Our best brokers for beginners have features that help new investors learn as they begin their investing journey. Brokers were selected based on top-notch educational resources, easy navigation, clear commission and pricing structures, portfolio construction tools, and a high level of customer service. Some brokers also offered low minimum account balances and demo accounts to practice.
Best Online Brokers for Beginners:
TD Ameritrade: Best for Beginners
- Account Minimum: $0
- Fees: Free stock, ETF, and per-leg options trading commissions. $0.65 per options contract.
Why We Chose It
Due to its strength in providing investor education, TD Ameritrade is our best overall choice for beginners. In addition to a robust educational platform, new investors may find that TD Ameritrade is also easy to use and navigate. The platform is comprehensive without feeling overwhelming, and the company has the resources, range of offerings, and support that will help new investors improve over the long term.
Extensive educational programming for beginner investors
Well designed web platform and mobile applications
A range of trading platforms and investment selections for all types of investors and traders
TD Ameritrade does not offer fractional shares
Higher account fees and fund fees than competitors
Uninvested cash is not automatically swept into a money market fund
TD Ameritrade: Best for Investor Education
- Account Minimum: $0
- Fees: Free stock, ETF, and per-leg options trading commissions. $0.65 per options contract.
Why We Chose It
TD Ameritrade is unmatched as far as the variety and depth of its educational offerings. It personalizes the learning experience through recommendations based on your history, holdings, and other content viewed by similar investors. TD Ameritrade’s educational platform includes everything from beginning to advanced trading as well as the ability to paper trade on the platform without making any commitment, allowing users to practice trading.
Expanded learning pathways for every level of investor
Paper trading so you can test drive the platform
Well-designed mobile apps
E*TRADE: Best for Ease of Trading Experience
- Account Minimum: $0
- Fees: No commission for stock/ETF trades. Options are $0.50-$0.65 per contract, depending on trading volume.
Why We Chose It
Good for new and experienced investors, E*TRADE’s intuitive website and mobile app provide easy access to the most relevant tools and straightforward menus to help users move quickly from research to trading. As investors gain experience, they can paper trade on a platform that mirrors the Power E*TRADE platform with more advanced features and customization options. Power E*TRADE also comes with its own mobile app, so you can upgrade the desktop and app when you are ready.
Mobile apps are extremely well laid-out and easy to use
E*TRADE paper trading can be used to test strategies
E*TRADE’s Prebuilt Portfolios offer a fast track to the markets
Strong educational content with a solid library and a calendar of live events
E*TRADE charges $0.65 per contract for less frequent traders and $0.50 for those who place more than 30 options trades per quarter
No consolidation of external accounts
TD Ameritrade: Best for Customer Service
- Account Minimum: $0
- Fees: Free stock, ETF, and per-leg options trading commissions. $0.65 per options contract.
Why We Chose It
In addition to its ease of use and robust educational library, TD Ameritrade also provides outstanding customer service along several ways to access its customer service options. Customers can contact the company 24/7 via phone, which generally has a wait time of less than a minute, or its virtual client service agent, Ted. There is also live chat and chatbox capability with Apple Business Chat, Facebook Messenger, Twitter Direct Messages, and in WeChat in Asia.
Virtual client service agent
Multiple channels to contact customer service
Very quick responses on customer service phone line
Clients can speak to TDA financial advisors
Thinkorswim mobile has live chat help within the app and trading platform
Can talk to a live broker, but fees may apply
Like many other brokers, TDA did experience outages during the January 27, 2021 surges in activity
What Is an Online Brokerage?
An online brokerage is a platform that executes buy and sell orders for stocks and other securities on behalf of retail and institutional clients. Different brokers offer varying levels of service and charge a range of commissions and fees based on those services. The most commonly referenced brokerage firms are discount brokers.
Do You Need a Lot of Money to Use an Online Brokerage?
Fortunately, you don’t need a lot of money to open a brokerage account. Many discount brokers typically offer $0 – $500 account minimums, making it easy for almost anyone to get started.
What You Need to Open a Brokerage Account
To open a brokerage account, you’ll need several pieces of information available, including:
- Name
- Address
- Date of birth
- Social Security number (or taxpayer identification number)
- Telephone number
- Email address
- Driver’s license, passport information, or other government-issued identification
- Employment status and occupation
- Annual income
- Net Worth
Trading vs. Investing
Generally, when people talk about investors, they are referring to the practice of purchasing assets to be held for a long period of time. Investors hold their assets long-term so that they may reach a retirement goal or their money can grow more quickly than it would in a standard savings account.
In contrast, trading involves buying and selling assets in a short period of time with the goal of making quick profits. Trading is typically seen as riskier than investing, and those new or inexperienced in trading should do so cautiously.
