Best Discount Brokers


Best discount brokerages in 2017. 3 top rated discount online brokers for low cost stock trading. Best discount stock brokers accounts for self directed investors.



Ally Invest rating

Ally Invest


Ally Invest Commissions


Ally Invest's charge on stock and exchange traded funds (ETFs) is just $4.95 per trade. But what makes the firm even more special is $9.95 rate on all no load mutual fund transactions. To see all fees and commissions charged by the Ally Invest follow this link.

Ally Invest Advantages

  • Very low commissions
  • No minimums, or maintenance or hidden fees
  • Free real-time quotes
  • Top-rated customer service
  • Best online investor community
  • Fee-free IRAs
  • Free DRIPs (dividend reinvestment plans)
  • Low cost professional portfolio management

Ally Invest Disadvantages

  • Additional $0.01 per share on the entire order for stocks priced at less than $2
  • Short after-hours trading: 4:00 pm - 5:00 pm EST, instead of 4:00 pm - 8:00 pm EST
  • No NTF funds

Best Discount Broker Review


Ally Invest has been one of our top ranked discount brokerage firms for the last six years. In 2017 we rated it one of the Top Brokerage Firms for individual investors. Ally Invest's investment commissions remained consistently low through its ten year history: the company charges just $4.95 for stocks and ETFs, and rock bottom $9.95 for no-load mutual funds. Ally Invest received lots of awards from financial magazines: Barron's magazine named it "Best for Option Traders" and among the "Best for Long-Term Investing." In Smart Money magazine's annual broker survey, it was the best discount brokerage firm in Customer Service.

One major disadvantage Ally Invest has compared to competition is absence of NTF mutual funds. The broker is not the best choice for investors that want to trade stocks priced under $2.00, or trade during after hours.

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Get $3.95 stock trades if you make 30+ trades per quarter or have 100K account balance.


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TD Ameritrade rating

TD Ameritrade


TD Ameritrade Commissions


For anyone who wants to invest exclusively with a brand name brokerage house, TD Ameritrade is the best discount brokerage firm. It charges $6.95 on stock and ETF trades and has over 100 commission-free ETF's.

TD Ameritrade Advantages

  • Very few fees and no surcharges on stocks under $1, large orders, or after-hours trading
  • Large and well-known company with 126 local branches
  • Two excellent trading platforms available to all clients: Thinkorswim and Trade Architect
  • Users can practice trading without risking real money using PaperMoney virtual trading
  • Easy access to myTRADE online trader community
  • No account maintenance or inactivity fees
  • Free streaming quotes, including Level II
  • Best selection of independent, third-party research from 13 firms (Standard & Poor's, Morningstar, Jaywalk, TheStreet, etc.)
  • 296 ETFs with no commissions
  • Large number of mutual funds - around 13,000 available; 4,051 NTF (no-transaction fee) funds
  • Free DRIP (dividend reinvestment plan)
  • No-fee IRA accounts

TD Ameritrade Disadvantages

  • $49.99 commission on transaction-fee mutual funds is high
  • High margin rates

Best Discount Broker Review


TD Ameritrade has been one of the top choices for customers looking to open an investment account at one of the oldest and largest discount brokerage firms in the country.

TD Ameritrade is the most popular out of the three top discount brokers among mutual funds investors. And it is easy to see why: it offers thousands of mutual funds from all major mutual fund families, over 2,000 no transaction fee (free to buy or sell) funds. There are no account inactivity or maintenance fees at the company for both IRA and taxable accounts.

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Trade free for 60 days + get up to $600.


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Overview of Traditional Brokers and Discount Firms

On-line discount brokerages were created to offer services that traditional brokerage houses don’t provide. In addition to more competitive commission schedules, best discount brokers today offer other nice features that most old school brokers don’t furnish.

Discount Brokers Commissions and Fees

The primary reason on-line discount brokers were established was to capture a consumer desire for lower brokerage fees. Sure enough, they succeeded. Today, discount brokers continue to push prices down even further. Ally Invest's stock and ETF commission is just $4.95. With no annual account fee, the broker is very inexpensive.

Other top discount brokers have low commissions as well. Today, there are many discount brokerage firms that have no account fees, no balance requirements, and low trading costs.

