The Best Cheap Online Stock Broker

The best cheap online stock broker offers a variety of investment options at a low cost. We compared fees, account minimums, and other costs of the cheapest brokerage accounts to find which best suits different investing priorities. While most online brokers have dialed down their costs, we found three that we like more than the competition.

The 5 Best Cheap Online Stock Brokers

Best for New Investors
Ally Invest
Ally
A clean and accessible online brokerage that provides investing newbies with a simple platform and no investment minimums.
Pros
Easy entry point
Room to grow
Managed portfolios
Cons
Difficult to find account specifics
Light on education

Why we chose it

Easy entry point

If you’re a relative newcomer to the stock market, you should look for an broker with low costs, plenty of educational resources, and, importantly, a low account minimum. Your best bet is Ally Invest. Because Ally Invest doesn’t maintain brick-and-mortar branches or run advertising campaigns, it is relatively unknown outside of the trading world. However, Ally does better than most online brokerages at making investing accessible to newcomers. The real welcome mat in front of Ally’s door: some of the cheapest rates in the industry. With a no minimum for independent brokerage accounts, just about anyone can get started investing with Ally.

Room to grow

Just because Ally makes investing approachable doesn’t mean it isn’t an expansive company. There are plenty of tools and opportunities to expand your investment horizons. Ally offers all the same major investment vehicles as other brokerages — stocks, options, ETFs, bonds, forex, futures, mutual funds. And on the subject of mutual funds, Ally provides access to nearly twice as many mutual funds (around 10,000 vs. 5,000) and charges a much lower mutual fund commission than the competition (around $9 vs. Schwab’s $75).

Managed portfolios

In addition to Ally’s swathe of investment vehicles, the brokerage also offers a host of accounts that fall under a managed portfolio.These portfolios are comprised exclusively of exchange-traded funds (ETFs) — bundles of investments that trade on the open market like stocks. They offer similar diversification to mutual funds, but typically carry lower expenses. In addition to small fees for holding the ETFs themselves, Ally charges a 0.3% advisory fee. That's a pretty middle-of-the-road percentage in comparison with other full-service brokerages but slightly higher than companies that offer only managed portfolios. We discuss these robo-advisor companies below.

Points to consider

Difficult to find account specifics

Ally boasts an aesthetically pleasing and easily navigable site, but buries much of the hard data that we were craving. From the easy-to-reach pages, scout out fine print hyperlinks promising “More Details” to find consolidated information about fees, investment vehicles, and account types.

Light on education

Ally takes a light approach to education and research. While having more in-house resources would improve the overall client experience, you can still find plenty of information elsewhere on the internet. And in-house improvement is on the horizon: Since Ally’s merger with TradeKing, its original system has seen a boost in tools and technology.

Best Resources
Charles Schwab
Charles Schwab
This old guard brokerage has stayed on the leading edge of trading technology, while providing plenty of support and advising resources.
Pros
Stellar research
Robo-advising options
Traditional brokerage feel
Cons
More expensive than Ally
Complex tech

Why we chose it

Stellar research

Schwab puts extensive information on accounts, products, as well as wider investment education front and center, hitting you with its expert counsel and breaking news. Not only does the firm provide access to independent research, it also publishes relevant in-house research.

Robo-advising options

Charles Schwab offers a managed portfolio option, Intelligent Portfolio, available for a large number of managed account types ($5,000 account minimum). Unlike every other managed account we looked at, it charges no advising fees. Instead, Schwab makes money by holding some of the underlying assets of the accounts. The only fees associated with the account come from the investments, and while that percentage increases to a substantial amount (from 0.07% to 0.21% as risk builds), it’s still lower than most.

Automated financial advisors are the wave of the future, but many people don’t feel comfortable putting their life’s savings in the digital hands of a computer. Charles Schwab has developed a half-and-half solution: A hybrid service, Intelligent Advisory puts both financial professionals and financial algorithms to work. A nice little solution, so long as you have $25,000 to plunk down.

Traditional brokerage feel

Charles Schwab has retained more of a classic brokerage feel through its in-person presence (you can schedule a free consultation with a financial advisor) as well as its more traditional account minimums. Charles Schwab offers a deluxe set of services, but depending on the account you choose, you don’t have to invest a correspondingly huge amount. Opting for an independent brokerage account gives you access to the resources of a traditional, full-service brokerage without putting down a traditional amount. And no brokerage can compare with Charles Schwab for ETFs: Over 200 trade commission-free.

Points to consider

More expensive than Ally

Just about every basic fee charged by Charles Schwab goes toe-to-toe with Ally. The price between the two does jump in certain instances — broker-assisted trades go up by $5 and mutual fund commissions go up nearly $70 — and while Ally lets investors start a brokerage account with any amount, Charles Schwab requires $1,000 to start. However, the breadth of tools and resources available with Charles Schwab does a lot to justify the extra expense.

Complex tech

If you need personalized settings and advanced features, StreetSmart Edge provides both in spades. You’ll just have to learn how to use it. User feedback about clunky trading tech has led the company to revise its approach, but if you still find the desktop platform unwieldy, there’s also a web-based platform, Trade Source, which offers streamlined trading and market insights on the go. Investors that are new to the game may find the web-based option more accessible.

