12 Best Brokerage Accounts for Beginners In 2022

Written by Paul Esajian

Key Takeaways

The online stock broker is one of the best innovations that the internet has brought to the investment world. Online stock brokers are great for new investors because they’re low-cost and typically come with plenty of educational resources. The only problem is that there are so many different online stock brokers available. How do you know which one is right for you?

Here’s a quick list of the best brokerage accounts for beginners. This guide will help you find an online stock broker that’s best equipped to help you accomplish your investment goals.

What is a Stock Broker?

A stock broker is a financial professional who buys and sells securities (stocks, bonds, mutual funds, etc.) on behalf of clients. A stock broker is a middleman that handles transactions for the investor.

A stock broker usually works for a brokerage firm and will handle transactions for various clients. Clients may include individual investors or institutions, like businesses or organizations. They’ll typically earn commission on each transaction that they handle.

Why do you need a stock broker, anyway?

Although you can purchase securities directly from a public company, it’s much easier to purchase from a stock broker. Furthermore, a stock broker provides added security for both the company and the investor. Stock brokers make sure that the company you’re buying from is legitimate. They’ll also make sure that an investor doesn’t have a fraudulent identity or criminal background (i.e., organized crime or terrorism).

Pro Tip: The term “stock broker” often refers to an entire brokerage firm.

Discount Brokerage vs. Full-Service Brokerage

There are two types of stock brokers: a full-service brokerage and a discount brokerage.

A full-service broker will buy and sell securities for an investor, but they’ll also provide a variety of other financial services. These services may include:

Investment advice: The stock broker advises the investor on which securities to buy or avoid.
Portfolio management: The stock broker helps the investor build a diverse portfolio to build wealth and mitigate risk.
Performance analysis: The stock broker analyzes the performance of the investor’s securities and makes recommendations on how to improve them.
Tax planning: The stock broker helps the investor maximize his or her tax savings.
Wealth management: The stock broker helps the investor manage his or her assets.

In the past, only wealthier investors had access to stock brokers, but the internet has made brokerage services more accessible than ever. Most online stock brokers are discount brokers.

A discount broker is a broker who buys and sells securities for an investor but for a discounted commission. Discount brokers do not offer any investment advice or financial services for an investor, and that’s why their commission fees are lower.

Most discount brokerages are facilitated through online trading platforms. You won’t interact with a live broker, and the software may even handle transactions for you. Discount brokerages execute orders for clients, and that may be a challenge for new investors who are still learning the ins and outs of the trade.

However, the line between full-service brokers and discount brokers are becoming increasingly blurred. Many online brokers are technically discount brokers, but they may offer plenty of educational resources and tools that can help new investors pick the right securities and diversify their portfolios.

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Best brokerage accounts for beginners

What Do You Need for a Brokerage Account?

To open up a brokerage account, you’ll need to collect some personal information:

Your name
Social security number
Telephone number
Email address
Date of birth
Driver’s license or passport information
Employment status/occupation
Annual income
Net worth

There are also some decisions you may need to make when you open up your account:

Authorization:

You may be able to authorize somebody else (a spouse, for instance) to make decisions for your account—you may need to provide written legal authorization.
Risk tolerance:

Some online brokers may have you state your financial goals and investment risk tolerance. Financial goals may include, “capital preservation,” “income,” “growth,” or “retirement.” Risk tolerance refers to how aggressively you’re willing to invest, whether it’s putting more money into a single stock or investing in risky stocks.
Cash management:

You may have cash in your broker account that hasn’t yet been invested—like money that you’ve earned from interest or dividends. You may be given options on what to do with that cash. Most online brokers allow you to transfer the cash to a bank account, reinvest the money into mutual funds, or leave it alone.

Lastly, you should budget for some of the fees that may be charged by online brokers:

Commissions
Account maintenance fees
Inactivity fees (some brokers charge a fee if you haven’t made a transaction in a while)
Account closing fees
Wire/transfer fees (some brokers charge a small percentage when you transfer money to an external bank account)

Many of the best brokerage accounts for beginners in this guide have very low fees and commissions, and so they’re optimal for beginning investors.

Types of Brokerage Accounts

Most brokerage firms offer at least two types of brokerage accounts: a cash account and a margin account.

