7 Best Online Brokers for Investors

1. Fidelity

• OVERALL: Total Commissions: Invest. choices: Tools: Research: Ease of use: Mobile: Advisory:
  

  BEST FOR: Managing cash

Fidelity offers the best overall mix of investment products, retirement-planning tools and services. Fidelity’s commissions aren’t the lowest, especially if you want a mutual fund for which you must pay a transaction fee. But its prices are close enough in other areas to be competitive with lower-cost brokers. Furthermore, Fidelity wins points for its full range of retirement and advisory services, along with top-notch investing tools and customer service.

If your priority is investing in mutual funds, you’ll do well with Fidelity. It offers more than 3,700 no-transaction-fee, no-load funds, almost all of which have minimum investment levels under $50,000.

Fidelity also shines for helping clients manage their cash. Customers can pay bills and track spending on all of their external accounts. Plus, sign up for a Visa Rewards card and you'll get 2% back on all purchases, cash that goes right into your brokerage or savings account (so you'll invest it, right?).

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2. Merrill Edge

• OVERALL: Costs: Invest. choices: Tools: Research: Ease of use: Mobile: Advisory:
  

  BEST FOR: Active stock traders

If you like to trade stocks, Merrill is your best bet. It’s the runway winner in this category, charging $6.95 per stock trade, the lowest flat rate per transaction. Investors with a bank account at Bank of America, Merrill’s parent company, may qualify for up to 100 free trades per month, depending on their combined balances. Merrill also charges the lowest rate, $19.95, to buy or sell mutual funds outside its no-transaction-fee fund network.

Merrill is also a standout for research on which stocks to buy. Customers can see Bank of America Merrill Lynch stock reports on more than 1,400 companies, along with stock research from Morningstar and S&P Capital IQ. Merrill’s big economic reports and thematic pieces, such as a recent report on stock picks for an aging global population, are also available. And customers get access to Merrill’s lists of recommended stocks.

If you want bond research, though, you’ll have to look elsewhere. Ratings reports on individual companies aren’t accessible on Merrill’s site. By contrast, E*Trade, Schwab, Scottrade and TD Ameritrade furnish company reports from credit-ratings agency Moody’s.

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3. Charles Schwab

• OVERALL: Costs: Invest. choices: Tools: Research: Ease of use: Mobile: Advisory:
  

  BEST FOR: ETF investors

We gave both Merrill Edge and Charles Schwab four stars, but in the underlying scoring, Merrill ranked ahead by a whisker. Where Schwab stands out – both against Merrill and all other contenders – is its wide range of commission–free exchange-traded funds offerings. You can choose from 226, including funds from iShares, PowerShares, State Street and WisdomTree. No other broker has nearly as many commission-free ETFs; E*Trade (118), TD Ameritrade (101) and Fidelity (85) take the next three spots.

Schwab also offers help picking those funds; you need just $25,000 to get into a managed portfolio of mutual funds or ETFs – one of the lowest bars in the business. Schwab also offers robo ETF accounts, free of charge, with only a $5,000 minimum (see slide 9 to learn more about “robo” services).

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4. E*Trade

• OVERALL: Costs: Invest. choices: Tools: Research: Ease of use: Mobile: Advisory:
  

  BEST FOR: Investors on the go

All brokers we surveyed let customers trade and conduct other business on a mobile device. All except Vanguard let you log in with a fingerprint. And the apps can be handy for banking: Investors can pay bills, transfer funds and more.

E*Trade’s smartphone app scores best in this category. Along with standard trading and account tools, it’s the only one with a screening feature for stocks, funds and ETFs. The app also shows E*Trade’s “all star” roster of funds. And investors can scan a product barcode to pull up stock information (a feature TD provides, too).

Of course, smartphone apps can’t handle everything. None shows a detailed analysis of your portfolio or lets you trade bonds. Stock and fund research remains sparse on phone apps, too, although E*Trade and Merrill make some stock reports available.

Another example of how E*Trade justifies the E in its name decades after its launch: you can track social media sentiment – what bloggers have to say — on individual stocks.

