Best Free Stock Trading Brokers of 2020

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Trading stocks used to be difficult for newer investors or people with smaller portfolios to make a profit. Any hopes of gains would evaporate when it was time to pay the transaction fees on purchases and sales. However, that’s all changed with the new trend of free stock trading sweeping the industry. Investors can now make commission-free stock trades through online brokerage firms. The best free trading platforms offer no commissions, no membership fees, helpful research resources and user-friendly websites and apps that cater to investors of all skill levels.

The 7 best free stock trading brokers of 2020

Best free stock trading brokers at a glance

ProviderMobile App RatingSelf-Directed, Robo or Advisor?Key Benefit
Robinhood3.75/5Self-directedCash not invested earns 0.30% APY
Charles Schwab4.6/5Self-directed and advisorWidest array of additional products
E*Trade4.1/5Self-directed, robo and advisorNo fees for mutual funds
Fidelity4.6/5Self-directed, robo and advisorMargin rates starting at 5.00%
Merrill Edge4.35/5Self-directed and advisorIntegrates with Bank of America banking
Interactive Brokers3.5/5RoboInvest in global stocks
TD Ameritrade4.0/5Self-directed, robo and advisorMultiple innovate account management tools

Best for beginners – Robinhood

Although Robinhood has made a name for itself in recent years, its lack of customer support and market insight make it more of a back-up option than first-choice investing platform.

Stock Trading Fee
$0
Online Trading Fee
N/A
Customer Satisfaction Score
N/A
SimpleScore
2.5 / 5.0
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SimpleScore Robinhood 2.5
Mobile App 3
Products 2
Resources 3
Support Channels 2
Customer Satisfaction N/A

Robinhood offers fee-free stock trades, fractional shares and informative resources for beginners as well as options for seasoned investors.

Robinhood offers several great benefits for beginner investors on its commission-free trading platform. One of the biggest standout features of Robinhood for beginners is fractional shares, a feature recently rolled out on the platform to all customers. This will allow smaller investors to get involved and not have to sacrifice diversification. On top of all this, your cash that’s in your account uninvested will earn 0.30% APY and comes with a debit card to access it.

However, Robinhood’s customer support is lacking — customers can only fill out a form online to reach out with issues. Its platform also experienced serious downtime in March 2020, causing many people to miss out on opportune stock trading for almost three days.

 

Best for buy-and-hold – Charles Schwab

High customer satisfaction and a bevy of investing products ranks Charles Schwab high in our review. However, high minimum deposits may keep beginners from starting with this firm.

 

Stock Trading Fee
$0
Online Trading Fee
N/A
Customer Satisfaction Score
4 circles
SimpleScore
4.4 / 5.0
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SimpleScore Charles Schwab 4.4
Mobile App 5
Products 5
Resources 5
Support Channels 3
Customer Satisfaction 4

Charles Schwab offers a limited number of fee-free trades on stocks and ETFs ideal for lower volume traders.

Investors looking for fee-free trades will be able to get them through Charles Schwab. However, there are some limitations. You will need to invest at least $100,000 into your trading account. This may limit a lot of investors from being able to take advantage of fee-free trading. Additionally, the program is limited to 500 equity or options trades good for the next two years. Compared to some of the other free trade brokers, this is rather limiting. But if you have the money to open the account and are planning on holding a lot of your equities for a while, it may work for you.

If you’re looking for a broker that offers additional services, though, Charles Schwab could be a good fit. The bank has a laundry list of additional services all the way from bank accounts to retirement accounts to managing trusts. Charles Schwab could be best for people looking for all of their banking needs in one location.

Best for active traders – E*Trade

Known for being a great platform for day traders, E*Trade makes it easy to stay updated on market news and research. Coupled with no account minimums, customers can get started easily.

Stock Trading Fee
$0
Option Trade Fee
$1.50 per contract
Customer Satisfaction Score
787/1,000
SimpleScore
4.2 / 5.0
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SimpleScore E*Trade 4.2
Mobile App 4
Products 5
Resources 4
Support Channels 4
Customer Satisfaction 4

E*Trade offers commission-free trades on stocks, mutual funds and ETFs with no caps on how many trades you can make.