With a cash account, you’ll pay the full amount for whichever securities you purchase.

With a margin account, you can borrow funds from your brokerage to purchase a security. That could be extremely helpful if you have a brief window to purchase a security (for instance, there’s a sudden surge in price on a stock you’ve been eyeing), but you don’t have the money in your account to make the purchase.

However, the brokerage firm uses your securities as collateral for the money it lends you. So while a margin account grants you more purchasing power, it’s also riskier. Don’t borrow more than what you’re able to pay back.

Is My Money Safe In An Online Brokerage Account?

Money in an online brokerage account is protected up to a certain amount by the Securities Investor Protection Corporation (SPIC) if the brokerage firm fails. The SPIC, created in 1970, is somewhat similar to the Federal Deposit Insurance Corporation (FDIC) that protects deposits held in FDIC-insured banks.

Customers of SPIC-member brokerages are covered up to $500,000 for accounts at one brokerage, with a maximum of $250,000 for uninvested money. What this means is, if your brokerage is an SPIC member, you would be offered some protections if that brokerage went out of business. The SPIC does not, however, cover money lost while investing.

How To Withdraw Money From A Stock Broker

The process of withdrawing money from a stock broker is relatively simple. First, you will need to look at the amount of uninvested cash you have and sell off any investments to ensure you have the amount you want to transfer. Then, you can initiate a transfer from the brokerage to your bank account. This process usually takes a few days, so it’s best to plan ahead and initiate the process a few days before you want the money.

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Best online brokerage for beginners

12 Best Online Stock Brokers for Beginners

Here are the 12 best brokerage accounts for beginners:

Robinhood
TD Ameritrade
E*Trade
Fidelity
Charles Schwab
Merrill Edge
Interactive Brokers
SoFi Active Investing
Vanguard
Firstrade
Ally Invest
Webull

What makes these stock brokers suitable for beginning investors?

All of the following online brokers have $0 minimum account balances (meaning that you don’t need to put money into them when you open your account), and they also charge no commission for stock trades or exchange-traded funds (ETFs).

In addition to being low-cost, these online brokers have educational resources or intuitive trading platforms that are optimized for new investors.

1. Robinhood

Let’s talk about Robinhood first because it’s one of the newest and trendiest online stock brokers.

Robinhood could be a good option for new investors because it’s got an easy-to-use platform that’s not too overwhelming for first-timers, although experienced investors may find it overly simplistic.

Although, the app is constantly updating to meet the needs of investors of all skill levels. Long-time users will know that the app is continuously gaining new features, such as extended day trading hours.

Robinhood Pros

Robinhood employs a mobile app and web platform that has a good selection of basic features, like watch lists, stock charts, and price alerts.
You’ll have a good interest rate on the uninvested cash in your brokerage account.
A recent update added advanced charts allowing users to better visualize data when making investing decisions.

Robinhood Cons

The mobile app and web platform may not offer advanced features at this time.
There are not many research tools available for finding profitable securities.

2. TD Ameritrade

TD Ameritrade is one of the largest online brokers, and it’s made a sustained effort to sign up new investors (hence it’s large social media presence). TD Ameritrade has incorporated many features that will help new investors succeed, while still offering a plethora of investment options for seasoned investors.

TD Ameritrade Pros

TD Ameritrade offers a variety of educational tools for new investors, including learning pathways.
The mobile app has a great design.
New investors can try out the platform without cancellation fees.
TD Ameritrade produces hours of educational programming that can be viewed on the TD Ameritrade Network—a terrific resource for new investors.

TD Ameritrade Cons

Investors get a low interest rate for cash that’s sitting in their brokerage account.
TD Ameritrade isn’t a fully comprehensive platform and lacks some of the tools that experienced investors may need.

3. E*Trade

E*Trade has undoubtedly one of the easiest trading platforms to use, and so it’s a good online broker for beginning investors.