Discount Brokerage vs. Full-Service Brokerage
There are different types of brokers beginning investors can consider based on the level of service and cost you’re willing to pay. A full-service, or traditional broker, can provide a deeper set of services and products than what a typical discount brokerage does. Full-service brokers can give their clients financial and retirement planning as well as tax and investment advice. These additional services and features usually come at a steeper price.
Discount brokers are better for those looking for a cheaper option, but who are willing to educate themselves and stay more hands-on with their accounts. They offer low commission rates on trades and usually have web-based platforms or apps for you to manage your investments.
How to Pick a Brokerage
Before selecting an online broker to use, you’ll need to ask yourself questions including: Am I a beginner? How much can I afford to invest right now? Am I a trader or an investor? What kind of assets would I like to invest in?
You’ll also need to decide the type of brokerage account you’ll want, the fees involved, and how involved you want to be, day-to-day, with your account. You can also read our guide to choosing the right online broker for additional assistance in choosing the right brokerage account.
Is My Money Safe in a Brokerage?
All brokerages operating within the U.S. are required to have $500,000 of SIPC protection, which includes a $250,000 limit for cash. This means that any holdings with a brokerage that exceeds $500,000 could be lost in the event that a brokerage goes bankrupt or is liquidated. That said, retail investors, especially beginners, are unlikely to have accounts that exceed $500,000, giving little cause for concern for new investors.
Can I Withdraw Money From a Brokerage?
Withdrawing your money from a brokerage is relatively straightforward. When you have money in a brokerage it is generally invested into certain assets. Sometimes there is cash left on the side that is in the account but not invested. This excess cash can always be withdrawn at any time similar to a bank account withdrawal. The other money that is invested can only be withdrawn by liquidating the positions held. This means selling the assets that you purchased like stocks, ETFs, and mutual funds. Once sold, you can withdraw that cash.
Types of Brokerage Accounts
There are a number of types of accounts available at brokerages:
- Cash accounts: A cash account is a brokerage account in which a customer is required to pay the full amount for securities purchased, and buying on margin is prohibited. The Federal Reserve’s Regulation T governs cash accounts and the purchase of securities on margin. This regulation gives investors two business days to pay for securities.
- Margin Accounts: A margin account is a brokerage account in which the broker lends the customer cash to purchase stocks or other financial products. The loan in the account is collateralized by the securities purchased and cash, and comes with a periodic interest rate. Because the customer is investing with borrowed money, the customer is using leverage which will magnify profits and losses for the customer.
- Retirement Accounts: Brokerages offer all types of retirement accounts like Traditional IRAs, Roth IRAs, and 401(k)s.
Terms Beginners Should Know
Anyone who would like to get involved in the stock market should know some basic terminology:
- Stock: A stock (also known as “shares” or “equity”) is a type of security that signifies proportionate ownership in the issuing corporation. This entitles the stockholder to that proportion of the corporation’s assets and earnings.
- Price-to-Earnings Ratio – P/E Ratio: The price-to-earnings ratio (P/E ratio) is a ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple.
- Market Capitalization: Market capitalization, commonly referred to as “market cap,” refers to the total dollar market value of a company’s outstanding shares. Market cap is calculated by multiplying a company’s shares outstanding by the current market price of one share.
- Dividend: A dividend is the distribution of reward from a portion of the company’s earnings and is paid to a class of its shareholders.
- Exchange-Traded Fund (ETF): An exchange-traded fund (ETF) is a collection of securities—such as stocks—that typically tracks an underlying index.
- Bond: A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.
- Mutual Fund: A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors.
- Limit Order: A limit order is the use of a pre-specified price to buy or sell a security. For example, if a trader is looking to buy XYZ’s stock but has a limit of $14.50, they will only buy the stock at a price of $14.50 or lower. If the trader is looking to sell shares of XYZ’s stock with a $14.50 limit, the trader will not sell any shares until the price is $14.50 or higher.
- Market Order: A market order is a request by an investor – usually made through a broker – to buy or sell a security at the best available price in the current market. It is widely considered the fastest and most reliable way to enter or exit a trade and provides the most likely method of getting in or out of a trade quickly. For many large-cap liquid stocks, market orders fill nearly instantaneously.
If you’re interested in learning more about the stock market you can check out our guide to investing.
Methodology
Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of online brokers. Our reviews are the result of months of evaluating all aspects of an online broker’s platform, including the user experience, the quality of trade executions, the products available on its platforms, costs and fees, security, the mobile experience and customer service. We established a rating scale based on our criteria, collecting thousands of data points that we weighed into our star-scoring system.
To determine the best broker for beginners, we focused on the features that help new investors learn as they are starting their investing journey. Brokers were selected based on top-notch educational resources, easy navigation, clear commission and pricing structures, and portfolio construction tools. We also looked for low minimum account balances and availability of demo accounts so new traders and investors can practice not only using the platform but also placing trades.
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