’ll quickly go over these two major types of traders and show you what these types of investors will more than likely value most when choosing a brokerage.

Day Traders and Swing Traders

A day trader is someone that needs to be able to make opening and closing stock trades multiple times a day and is looking for quick gains and fast trades.

This type of trading is pretty advanced and not for the faint of heart. If you are interested in day trading, you probably need an account that offers low fees to open and close trades. in addition, you will want an account that has minimal support regarding choosing trades and assisting with research.

Day traders are usually on their own since they need to be able to take action quickly.

Swing traders are similar. They use a different type of analysis to determine which stocks are undervalued and sell them as soon as they earn a certain profit or become overvalued.

Both day traders and swing traders need very little from their brokerage accounts in terms of full-service brokers. They merely need the means to buy and sell stocks on their owns and the cheaper that they can do that, the better!

Generally, commission fees are the most important factor in choosing a brokerage.

Buy and Hold Investors

The other major type of investor is the long term investor known as the “buy and hold” investor. These types of investors typically buy stocks and hold them for years on end and benefit from their rise in value.

“Buy and Hold” investors typically do not pay attention to changes in the market since they understand that the market will have ups and downs and that historically there are more ups and downs.

While no one wants to pay more for commissions, these types of investors are typically less concerned with fees as long as the brokerage makes up for it with other services. Often buy and hold investors will want a more full-service type of brokerage.

They want research capability, broker support, and sometimes management services. The benefit to having research capability means that while inside the brokerage account, investors can really do their homework about a company they are interested in to make sure it will fit in their portfolio.

Often times, brokers that work at the brokerage will take a look at your portfolio and give you insights on what you may want to add in order to help maintain its diversity and balance your portfolio.

Lastly, having your portfolio managed will mean that a broker will buy and sell shares of stocks based on your preferences to ensure you keep a balanced portfolio based on your risk tolerance. This, of course, will require a management fee.

Minimum Deposits and Fee Structures

Some brokerages are for serious investors that have a lot of capital to invest while others are tailored to the beginner and intermediate investors. One thing to watch out for is minimum deposits.

Minimum Deposits


A beginner investor that hasn’t really experienced investing before is unlikely to have $10,000 to put into an account and start investing.

They want to “test the waters” so to speak and get started with as little as possible and see if investing is right for them.

Others have been investing for a while and are ready to invest large amounts right away. A more advanced investor might want to join a company that has higher entry amounts to ensure they are among like-minded investors.

Fee Structures

Another factor to consider is how much transaction fees might be. The biggest fee to watch out for is trading fees.

Most brokerages charge a flat fee to buy stocks and mutual funds and a separate fee to close trades. Others have fees for stocks and mutual funds but no fees for trading ETFs.

Sometimes these fees can be $9.95 per trade while other times they can be $6.95 or $5.95. That means if you buy 100 shares of Apple (APPL) stock you would be charged $9.95 (let’s say).

A few months go by and you decide to sell the 100 shares back to your brokerage so you can either lock in your gains or maybe you just want to allocate your money into different investments.

You will have to pay another $9.95 to close out that trade. That’s a total of $19.90 to open and close a trade.

Commission Free Brokerages

There are commission-free brokerages that offer the ability to buy and sell stocks and other securities without having to pay the trade commissions.

If you are a beginner investor or just an investor that doesn’t want to invest a lot of money, this is the best way to go because, with smaller accounts, commission fees can eat your account alive.

I use three two brokerages for a lot of my trades.

My favorite right now is Webull because I have been getting more into analyzing stocks and using stock charts to signal when to start investing in companies.

I think Webull has the best capability for researching stocks since they started out as a research and analysis company before they became a brokerage.

Read my full review of Webull for more information.

I also use Robinhood because I trade options as well. This is probably the easiest platform to get started with. Their app is by far the easiest to use and look at and lets you trade options, stocks, ETFs, and cryptocurrencies.

They lack a lot of the tools Webull has but is great for starting out investing. Of course, I also wrote a review of them that you can read.

My Robinhood Review takes you inside my account.

Whether you are investing $1000 or $50, you will have to pay a transaction fee for each trade unless you are using one of the no-commission fee brokerages that I listed above.

If you choose a brokerage that does have fees, make sure the transaction fee that you are paying is worth the service you are provided.

How Much Control Do You Want?control room with investors

Everyone has different investment styles. In fact, some prefer to do all of their own research and make investments based on personal research.