E*Trade Pros

E*Trade uses a variety of different platforms: it offers 3 computer-based platforms and 2 mobile-based platforms. Each platform is optimized for a different kind of investor, and they’re all easy-to-use.
Each E*Trade app is equipped with a comprehensive selection of investment features.
The E*Trade apps allow investors to do paper trading (simulated stock trading), which is a great learning tool for beginning investors. It’s also a good way to test investment strategies.
If you have more money to spend, you can utilize E*Trade’s “Prebuilt Portfolios” option. This will automatically invest your money into several different mutual funds of ETFs so you can quickly build a diverse portfolio of securities.

E*Trade Cons

E*Trade doesn’t allow direct access to international markets.
You can’t consolidate your other financial accounts (which is a helpful thing to do when you’re trying to get a full picture of your net worth). Most beginning investors, however, probably won’t be preoccupied with net worth.

4. Fidelity

Fidelity is a very well-rounded broker that’s good for both beginning and advanced investors.

Fidelity Pros

Fidelity gives you access to a huge variety of research providers—companies that analyze stock and market performance. These resources may prove incredibly helpful if you plan on investing in stocks.
Fidelity offers a variety of index funds with virtually no expense ratios. This is optimal for those investors who want to save for retirement or who want to build a diverse investment portfolio.
The Fidelity platform is intuitive and easily customizable.
Fidelity has a range of educational resources and frequently hosts seminars and webinars.

Fidelity Cons

Fidelity has a solid trading platform, but the website can be difficult to navigate.
Fees for broker-assisted trades (trades you request over the phone when you don’t have internet access) can be very high.

5. Charles Schwab

Charles Schwab is another well-rounded online broker that’s designed for both beginning and advanced investors.

Charles Schwab Pros

Charles Schwab has a big selection of mutual funds with no expense ratios, so it’s optimal for those investors who are planning for retirement or seeking a diverse portfolio.
Charles Schwab offers a large array of research providers. Research is also integrated with Google Assistant (so you can ask your Google smart speaker to give you information about securities you’re curious about—fun for the tech-savvy investor).
The trading platform is customizable and nicely designed.

Charles Schwab Cons

Any cash that’s sitting in your brokerage account will earn a doozy interest rate. You could always opt for your cash to be swept into the Schwab Value Advantage Money Fund, which pays far better interest. It’s just not the default option.

6. Merrill Edge

Merrill Edge has plenty of helpful resources for new investors, especially if you have an account with Bank of America.

Merrill Edge Pros

Merrill Edge has fantastic customer service. You can go to almost any Bank of America branch in the United States and meet with a financial advisor face-to-face (they’ll help you more with financial planning than with investment advice). There’s also an online chat and 24/7 support line.
Merrill Edge has solid portfolio analysis tools that can help you create a stronger and more diverse portfolio.
The Merrill Edge trading platform is unique in that it has context-sensitive help pop-ups. That’s an important feature for new investors.

Merrill Edge Cons

There are high interest rates on money borrowed for margin accounts.
You can’t trade futures, futures options, or cryptocurrency.

7. Interactive Brokers

Interactive Brokers was primarily designed for active traders, but the online stock broker recently launched the IBKR Lite platform that’s geared toward beginning investors.

Interactive Brokers Pros

IBKR Lite has no inactivity fee or account maintenance fees.
There are great research tools on all Interactive Brokers platforms.
There’s a massive selection of investment options, including over 4,000 mutual funds with no expense ratios.
IBKR Lite has very low commission fees.
There are low interest rates on money borrowed in margin accounts.
Interactive Brokers offers a robo-advising service.

Interactive Brokers Cons

The platforms are fine, but the Interactive Brokers website isn’t the most intuitive.
The pro platform has inactivity fees.
There aren’t as many features for new investors—no “hand-holding” features that’ll help you grasp the investment tools at your disposal.

Best stock broker for beginners

8. SoFi Active Investing

SoFi offers a slew of financial products, but it’s their SoFi Active Investing platform that’s specially optimized for young investors (emphasis on “young” investors and not “beginning” investors).

SoFi Active Investing Pros

In addition to low fees, you can also get free financial counseling with your account.
SoFi has plenty of online resources and research tools that can help you gain proficiency in the investment world and find optimal securities.
SoFi Active Investing offers career coaching services and frequently hosts educational events.
This is a good platform for active trading, so long as you’re willing to do your own stock research.