Active traders looking for uncapped commission-free trades should check out E*Trade. The company has no limits on the number of trades you can make on stocks, ETFs and mutual funds. E*Trade’s expansive learning library not only has great articles for beginners, but the company also includes many resources for advanced training.

E*Trade offers all three forms of stock investing — self-directed, robo and dedicated advisors. Whatever level of involvement you want with your account, it can be achieved through the platform.

 

Best mobile app – Fidelity

Fidelity scores high due to its high customer satisfaction from J.D. Power and robust, easy-to-navigate mobile app. This brokerage account is highly recommended as a great platform to start investing.

Stock Trading Fee
$0
Option Trade Fee
$0.65 per contract
Customer Satisfaction Score
800/1,000
SimpleScore
4.6 / 5.0
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SimpleScore Fidelity 4.6
Mobile App 5
Products 4
Resources 5
Support Channels 5
Customer Satisfaction 4

Fidelity delivers investors a high-quality mobile app allowing for unlimited commission-free trades on stocks, ETFs and options.

Fidelity is a well-rounded option for investors looking to cash in on commission-free trades. The company offers self-directed, robo advisor and dedicated advisor support for whatever level of help you’re looking for. Fee-free trades are available on U.S. stocks, ETFs and options trades. Additionally, more seasoned investors looking to get into margins trading will see published rates as low as 5%.

The company’s app scored well in both the Apple store and the Google Play store with tons of glowing reviews. Investors looking to stay up with their trades on the go will like what Fidelity has put together on the mobile front.

 

Best for self-directed investors – Merrill Edge

Bank of America’s investing arm scores average in customer service, but its variety of products and low minimum deposit make up for its faults. If you’re already a Bank of America customer, this is a great place to start investing.

Stock Trading Fee
$0
Option Trade Fee
$0.65 per contract
Customer Satisfaction Score
3 / 5 circles
SimpleScore
4.2 / 5.0
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SimpleScore Merrill Edge 4.2
Mobile App 4
Products 5
Resources 5
Support Channels 4
Customer Satisfaction 3

Merrill Edge from Bank of America offers lucrative sign-up bonuses and unlimited free trades.

If you’re looking to open an investment account you’re in charge of, Merrill Edge is a viable candidate. What jumps out first is that the company is offering up to $600 in bonus funds for investors who open new self-directed brokerage accounts in May 2020. To get the full reward, you will need to invest $100,000.

Merrill Edge’s iOS app has one of the highest ratings in the industry, with the Android app not far behind. The bank-backed company offers self-directed investment accounts as well as Merrill’s Guided Investment program. Annual fees for advised accounts are 0.45% for guided accounts and 0.85% for managed accounts, but have $5,000 and $20,000 account minimums, respectively.

 

Best desktop platform – Interactive Brokers

Interactive Brokers’ desktop platform makes it easy to interpret the market and make self-directed investing decisions. Additionally, investors looking to expand their portfolio will find a variety of investment products at their fingertips here.

Stock Trading Fee
$0
Option Trade Fee
$0.65 per contract
Customer Satisfaction Score
NA
SimpleScore
4 / 5.0
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SimpleScore Interactive Brokers 4
Mobile App 3
Products 5
Resources 5
Support Channels 3
Customer Satisfaction N/A

Interactive Brokers offers robo advisor options with several different portfolios investors can choose from.

With your Interactive Brokers account, you have the option of investing in several pre-setup portfolios or answering questions and getting a more personalized portfolio. The majority of investment opportunities are managed automatically, which makes this a viable option for investors who want to be hands-off.

The desktop platform is quite intuitive but may feel a little overwhelming for a newer investor, however, investors looking to trade in more unique fields will enjoy the options at Interactive Brokers. These include futures, options, FOPs, forex, metals and global investments.

 

Best for resources – TD Ameritrade

A great mobile app, amazing customer service and multiple portfolio options make TD Ameritrade a great place to start — for both beginners and experienced investors alike.

Stock Trading Fee
$0
Option Trade Fee
$0.65 fee per contract
Customer Satisfaction Score
778/1,000
SimpleScore
4.4 / 5.0
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SimpleScore TD Ameritrade 4.4
Mobile App 4
Products 4
Resources 5
Support Channels 5
Customer Satisfaction 4

Customers can learn more about the world of investing with TD Ameritrade’s wealth of online resources.

