Safest Online Brokers

Are online brokerage firms safe? U.S. most secure, reliable, safest brokerage houses for investments, stock trading and IRA accounts.

What Happens if Brokerage Goes Bankrupt

So, you've decided that you are ready to invest your money and make them work for you. But then questions arise: Can I trust online brokers with my money? What happens if brokerage goes bankrupt? What is the safest brokerage firm?

After 2008 collapse of Lehman Brothers, Bear Sterns and, later, MF Global, these are all very legitimate questions. After all, all those companies appeared very solid, seemed to be run by the most educated and highest paid finance wizards in really expensive suits. Yet, they are all gone. Could this happen to your brokerage firm?

Well, the great news is that most brokerage firms are fully insured. Similarly to FDIC insurance that protects customer bank accounts in case of bank bankruptcy for up to $200,000 per account, there is an equivalent federally mandated, non-profit, member-funded, United States corporation, called SIPC, that regulates online brokerage industry. It protects brokerage accounts for up to $500,000 of the customer's net equity balance, including up to $250,000 in cash. All you need to do when choosing brokerage firm, is to check if the company is a member of SIPC (all reputable brokerage companies list this information at the bottom of their website homepage).

Of course, if you decide to buy a stock or any other investment, and the value of that investment goes down, or a company which stock you bought becomes bankrupt, SIPC insurance will not cover your losses. SIPC will only step in and help customers when brokerage firm goes bankrupt.

List of Safe Online Brokers

Below is the list of reliable, safe online brokerage houses. All of them are U.S. government regulated. All are also members of SIPC and FINRA, and customer accounts are insured by SIPC: Ally Invest, TD Ameritrade, Capital One Investing, Charles Schwab, Etrade, Fidelity, Firstrade, Interactive Brokers, Merrill Edge, Motif Investing, Muriel Siebert, Scottrade, TIAA, Tradestation, USAA brokerage, Wealthfront, WellsTrade, and Vanguard. You could see our ratings and read reviews of these companies here.

Brokerages and Economic Crisis of 2008

Another very comforting fact is that while a lot of banks failed during the crisis of 2008 (though most customers got their money back), none of the big brokerage firms (don't mistake them with investment banks) have failed. The reason for this is that online brokers make money not from investing their clients money, like investment banks do, but from charging commission when clients make investments, such as buying stocks, ETFs, mutual funds, etc. They also make money by offering various banking services - credit cards, saving and checking accounts, CDS, and mortgages (learn more in How TD Ameritrade makes money article). Therefore, unlike investment banks, they don't have risky investments that could sink them when economy goes down.

Most Reliable Brokerage Firms

Below we are listing safe brokerage firms that we recommend to all investors:

-  TD Ameritrade (review). Everybody have heard about this firm: it's one of the largest, most reliable and safest online brokerage companies in the U.S. and it is very well run. The total client assets at the firm are over $1.3 trillion and the firm has over 11 million funded customer accounts.

TD Ameritrade offers stock/ETF commissions at $0 per trade. It is a good choice for a brokerage if you want the best trading platform or top selection of independent, third party investment research. The firm always offers an enticing promotional offer to attract new clients. Read full review of TD Ameritrade.

TD Ameritrade Promotion

Open TD Ameritrade Account

-  Ally Invest (review) charges $0 per trade and has the best pricing among large brokerage houses. The firm in merged with two other discount brokers - Zecco and MB Trading - and as a result became one of the largest brokerage house in the U.S. If you are new to investing, want the lowest pricing, or looking for the help of the online investor community, then definitely check out this company. Read full review of Ally Invest.

Ally Invest Promotion

Open Ally Invest Account