Others, on the other hand, would rather let professionals handle their wealth and watch it build passively. Of course, there are always those that want a little guidance but ultimately want to control all aspects of wealth.

Whether you are hands-on, hands-off, or somewhere in between, investing starts with the right brokerage to match your style.

Like we mentioned before, discount online brokers are mostly tailored to the investor that’s not looking for all the bells and whistles. They provide free trades and low or no minimum deposits but don’t really give you any help with determining where to invest.

They may provide basic training similar to what you can already find on this website but they aren’t going to build a portfolio for you.

Full-service brokers like E-Trade, Ameritrade and Charles Schwab will have a little bit for everybody. They allow for a completely hands-on approach where you can invest on your own without any interference, have services to help you choose a portfolio and have services in which they will build a portfolio for you and manage it.

Of course, any help you are provided will come with a fee since it requires a real person to sit and analyze your goals and match them with a portfolio to fit your needs.

Thirdly, there are investing services that are completely hands-free and usually offer services as mentioned above but for a smaller fee. This is because they are mostly automated.

These sites pride themselves on low fees and using automated software to choose a portfolio based on what you input into an online form and build an investment portfolio for you that is completely hands-off. Two examples of this are Betterment and Wealthfront.

Betterment and Wealthfront use digital software to trade the markets using sophisticated analysis and removes all the emotion that generally accompanies a human trader. By buying and selling shares according to their analysis, they claim to beat the typical investor and financial advisor.

Here is a screenshot of Betterment’s performance from January 2004 to July 2018:

betterment performanceOpens in a new tab.

One thing to note is that they outperform the “average investor by about 100%. I’m not completely sure what data they used to determine the average investor but the results are still nonetheless impressive.

I think a more accurate comparison would be to compare it to a stock market index so I went ahead and compared it to the S&P 500 for the same time frame and found that the S&P appreciated about 144% during that same time frame.

I then looked up how the S&P performed if all dividends that were received during this time frame were reinvested and discovered that it appreciated a total of 226%.

Feel free to run the numbers yourself hereOpens in a new tab..

After reviewing this, I believe Betterment does a pretty good job at managing accounts and is rather comparable to the stock market indexes. In fact, a third robo-investor that you may have heard about is Acorns.

I have an article that discusses Betterment vs Acorns.

Wealthfront didn’t seem to have as high of returns when I looked at it. It started in 2011 and since then had an average annual profit of about 7%.

wealthfront historical performanceOpens in a new tab.

This is still a decent investment but if you had just invested in an ETF that followed the S&P 500, you’d have come away with an average 10% It’s a little unfair to compare the two since Wealthfront has a lower risk factor since its more diversified than just stocks.

One thing to notice is that they underperform the benchmark they are comparing themselves too which is a compilation of various investments. To see exactly what they benchmark against you can see hereOpens in a new tab. and click on “Read Historical Performance Disclosure” below the graph.

You’d have to decide for yourself if it’s something you’d like to invest in. If you like the idea of automated portfolio adjusting and maintenance with a low fee, these sites may be for you. If you have a hard time choosing between the two, you could just split your investment between both companies and benefit from the diversification of two separate services.

Automated investment services can definitely simplify your investing and make it very passive so you don’t have to actively be involved in the day to day changes in investing. If you want an easy approach to investing, this may be for you.

Recap Choosing the Best Online Brokerage Companies

vacation on the beach

So, there you have it! By now, you should have a good idea of what to look for when choosing an online brokerage company. Depending on what type of investor you are, what types of fees you are willing to pay, and how “hands-on” you want to be, there is surely a brokerage that is right for you.

If you are interested in starting to invest but only have a little money, check out our article on how to invest with little moneyOpens in a new tab..

If you have any questions about brokerage accounts or how to choose them that wasn’t covered here, please leave me a comment below and I’d be happy to answer it. Also, if you know someone that can benefit from this article, please help me get the word out by sharing this with them.

I hope you learned something to make you a better investor. Thank you for reading this article.

Now, let’s start investing!

Eric Baglio

Eric Baglio has been investing for over ten years and learned a lot of valuable lessons along the way. He has helped numerous people start investing on their own and founded Let's Start Investing to help anyone willing to learn how to build wealth. His favorite brokerage is Webull and his favorite stock advising service is Motley Fool Stock Advisor.

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