TD Ameritrade is jam-packed with technological resources to help you take advantage of unlimited fee-free trades and other investment products. The company has extensive third-party research resources, the Bond Wizard, Market Java, alerts and watch lists and Market Edge. If you’re looking to invest somewhere that gives you some of the tools the pros use, TD Ameritrade should be on your radar.

Opening an account with TD Ameritrade is simple, and you have extensive customer support options available in case you have questions. The company can be reached through most traditional methods, as well as by direct message on Facebook and Twitter.

 

How to find the best free stock trading brokers

It’s not hard to find an offer from a broker that promises you free trades. But not all “commission-free” platforms are created equal. I dug into roughly a dozen of the most popular brokers out there.
Among these platforms, I investigated the following factors.

Free Trades that Last: It’s common practice in the broker biz to offer an initial discount to win new clients and then ratchet up the cost per trade after a few months. But what’s the point of buying a stock or an ETF for free today only to be charged a big-time commission to sell it tomorrow?

A Wide Menu of Commission-Free Options: It’s also increasingly common for brokers to tout commission-free ETF trades. For instance, Vanguard offers about 70 commission-free ETFs under its own brand to customers. But many of them are boring mainstream funds that skew toward large, US-based corporations — meaning any truly tactical trades won’t be covered in this limited universe of commission-free options.

No Sneaky Costs That Offset Savings: Brokers aren’t nonprofits, of course, so if they’re waiving fees, then they’re looking to make money in other ways. That means reading the fine print to see if there are other surcharges that could eat away at your savings in a similar way to conventional commissions. For instance, it’s also worth noting that Vanguard’s brokerage platform will tack on a $20 annual account maintenance fee if you’re a small-time investor with less than $10,000 invested in its branded mutual funds and ETFs.

How should I choose the right free stock trading broker?

Choosing the right free stock trading broker is a critical step in your investment journey, as you will most likely spend the next few years or longer investing through the platform. Some of the most important things to consider when making your decision include the quality of the desktop and mobile apps, the reliability of the customer service, any lucrative promotions and the overall trust you have in the provider.

Additionally, look for any added resources, helpful tools or research platforms that you may gain free access to as a client. While these things are not necessary to make a commission-free trading platform the right fit, it’s always smart to get the most bang for your buck.

[Read: How Can I Buy Stocks Online?]

How do I claim stock returns on my income taxes?

If you make money on your stock investments, you will be required to pay taxes on those gains. What you will pay and when you will pay will depend on several factors. For stocks that you hold for less than a year, you’ll pay your normal income-tax rate.

If you hold the stocks for longer than a year, you won’t owe income tax, but you will owe capital gains taxes. The percentage you owe on these gains will be from 0% to 20%, dependent on your taxable income.

For investors that own dividend-paying stocks, you’ll need to ensure you pay taxes on your dividend payments every year. You will receive a Form 1099-DIV each year from each company that you earn dividends from letting you know how much you need to report.

While paying taxes on income gains is never fun, many would agree it’s a good problem to have.

Stock Trading Fees to Keep in Mind

I’m a big believer in keeping down investing costs. And keeping your commissions in check isn’t the only way to guard against unwanted fees in your investment portfolio. A few other important expenses that can add up include:

Margin Interest: As mentioned in reviewing Robinhood above, the company makes its money by charging investors who trade “on margin” with borrowed money. The fee structure at Robinhood allows you to secure $1,000 of buying power for 30 days for a cost of $5. Doesn’t sound like a lot to you? Then consider it adds up to $60 a year if you don’t pay the $1,000 back quickly. You easily offset any savings from commission-free trading with that kind of cost structure, so be wary of trading on margin.