Best for Active Investors
Interactive Brokers
Interactive Brokers
A top choice for experienced traders, this brokerage boasts a complete lineup of investment products, plus pro-grade trading tech.
Pros
Rewards active trading
Exceptional platform
Protegés get perks
Cons
Trading tech learning curve
Futures trading violations

Why we chose it

Rewards active trading

For pure trading and competitive prices, no other brokerage comes close to Interactive Brokers.The two elements that make IB a bit unwieldy for new investors make it a perfect tool for the experienced: Once you meet the hefty minimum account balance — $10,000 — the rest of IB’s demands on your wallet are light. And the relatively high $10 monthly activity fee is charged only if your trades don’t rack up at least $10 in commissions. With the tiny $1 per-trade fee, that means you’ll need to make ten trades every month or pay the difference, e.g. six trades will leave you with a $4 activity fee. It also offers extremely low margin rates (their highest interest bracket still charges less than 3%) as well as the choice of fixed or tiered pricing, giving investors the opportunity to choose what makes more financial sense for them. Tiered structures like this will typically benefit high-volume traders.

Exceptional platform

Interactive Broker’s incredibly rich platform offers trading technology advanced enough for professional day traders. Choose from the web-based trading platform WebTrader and the more advanced, downloadable platform, Trader Workstation. Both are included for Interactive Brokers clients at no additional cost. Serious traders will likely gravitate to the Trader Workstation’s more in-depth features.

Protegés get perks

If you are savvy investor who also happens to be under 25, you can open an Interactive Broker account with a reduced minimum balance — the required deposit is just $3,000 — and the monthly fee bumps down to $3. For an IRA, the minimum deposit is $5,000.

Points to consider

Trading tech learning curve

Navigation in Trader Workstation is far from intuitive as tools are located in discrete sections. However, it is also customizable, allowing you to group together the resources you make frequent use of and hide the ones you don’t. The interface, like the rest of an IB account, only benefits experienced traders. However, IB has recognized the learning gap. To supplement the educational tools on Traders' University, IB has introduced a layout library (choose from pre-made setups and templates for different trading strategies) as well as an AI assistant. IBot can answer plain-English questions. But, like any other voice-activated helper from Siri to Alexa, it has its limits.

Futures trading violations

Back in 2012-2013, the company was fined for several violations relating to the management of futures market funds. The result was a pair of fines totaling $925,000. Because the fines occurred several years ago, and because futures trading is a fairly niche investment area compared to stocks and funds, we don’t think this is enough to cancel out Interactive Brokers’ overall value. However, if you’re planning on doing a substantial amount of futures trading, be aware of this mark on their record.

How to Choose a Cheap Online Stock Brokerage

Choose with your investment habits in mind

Your financial goals and your personal investing style will be the two biggest factors in choosing the right brokerage for you. We set out to find the strengths and weaknesses of the cheapest brokerages we could find, but you’ll still have to decide which offers the right combination of savings and services for your needs.

Weigh the worth of special offers

Special offers for opening a brokerage account can include a set number of free trades or even cash bonuses for investing above a certain amount. Read the fine print to be sure that these early benefits outweigh later costs, and whether those new client perks align with your investing practices. In other words, don’t be enticed into choosing a broker offering deals on investment products you don’t understand or aren’t ready to use. Since special offers are by definition short-term, we focused on set account pricing. In the long run, those are the savings that will impact your financial goals.

Start with virtual trading

One of the many reasons we prefer Ally Invest for new investors is because it offers virtual trading. With virtual trading, you can test out strategies before putting your own cash into the mix.

Online Stock Trading FAQ

How much money do I need to start online trading?

If this is your first foray into investments, the general wisdom suggests you dedicate around $1,000. Less, and it can be too difficult to gauge the success of your strategy or to weather any stock market storms. That said, no amount is too small. The concept of Time Value Money (TVM) suggests that money is always worth more the earlier you receive it because of its earning capacity. If you have the choice to get a spare $50 now or in three months, you should choose now because you could invest it and watch it grow. With no account minimums, there’s no reason to save up to invest.

How often should I check my stocks?

If you relish the thrill of quick trades, you won’t be asking this question at all. Performing multiple trades a day means that juggling stocks is your part-time or even full-time job. But if you’re interested in keeping investments a side hobby, and don’t have the time or interest to try and outwit the market, don’t stress yourself checking the numbers more than once a week. Any closer monitoring than that, and you may be tempted to make trades based on short-term fluctuations — and that’s bad for your long-term earnings potential.

What about robo-advisors?

The inexpensive trading platforms established by the likes of Scottrade and E*trade make it easy to invest by reducing or eliminating fees that make traditional brokerage firms elite. They are not, however, the newest rich kid on the block. A slew of robo-advisor investment portfolios — Wealthsimple, Wealthfront, and Betterment — have materialized within the past five years, with marketing and functionality geared toward a demographic used to automated services. Simply plug in your time frame and risk tolerance and an algorithm takes it from there. Wealthsimple's slogan says it all: “Investing on autopilot.”

A nice side effect of AI investing — even lower fees. Wealthsimple and Betterment both allow you to open an account with $0 down; Wealthfront asks for $500. Wealthsimple charges an annual 0.5% advising fee; Wealthfront and Betterment charge just 0.25%.

The Best Cheap Online Stock Brokers: Summed Up

Ally Invest
Charles Schwab
Interactive Brokers
Best for New Investors
Best Resources
Best for Active Investors
Account Minimum
$0
$1,000*
$10,000
Price Per Trade
$4.95
$4.95
$1
Per Share Fee
$0
$0
$0.005
Margin Rates
4.25%-8.75%
6.825%-8.575%
1.78%-2.66%

*Waived with monthly direct deposit of $100

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