SoFi Active Investing Cons

The big drawback to SoFi Active Investing is that it has a smaller selection of securities. There isn’t a very large selection of mutual funds, and that may be a turn-off for investors who are trying to save for retirement—especially older investors.

9. Vanguard

While SoFi Active Investing is optimal for day traders, Vanguard is a great online broker for long-term investors.

Vanguard Pros

Vanguard is well-known for its low-cost index funds and ETFs (in fact, company founder Jack Bogle is credited with inventing the index fund).
Vanguard’s mutual funds have low expense ratios—far less than the market average.
Mutual funds, index funds, and ETFs are great for retirement planning. To boot, Vanguard offers many retirement planning tools.
Vanguard has an automated portfolio management system.

Vanguard Cons

Mutual funds aside, the Vanguard platform is somewhat limited and doesn’t have many tools for active traders.
Many of the mutual funds offered by Vanguard have minimum contributions, which are often as high as $1,000 to $3,000. That’s common in the investment world, but it may nonetheless be too expensive for beginning investors. If you’re low on cash, you may need to save up money in advance before opening an account.

10. Firstrade

Firstrade is another online stock broker that’s good for those long-term investors who are planning for retirement. It has a nice set of features for both beginning and advanced investors.

Firstrade Pros

There are no commission fees for mutual funds, so it’s a great online broker for long-term investing.
Firstrade offers three different trading platforms (including a mobile app) that are easy to use and customizable.
There are great research tools you can utilize.
You can earn free stock for referring others to Firstrade. Contact your friends!

Firstrade Cons

While there are lots of features for retirement-oriented investors, there’s not a whole lot for those who want to do active trading.

11. Ally Invest

Ally Invest is an option geared towards beginners and more. The platform doesn’t charge trading commissions on select US securities trades, making it a viable option for those still figuring out the right portfolio balance.

Ally Invest Pros

Ally Invest does not have an account minimum making it a great beginner-friendly option.
No commission fees on eligible US stocks, ETFs and options.
Ally Invest is known for its strong website and user-friendly features.
This is another app with a number of research resources available for beginners.

Ally Invest Cons

The platform is entirely online, making it impossible to get in-person advice or support.
Users hoping to invest in mutual funds may be disappointed to learn these do have transaction fees through Ally Invest.

12. Webull

Webull is geared towards moderate to experienced investors who want an online-only experience when managing their portfolios. Webull features a number of asset types, including cryptocurrency.

Webull Pros

Webull has a desktop and mobile app that are generally easy to use.
There are advanced trading tools you may not find on other apps on this list
Webull is a low-cost trading platform, with a $0 account minimum.

Webull Cons

Unfortunately, Webull is not known for its educational resources and is often recommended for investors with at least some experience.
Webull does not have mutual funds among its possible investment options.

Picking The Best Online Brokerage Account

There’s no single broker that is perfect for everyone. We all have different financial goals, investing styles, and support needs. That’s why you’ll need to compare and contrast other elements provided by brokers and select the one that makes the most sense for you. Here are some factors to keep in mind:

Cost: As a beginner, you’ll likely be drawn to brokers who don’t charge commissions for stocks and ETF trades. As you get more advanced, you may find that your broker will charge fees and commissions on more complex trades and investments.

Account minimums: Some online brokers won’t charge anything to open an account, while others require a minimum between $5 and $500. Most beginners prefer brokers who don’t require a minimum to open an account.

Variety of funds: Great brokers will offer a variety of funds to choose from, such as individual stocks, exchange-traded funds, and mutual funds. Low-cost and no-fee funds are a great way to begin investing without a ton of market knowledge.

Special Features: Many brokers draw in customers through special features. You may find that certain perks are more attractive than others. For instance, you might be drawn to a broker that offers easy-to-understand news and research articles provided within the app or platform.

Support & Education: Last but not least, you’ll want as much support as you can as a beginner. Look for a broker who offers an ample amount of live customer support, plus educational resources.

Summary

A stock broker is a financial professional who buys and sells securities on your behalf. Online stock brokers handle your transactions at a discounted cost, so they’re suitable for beginning investors with less money to spend. The best brokerage accounts for beginners are those that feature educational tools, low account fees, and intuitive mobile platforms.

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