Most traditional firms have minimum balance requirements and an annual fee, sometimes on top of an asset-based management fee. For example, Raymond James, a traditional brokerage house, charges $50 per year for accounts below $100,000. The broker also charges $10 for stock and ETF trades and up to 2.25% annually for its portfolio management.

Self-Directed Accounts

One of the major advantages of choosing one of the best online discount brokers is the ability to make trading decisions in your account. Traditional broker-dealers usually make all investment decisions for their clients. If you’re confident enough in your own financial acumen, it makes reasonable sense to open a securities account with a discount broker and manage your own investment portfolio. Doing so can save a lot of money over the long term, and most brokers who offer self-directed accounts provide plenty of resources to help you along the way.

Many discount brokers today who offer self-directed accounts also provide investment advice and portfolio management. For example, TD Ameritrade offers both account types. Its management services cost between 75 and 125 basis points annually with a $25,000 account minimum. These numbers are lower than what most traditional brokers require.

Robo-Advisory Services

Recent advances in technology have produced a new type of investment management in the brokerage world: the robo-account. A computer program makes all trading decisions, with very little human oversight. While most traditional brokerage houses do not offer this service, many low-cost firms do offer it today. Discount firms that offer the new style of portfolio management include Schwab, WellsTrade, Fidelity, Betterment, Wealthfront, and TD Ameritrade.

The primary advantage of the robo model over traditional management is cost savings. The annual asset-based fee is typically around 0.30%, although Schwab has managed to provide its service for free. The highest fee on our list is Betterment’s Premium plan. It costs 40 basis points and includes unlimited phone calls with licensed human advisors.

The new robo model presents a major challenge to traditional management due to its ultra-low cost. Old-school brokers will have to justify their higher fees or risk losing clients.

Educational Materials

Because traditional brokerage houses take care of most financial decisions, they have no need to provide their customers with large amounts of educational materials to help them learn more about securities and trading. Top discount brokers, on the other hand, have a reason to publish these materials. If their clients are going to manage their own accounts, they need the necessary financial understanding to make investment decisions.

Schwab is an example of a low-cost on-line broker that provides many learning materials on its website. There are articles and videos that explain many financial topics. These include retirement planning, stocks, bonds, options, saving for education, and much more. There is also information on estate planning. With these extensive tools, it is possible to manage your own financial life instead of hiring a more expensive traditional broker.

Technology

Because traditional brokers take on the burden of managing their clients’ financial accounts, they have no reason to provide their clients with advanced technology or other trading tools. Discount firms, on the other hand, usually provide a suite of tools to help investors make better financial decisions.

For example, TD Ameritrade provides robust screeners on its website that can search for bonds, stocks, ETF’s, and mutual funds. These tools can perform searches based on a wide variety of criteria, such as P/E ratio, manager tenure, and Morningstar ratings.

TD Ameritrade also provides an advanced desktop platform where more knowledgeable traders can buy and sell securities with very sophisticated charting and research tools. The broker also offers a mobile app where stocks and ETF’s can be traded. Charting is also available on the TD Ameritrade mobile platform, and the broker also has a platform for Apple Watch, something that most traditional brokers don’t offer.

Banking Features

Cash management tools are now commonly offered at many best discount brokerage houses. Traditional firms have been slower to provide these services, and when they do, they are usually more expensive than discount firms.

For example, banking features at Merrill Lynch Wealth Management cost $125 per year. The annual fee can be waived by maintaining at least a quarter of a million dollars in Merrill Lynch financial accounts. The cash account’s balance is protected by SIPC, not the FDIC. The broker-dealer waives all ATM fees incurred at Bank of America cash machines.

Fidelity, by comparison, offers a cash management account with no fees and no minimum balance requirement. The company also reimburses all ATM fees incurred nationwide with its Visa debit card. Fidelity provides a cash-sweep program utilizing up to five participating banks, which creates FDIC insurance up to $1,250,000.

Best Discount Brokerage Firms Recap

Traditional brokerage firms provide competitive services for retirement savers and other investors who have large balances, but lack the time or skill to manage their money. Not everyone falls into this category, and America’s top online discount brokerage firms often provide a better value for many different types of investors.


Updated on 9/25/2017.



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