The Best Discount Brokers for Low-Cost Trading
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Are you a trader who wants to cut down on costs?
Welcome to the club – now here is the good news:
Thanks to a few first movers offering low-to-no fee commission trades, many brokers recently slashed their prices, making it extremely affordable to make trades. By doing so, brokerage firms now appeal to many people who thought investing in the stock market was too expensive or risky.
These “discount brokers” got their name because of their thrifty price cuts on commissions and fees. While you may not get as many full-service options – even with the best discount brokers – you’ll everything you need to successfully buy, sell, and invest in stocks online.
Today, most traders look for brokers who have low to no trading fees because they want to actively buy and sell without losing any profits. However, discount brokers are mostly suited to intermediate and advanced traders unless you plan to use educational tools to learn how to make the right trades.
Before I get into the reviews, it’s important to understand that the best discount broker is the one who helps you make the most money overall. That doesn’t necessarily mean the lowest fees (although it could).
Affordably-priced brokerages offer much more than cost savings: reliable, secure trading platforms, educational knowledge bases, and helpful customer support are among the many features offered by some of the brokers who made my “best” list here.
Benjamin Franklin said it best, “An investment in knowledge pays the best interest.”
In other words, it’s not all about the Benjamins… baby. With that said, let’s dive into my top picks for the best discount brokers.
Best Discount Brokers – 2020 Reviews
For those traders who want rock-bottom pricing and no-fee brokerage accounts, we’ve found the best firms just for you.
1. Interactive Brokers: Best Overall for Low Cost
For advanced, active traders, Interactive Brokers (IB) offers no stock-trading commissions on a high-quality platform with a wide selection of investments.
- Free trades on IBKR Lite
- $0.005 per share to trade on standard IB platform
- Low margin rates
- Geared for active traders
- Trade 120 markets in 31 countries in over 31 currencies
- Includes portfolio analysis, research tools, and backtesting
- May be subject to inactivity fees for small or inactive accounts
- Difficult learning curve for certain tools like Mosaic
- Quotes only stream on one device at a time, no syncing
You may wonder why IB was chosen for low costs if it still shares $0.005 per share. This is because the amount of profits that traders earn on this platform is unbelievable. The order routing system is by far the best for active traders, and you’ll see price improvements in almost any market using this platform.
Traders can use a variety of tools to find appropriate trades, and you can test your strategies using their backtesting and simulation tools. With IBKR Lite, there are $0 fees, but it’s completely stripped down and made for seasoned traders. However, using their education tools and videos, most beginners could become active traders on IBKR lite.
You must be a US-based trader to take advantage of $0 commission fees, and you also have to only use the web-based or mobile app to make trades.
2. Charles Schwab: Best for Commission-Free Trading and Tools
Charles Schwab is one of the best discount brokers currently because of recent updates to their policies and mobile apps. You can now access advanced tools and charts with their app StreetSmart Edge.
- Free stock, ETF, and options trading commissions in US
- $0.65 per options contract
- More advanced options and research tools available in StreetSmart Edge
- Same trading functionality across all web and mobile apps
- Pushes you towards higher cost financial advisors and full service pricing
Charles Schwab offers a ton of convenience for beginner investors, passive investors, and some active traders. With its newly eliminated commission policy, many investors are getting into investing through Charles Schwab because they have incredible marketing. However, the discount broker stands up to its quality thanks to StreetSmart Edge.
You can download StreetSmart Edge or run it from the browser. It’s an advanced platform that streams real-time data and trending news in a dashboard, and you can also customize charting toolkit. Charles Schwab also has other tools like TradeSource, which is more simple than Edge but doesn’t offer as many tools.
While some traders complain about Charles Schwab’s trading technology, the accuracy is pretty high for a discount broker, and they have excellent reviews for their customer support. In addition, their portfolio analysis and in-depth reports can help you make smarter decisions and diversify your investments even more.
However, you don’t need to fall for their full-service plans and pricing unless you are trading in very high volumes and taking on a lot of risk.
3. TD Ameritrade: The Leader in Discount Brokers
While it used to be the most costly to trade with TD Ameritrade, the company led the way in ending commissions in October 2019. Now most brokers don’t charge commission fees on stocks, ETFs, and per-leg options.
- No commissions on stocks, ETFs, and per-leg options trading for US clients
- In-depth research tools and tons of streaming news feeds to keep you in the know on your favorite markets and stocks
- Variety of education tools and testing simulators
- Accessible on web, desktop, and mobile
- Additional customer support available through Facebook Messenger, Twitter, and WeChat
- Traders may have to switch between platforms to access certain analysis tools
- It’s difficult to find some educational content as the knowledgebase is disorganized
If you want a variety of tools, access to years of historical data, and a simple-to-use platform, TD Ameritrade offers one of the best discount broker platforms. It’s also one of the oldest and largest online brokers. Since the company eliminated commissions on stocks, ETFs, equities, and per-leg options, they have brought on more investors as a whole.
With a variety of tools and research capabilities, you can learn a lot about investing before you even make a deposit. You can use the paper money app to simulate and test strategies without using any real money. When you’re ready, the thinkorswim platform offers a number of streamlined tools for buying and selling on all kinds of markets.