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5. TD Ameritrade

• OVERALL: Costs: Invest. choices: Tools: Research: Ease of use: Mobile: Advisory:

TD Ameritrade offers a healthy range of no-fee mutual funds (3,587) and commission-free ETFs (101) to choose from. Helping you pick is TD’s handy fund screener, which lets you see how ETFs, mutual funds and closed-end funds with similar holdings stack up against one another. Another cutting-edge feature (that it shares with Fidelity) – you can use the site to see how a stock is trending on Twitter and similar social-media sites.

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6. Scottrade

• OVERALL: Costs: Invest. choices: Tools: Research: Ease of use: Mobile: Advisory:

If being able to visit a bricks-and-mortar location and interacting with a real, live human matters to you, consider Scottrade. With 495 offices, it scores well for availability, second only to Merrill (which gets to piggyback on the 2,000 Bank of America branches its corporate parent has nationwide).

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7. Vanguard

• OVERALL: Costs: Invest. choices: Tools: Research: Web site: Mobile: Advisory services:
  

  BEST FOR: Retirees

  At Kiplinger's, we’re big fans of many of Vanguard’s low-fee funds. But for those who want to invest in stocks, bonds and mutual funds outside the Vanguard family, the brokerage site it runs doesn’t measure up.

However, retirees are a group who can do right by Vanguard. Customers with at least $50,000 in assets can tap into the firm’s Personal Advisor Services, which lets you slide into a managed account that charges just 0.3% in annual fees. That low rate, coupled with Vanguard’s ultra-cheap index funds, is a great recipe for pocketing more money in the long run.

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Ranking the Brokers’ Computerized Advice

E*trade and Fidelity are now rolling out “robo” services, joining Schwab in selling managed ETF accounts that are automatically adjusted to maintain a steady asset mix. Which one is best?

On the surface, Schwab’s Intelligent Portfolios look unbeatable for one big reason: The firm doesn’t charge a management fee. Customers pay only the low fees of the underlying ETFs. But Schwab doesn’t let customers stay fully invested in stock and bond funds, requiring at least 6% in cash for aggressive investors—climbing to 29.4% for the most conservative portfolios. Held at Schwab Bank, that cash earns just 0.08% in interest, and it can weaken long-term returns.

E*Trade says cash in its new Adaptive Portfolios won’t top 1%. But all-in annual costs are 0.50% for ETF portfolios and 0.75% for accounts with both ETFs and mutual funds. Conversely, Betterment (one of the first robo advisers) charges a management fee of 0.25% a year for portfolios between $10,000 and $100,000 and 0.15% above that. Betterment holds only low-cost Vanguard and iShares ETFs, while E*Trade includes some pricier mutual funds and ETFs.

Fidelity was slated to launch its robo service, Fidelity Go, in July. The firm says all-in fees will be 0.35% to 0.39%, which would beat E*Trade’s. And Fidelity says Go portfolios will hold 0.5% in cash, much less than Schwab. That could give Fidelity portfolios a performance edge over the long term.

Ultimately, though, your results will depend on whether the robots do a better job of managing your money than a human.

2014 Rankings

1. Fidelity

2. Charles Schwab

3. Merrill Edge

4. E*Trade

5. TD Ameritrade

6. Scottrade

7. TradeStation

8. TradeKing

9. Firstrade

Kiplinger updates many of its best rankings regularly. Above is our 2014 ranking of best online brokers. Keep in mind that ranking methodologies can change from year to year based on what data was available at the time of publishing, changes to how the data was gathered, switches to new data providers and tweaks to the formulas used to narrow the pool of candidates.

TOOL: Compare Leading Online Brokers

2012 Rankings

1. E*Trade

2. Fidelity

3. Scottrade

4. TD Ameritrade

5. TradeStation

6. Firstrade

7. Charles Schwab

8. Merrill Edge

9. Just2Trade

10. ShareBuilder

Kiplinger updates many of its best rankings regularly. Above is our 2012 ranking of best online brokers. Keep in mind that ranking methodologies can change from year to year based on what data was available at the time of publishing, changes to how the data was gathered, switches to new data providers and tweaks to the formulas used to narrow the pool of candidates.

TOOL: Compare Leading Online Brokers