Frequently asked questions about online brokers
Which brokerage account is best for me?
That depends on your goals. If you’re looking for an online broker through which to invest your savings for the long-term, you may want to prioritize a broker with good financial planning tools, or one that offers retirement accounts.
If you’re looking to do a lot of day trading, you may want to consider order execution quality in choosing the best brokerage account for you — some brokers use the payment for order flow (PFOF) business model, which can result in trades being executed slower or at worse prices than non-PFOF brokerages.
Or, if you’re just looking for an all-around good broker, you may just want to compare them according to more basic factors like trading costs and investment selection.
How much money do I need to start?
Not much. Note that many of the online brokers above have no account minimums for both taxable brokerage accounts and IRAs. Once you open an account, all it takes to get started is enough money to cover the cost of a single share of a stock and the trading commission, if charged. Keep in mind that many online brokers now allow you to purchase fractional shares, or a slice of a stock rather than the full share. That will allow you to get into the market with even smaller amounts of money.
Need more guidance? Read our article on how to buy stocks for step-by-step instructions on placing that first trade.
Should I just choose the cheapest online broker?
Trading costs definitely matter to active and high-volume traders, but many brokers offer commission-free trades of stocks and ETFs. A few online brokers have also eliminated fees for options contracts. Other factors — access to a range of investments, the quality of the research — may be more valuable than saving a few bucks when you purchase shares. You might also want to consider platforms — we have a separate list of brokers with the best trading platforms.
How can I diversify with little money?
One easy way is to invest in exchange-traded funds. ETFs are essentially mutual funds that are bought and sold just like individual stocks on a stock market exchange. Like mutual funds, each ETF contains a basket of stocks (sometimes hundreds) that adhere to particular criteria (e.g., shares of companies that are part of a stock market index like the S&P 500). Unlike mutual funds, which can have high investment minimums, investors can purchase as little as one share of an ETF at a time. All of the online brokers on our list offer ETFs.
Is my money insured at brokerage firms?
Your money is indeed insured, but only against the unlikely event a brokerage firm or investment company goes under. A broker’s SIPC coverage (Securities Investor Protection Corporation) doesn’t cover any loss in value of your investments.
What type of online brokerage account should I choose?
Your account choices boil down to a taxable brokerage account versus tax-favored retirement account, such as an IRA. Our guide to brokerage accounts goes into more detail about what’s involved in setting up a taxable account. Opening an IRA involves choosing which type, such as a Roth IRA, traditional IRA or SEP IRA. If you’re new to this, we’ve got you covered in our guide to IRAs.
How quickly can I start trading at these online brokers?
After you’ve opened the account, you’ll need to initiate a deposit or funds transfer to the brokerage firm, which typically takes just a few days — though certain circumstances may mean it takes longer. For example, if you’re transferring in investments from another brokerage account rather than cash, that may extend the timeframe.
How do I choose the best brokerage account for me?
Some key criteria to consider when evaluating any investment company are how much money you have, what type of assets you intend to buy, your trading style and technical needs, how frequently you plan to transact and how much service you need. Our post about how to choose a broker for you can help you sort through the features brokerage firms offer and rank your priorities.