Fund Expenses: While brokers like Fidelity, Vanguard, and Charles Schwab may waive commissions on some funds, those investments aren’t 100% free. Every mutual fund or ETF carries an “expense ratio,” or an annual charge that is automatically deducted from your investment returns without you seeing it. Take two commission-free offerings from Charles Schwab: the U.S. Broad Market ETF (SCHB), with a super-low expense ratio of just 0.03%, and the John Hancock Multifactor Mid Cap ETF (JHMM), with a moderately high expense ratio of 1.11%. The first will cost you just $3 annually on every $10,000 invested while the other will cost you $110 in expenses. If you really want that second fund for the strategic advantage, that’s fine, but remember it needs to perform much better to offset the additional cost.

Taxes: The IRS taxes all investment profits as capital gains, but short-term investments are taxed at a significantly higher rate. For a married investor who files jointly and has a household income of $120,000 a year, they would pay a 15% tax rate on profits for stocks held more than a year. But if that investor buys and sells within a few months, they would pay a 25% tax rate. Or put another way, a $10,000 investment profit turns into $8,500 after a 15% tax if you held your stock for 366 days. If you hold for 365 days, that profit is just $7,500 after a 25% tax.

Going with either of these “free” brokers is a great start to keeping your expenses down. But remember that commissions aren’t your only cost center.

[Read: Best Online Stock Trading Brokers for 2020]

Even modest stock trading fees can add up

Of course, the irony of me harping on costs is that many investors are paying lower fees than ever before to invest in the market. Consider a Business Insider report that quotes one veteran broker who estimates an average trading commission was $45 in the 1980s, and it wasn’t uncommon to see larger orders cost an investor hundreds or even thousands of dollars.

If you’re paying $10 a trade, then it may seem like you’re way ahead of the game. But even a small amount of fees matters big-time, since any money you give your broker is cash that’s not accumulating bigger profits in the market.

Consider this math:

  • You have $1,000 to invest, and make five consecutive trades that net 30% returns each. With zero transaction fees and compounded returns, you finish with $3,713.
  • You have $1,000 to invest, and make five consecutive trades that also net 30% returns each, but this time you are charged a $10 commission to buy or sell. You instead finish with $3,531 – a nice gain, but around $200 less in total profits when you account for both the cost of commissions and lost profit on money paid to your broker.

On the surface, $10 doesn’t sound like a lot of money. But as you can see, over time even those seemingly modest costs can really add up.

We welcome your feedback on this article and would love to hear about your experience with the stock trading brokers we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Methodology

SimpleScore

The SimpleScore is a proprietary scoring metric we use to objectively compare products and services at The Simple Dollar.

For every review, our editorial team:

  • Identifies five measurable aspects to compare across each brand
  • Determines the rating criteria for each aspect score
  • Averages the five aspect scores to produce a single SimpleScore

Here’s a breakdown of the five aspect scores and their rating criteria for our review of the best stock trading platforms and brokerages of 2020.

 

Why do some brands have different SimpleScores on different pages?

To ensure the SimpleScore is as helpful and accurate as possible, we developed unique criteria for every category we compare at The Simple Dollar. Since most brands offer a variety of financial solutions, their products and services will score differently depending on what we’re scoring on a given page.

However, it’s also possible for brands to have multiple SimpleScores, as we measure each category individually with a separate set of criteria. For example, when we apply our methodology to Chase’s stock trading product, it scores a 3.6 out of 5. On the other hand, when we compare Chase checking accounts, it scores a 4.4 out of 5.

Questions about our methodology?

Email Hayley Armstrong at hayley@thesimpledollar.com.

Mobile app rating

We took an average of each stock brokerage’s iOS App Store and Google Play ratings and scored brands based on the result.

Additional products

Investing is not just about stocks. We rated brands based on their product variety including ETFs, bonds, mutual funds, IRAs and options. The more products means higher the score.

Resources

We rated brands based on how many educational and investing resources are available. This includes Morningstar reports, market trends, how-to guides and more.

Customer support

When you run into trouble with your stock investment account, how can you get in touch for support? We award brands with more channels of support with higher scores in this aspect.

Customer satisfaction

We leveraged J.D. Power’s 2020 U.S. Self-Directed Investor Satisfaction Study to rate each brand’s customer satisfaction. As always, a higher customer satisfaction rating means a higher SimpleScore.

Jason Lee

Contributing Writer

Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here

Reviewed by

  • Courtney Mihocik
    Courtney Mihocik
    Editor

    Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.