TD Ameritrade works for all beginner and advanced traders, but it’s not the greatest for margin trading due to high-interest rates.
4. Robinhood: Best for Simple Stock Investments
Robinhood takes a no-frills approach to investing. While you won’t pay commissions on any stocks, ETFs, options, or cryptocurrencies, you don’t have as many tools or portfolio analysis options. In addition, traders can’t invest in mutual funds and bonds with this broker.
- Never pay commissions on stock trades
- No account minimums
- Streamlined browser and mobile interfaces
- No support for retirement accounts such as IRAs
- No access to mutual funds or bonds
- Slow response customer support
Robinhood is designed to be a very simple, introductory mobile app to investing. It’s the best discount broker for those who want to trade stocks, options, ETFs, and digital currencies without ever paying a fee or commission. In exchange, you don’t have access to many research tools, and customer support is pretty limited.
For those who frequently trade stocks – and love to use their mobile phones – Robinhood offers a user-friendly mobile app. There are various account levels as well, and while the base account requires $0 balance, you may need $2,000 for a Gold margin account.
5. Fidelity: Best for Active Traders
As a highly rated broker, Fidelity is likely the best when it comes to no commissions and trade order execution. In addition, you also get access to robo-advisors, research tools, and portfolio analysis reports.
- Highly rated for trade executions
- No commissions on stocks and ETFs
- ETF research is very detailed and easy to access
- All customers can access Active Trader Pro
- Multiple platforms make it clunky to use
- Only for US residents
Fidelity has made some improvements to its platform in the past two years. Now it’s easier for investors to place an order online or on their mobile phone via the app. In addition, the company added a quantity calculator to order tickets so customers would not exceed their buying power.
With high-quality trade executions, Fidelity prioritizes your order so you get it at the best price. Their price improvement has a very high rating, which makes most of its customers happy. You can also use their real-time data streams on Active Trader Pro to get up-to-the-minute quotes.
What to Look for in a Discount Broker
Most brokers are doing anything right now to get more investors and keep their current clients, which meant slashing commission fees completely in October 2019.
As more mobile apps get into “easy investing” for those who don’t know how to invest, many of the larger brokers had to reduce their fees as well. TD Ameritrade was the first to do so, and that chain reaction led to many other brokers either lowering or completely removing commissions.
In addition to lower costs, there are a few other things to consider when choosing a discount broker.
Full-Service Brokers vs. Discount Brokers
For those investors who are just starting out, you may want more attention, advice, and tools that you pay for. If you want these things, then a full-service broker is your best choice. Charles Schwab is both a discount broker and a full-service broker. They offer complete account management or allow you to manage it yourself. See more full service brokers.
Discount brokers are better for traders who have some knowledge of the market and want to place trades themselves. You have to have more confidence in your trades if you are placing bids manually, but some discount brokers have robo-advisors and other tools to help you decide on the best trades.
Why Do People Choose Discount Brokers
- Lower costs overall
- Low to no commission fees
- Online, browser-based or mobile app tools
- Access to educational resources
- No account minimums
- Better for active traders rather than passive investors
If you want more advice, guidance, and hands-on customer service, then full-service brokerage firms offer more services. However, these typically require you to keep a significant account balance of $10,000 or more.
What Tools and Robo-Advisors are Available?
Discount brokers make up for their lack of fees by not offering financial advice or greater tools for their lower-level accounts. You may have to pay more or keep a certain account minimum to get access to better charting tools and more intelligence software.
Interested in more robo advisors? See our robo advisor report.
How Much Do Discount Brokers Charge?
Trading fees or commissions are no longer charged by most discount brokers. While there may be some online brokers that still charge a small fee, they should make up for it in some way with a smart tool or lower margin rates.
Can You Trade Online Without a Broker?
Some employers and companies offer a direct investment plan. In this way, you don’t have to use a broker at all. However, it’s not easy to trade on your own, and only a few publicly traded companies allow you to buy stock directly.
Can You Trade Stocks for Free?
There are plenty of brokers that no longer charge any commissions on stock trades. These include Charles Schwab, TD Ameritrade, Fidelity, and Robinhood. Read our guide to free brokers for more.
Are Discount Brokers Good for Long-Term Investing?
Stocks offer the most advantages with an IRA or Roth IRA. You can set up these long-term savings accounts and play the stock market to grow your money. Most of the time, these accounts allow you to select what you invest in, and financial advisors typically go with mutual funds.
Most discount brokers have retirement planning options, but they may not be as robust as TD Ameritrade or other historic brokers.
Wrapping Up: What Discount Broker Should You Pick?
Most traders have specific investment personalities. For those who are looking to passively invest and earn a nest egg, you may want to go with a larger broker such as TD Ameritrade. For active traders who want to save the most money, Interactive Brokers makes the most sense because of its benefits for high trade volumes.
In addition, traders need to look at overall services and fee structures before setting up any brokerage account. Some of the best discount brokers give you access to exclusive tools like the thinkorswim platform on TD Ameritrade.