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All Contents © 2018The Kiplinger Washington Editors
By Daren Fonda, Senior Associate Editor
| From Kiplinger's Personal Finance, October 2017
However you invest, it’s a great time to shop for an online broker. Firms have been trimming commissions, expanding their online tools, offering more transaction-free mutual funds and enhancing their mobile apps.
To help you choose the best broker, we surveyed seven major firms that offer online trading of stocks, exchange-traded funds, mutual funds and individual bonds, while also providing some retirement-planning tools and advisory services.
We weighted the categories based on what our readers consider vital: commissions, 15%; investment choices, 15%, tools, 15%; research, 20%; ease of use, 15%; mobile, 10%; advisory services, 10%. But remember that the best broker for you will depend on your priorities: Are you a frequent trader? Do you like to rely on your mobile device? Are low fees paramount? We’ve called those factors out, too.
Take a look at our reviews of seven of the biggest brokers to find the right fit.
To be included, firms had to offer online trading of stocks, ETFs, funds and individual bonds. T. Rowe Price declined to participate. We also excluded some brokers that focus primarily on active traders. Scottrade wasn’t included because TD Ameritrade recently purchased the firm (and is in the process of absorbing Scottrade’s clients).
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Evaluate Fidelity for Yourself »
Fidelity made news when it launched a price war early this year by cutting its stock commissions to $4.95 per trade. The result, though, is that you shouldn’t pay more than a few bucks to trade anywhere, and others even offer some free trades.
What put Fidelity at the top of our rankings was not just the lowest overall commissions, but strong scores in all categories.
If you like to use your brokerage more like a bank, Fidelity also shines as the best for managing cash. Customers can easily pay bills and see a complete picture of their financial life on Fidelity’s site, including mortgages and balances in non-Fidelity accounts. Plus, Fidelity’s Visa Rewards card pays 2% back on all purchases, which beats the cash rebates from cards of most other brokers.
Evaluate Merrill Edge for Yourself »
We had a tie for first place this year. Merrill Edge did as well as Fidelity this year in overall scoring, and is only listed second thanks to the alphabet.
Merrill’s standout qualities are its research and tools. Investors can see details on more than 1,300 companies covered by Bank of America Merrill Lynch analysts. And along with top-notch screeners for funds and stocks, Merrill provides Morningstar’s powerful Portfolio X-Ray, a tool that can dig into your fund holdings and individual stocks and, among other things, analyze areas of overlap and market factors affecting your returns. As a bonus, these tools are easy to find, too.
That helps make Merrill Edge our favorite broker for active stock traders. Also helping: Low commissions. Investors can qualify for 30 free trades per month by having at least $50,000 in combined balances at Merrill and parent Bank of America. Maintain at least a $100,000 balance and you get 100 free trades per month. So don’t get hung up on Merrill’s relatively high base rate of $6.95 per trade; most clients aren’t paying that.
Evaluate Charles Schwab for Yourself »
In a tight contest, Charles Schwab came in third, posting the highest score available for the breadth of investment choices.
It’s our pick for those whose primary interest is investing in mutual funds and ETFs. Offering 3,976 funds with no loads, no transaction fees and investment minimums of less than $50,000, Schwab edges the competition. Need some help? Pick from Schwab’s “select list” of 168 no-transaction-fee mutual funds, a roster that includes many solid performers with reasonable expense ratios.
The firm offers the most commission-free exchange-traded funds as well: 231. Many of these ETFs have wafer-thin expense ratios, enabling investors to build a low-cost portfolio without paying a penny in trading commissions. And for clients with at least $25,000, Schwab offers tailored portfolios of ETFs, with an annual advisory fee of 0.28% (capped at $900 per quarter for high-value accounts).
Evaluate E*Trade for Yourself »
All brokers we surveyed let customers trade stocks and deposit checks from their mobile devices. But there’s a lot of variance among them in how much more business can be transacted by app.
If you want to do it all from the palm of your hand, E*Trade is for you. Packed with handy features, E*Trade’s app lets you buy or sell stocks, mutual funds and options, as well as run screens, deposit checks and pay bills. Stock research is also available, something most brokers exclude from their apps.
E*Trade also scores high for its substantial roster of no-fee funds (3,887). For ETFs, it emphasizes higher-fee ETFs in niche investment areas, such as Global X S&P 500 Catholic Values (symbol CATH) and WisdomTree Managed Futures Strategy (WDTI).
Evaluate TD Ameritrade for Yourself »
TD Ameritrade ranks high for its research offerings and ample lineup of no-transaction-fee (NTF) mutual funds and ETFs, many of which can be purchased without trading commissions. Customers can find plenty of investing ideas, thanks to access to Credit Suisse’s U.S. stock "focus list."
It’s also easy to find (in the physical world): The firm is expanding its branch network from about 100 locations to more than 400, now that it's purchased Scottrade.
Evaluate Vanguard for Yourself »
There’s a lot to love about Vanguard’s fund offerings and low-cost approach to investing, but it’s harder to say good things about its usefulness as an online broker, particulary if you lean to trading stocks. Commissions and fees can get pricey. You also won’t find user-friendly tools to trade like real-time streaming quotes.
But customers can load up on all Vanguard mutual funds and ETFs without having to pay sales charges — a good deal if you invest mainly in the low-cost index funds that are Vanguard’s bread and butter.
If you’d like some guidance with your investments, Vanguard is eager to help. Vanguard customers can get into a managed account with a $50,000 minimum investment. Annual fees are 0.30%, no matter what investing strategy you choose. These accounts hold Vanguard ETFs and the Admiral share class of its mutual funds, which charge some of the lowest expense ratios in the industry.
Evaluate Ally for Yourself »
Here’s the story: Ally Financial, which got its start as an online-only bank, bought the Trade King platform in 2016.
The brightest spot in its rankings? Commissions. Ally’s base rate of $4.95 lands it on the leader board for stock trades, and the firm trims that rate to $3.95 for clients who make at least 30 trades a quarter. Ally also charges a relatively low $9.95 to buy or sell mutual funds. Those fees are much less than what the completion charges. But Ally doesn’t offer any no-transaction-fee mutual funds or ETFs—a big drawback that could cost you quite a bit in fees if you buy and sell a lot of funds. “No-fee funds are something we’re starting to look at,” says Rich Hagen, president of Ally Invest.
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