Best Brokers for Free Stock Trading
Long ago, buying and selling stocks meant calling a broker. The broker then called down to the floor of the New York Stock Exchange to give the order to a buyer. The buyer then waded through a sea of screaming traders to secure the shares you wanted. Big broker commissions compensated the people who put in the effort that went into executing trades.
Computers now do all that instantaneously. They have for years. Yet investors were still paying commissions on trades that didn’t cost anything to execute until fairly recently.
When Robinhood launched its free stock-trading app in 2013, the industry was forced to answer some tough questions about $10 commissions being charged on trades that cost only a fraction of a penny to execute. Now, the trail that Robinhood blazed is the norm, and platforms that were recently “discount brokers” are now mostly all free — and you have a lot of them to choose from.
Read on to get a look at the brokers that let you make your own stock trades without putting up any more money than that which you want to invest.
Jump to a section:
- Best Brokers for Free Stock Trading at a Glance
- Best Free Stock Trading Brokers Reviews
- Read the Fine Print: What To Look Out for With “Free” Stock Trading
- Other Stock Trading Fees To Keep In Mind
Here’s a quick breakdown of the top free stock trading apps, the type of free trading they are best for, and some other key details to consider.
|7 Best Brokers for Free Stock Trading|
|Robinhood||No trading fees on stocks, ETFs, options, and crypto||Relevant SEC & FINRA fees might apply|
|Interactive Brokers||No trading fees on stocks and ETFs||Free trading only available with the IBKR Lite product|
|Charles Schwab||No trading fees on stocks and ETFs||$0.65 per contract for options|
|E-Trade||No trading fees on stocks, options, and ETFs||$0.65 per contract for options, falls to $0.50 for customers with more than 30 contracts per quarter|
|Fidelity||No trading fees on stocks and ETFs||Zero expense ratio index funds available|
|Merrill Edge||No trading fees on stocks and ETFs||$0.65 pe-contract fee for $0 options trades|
|TD Ameritrade||No trading fees on stocks, options, and ETFs||Industry-leading trade execution|
If you want to trade stocks without paying a fee for the privilege, you have a number of options — just be careful while reviewing each to make sure you understand exactly what’s being offered.
Robinhood gets a lot of credit for pioneering the path towards free trading, and it continues to offer completely commission-free stock trading without account minimums. Robinhood makes it easy for you to take part in the stock market. Simply download the app, sign up and start buying stocks with a single swipe. There are no account minimums and no fees, meaning it’s essentially free access for you. What’s more, the app allows you to trade a wide variety of assets aside from stocks — including cryptocurrency and options — as well as offering the chance to buy on margin. More recently, Robinhood enabled fractional-share investing, which means you can buy into thousands of companies with as little as a single dollar instead of having to save up for the cost of a full share.
That said, while Robinhood makes it cheap and easy for you to trade stocks, it doesn’t offer much in terms of educational resources or access to advisors.
Interactive Brokers also offers completely free stock trading if you opt for its IBKR Lite product. The Lite option is an alternative to its beefier IBKR Pro option, which is geared toward more advanced traders. You’ll avoid fees, but you earn less interest on your cash balances, you don’t get access to their Trader Workstation platform and you can’t make certain types of trades.
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On the whole, though, if you’re just a retail investor looking to avoid commissions, you probably won’t miss being able to replicate ETFs or make conditional trades. The website is clumsy and hard to navigate, but IB’s margin rates are best-in-class by far — as low as 0.75%.
Charles Schwab is one of the biggest names in the business. Users can trade stocks and ETFs with no commissions and options trading is $0.65 per contract. On top of that, free trading also applies to mutual funds, treasuries and real estate investment trusts (REITs). That’s almost everything you need for a balanced, diverse investment portfolio all in one place. Schwab’s brand, reach, and technology are all at the top of the industry. The mobile app is as functional as the full website and the platform stands out for its excellent free trading tools, ETF screeners, and educational resources.
E-Trade offers commission-free stock, ETF, and options trading to its customers. Options contracts cost $0.65 apiece, falling to $0.50 when you make more than 30 trades per quarter. Whether you’re looking to open a retirement account like an IRA or a basic brokerage account, E-Trade has a full suite of tools available to help you.
E-Trade also offers options for managed portfolios, including an automated investing program or a professionally managed portfolio. On top of that, for the more active traders, E-Trade touts powerful trading tools, including its Power E-Trade Platform.
Like Schwab, Fidelity is one of the biggest names in the investment world. The company has the resources, name recognition, and technology to stand out from the many other no-fee brokerages competing for your business. It does that by offering the prospect of truly free investing. Not only does it deliver the free trading of stocks, ETFs and most mutual funds, but it has an entire suite of zero expense ratio index funds. That means you avoid even the modest fees usually associated with ETF investing.
Fidelity also has impressive educational resources, including coaching sessions and webinars, and it’s recently upgraded its offerings to include fractional-share investing.
Bank of America makes online stock, ETF and options trading free through its Merrill Edge self-directed brokerage accounts. The standard $0.65 per-contract fee still applies for $0 options trades, but there are no annual fees and no balance minimums. It’s currently ranked as one of the top platforms for ESG-themed portfolios and Merrill’s technology, educational resources, and access to advisors have all been well-received by reviewers. BOA customers enjoy streamlined access to all their accounts, including Merrill, in a single place.
TD Ameritrade provides free trades, with no commissions on stocks, ETFs, or options. Options contracts are $0.65. The platform also opens the door to many other kinds of more exotic investment products beyond just stocks, ETFs and options. That includes crypto, forex, IPOs, annuities, mutual funds, bonds, and CDs.
You can get live help through the in-app chat feature, and TD Ameritrade has been heralded for the quality of its research tools and support technology.
The old adage about there being no free lunch is as true for stock brokerages as it is elsewhere. These companies waive commission fees, but that doesn’t mean they’re running nonprofits. That doesn’t necessarily mean they’re a bad choice, but you should always be clear on how these apps are making money off of your business.
In the case of brokers like Robinhood, E-Trade and TD Ameritrade that means “selling order flow,” a process that requires understanding some of the more arcane aspects of the stock market to fully comprehend. Any time you execute a trade, your broker has to find people selling that stock at that same time to fill your order. For smaller brokers, this means going to “market makers” — companies that specialize in scanning the thousands and thousands of orders coming in every second and matching sellers to buyers and vice versa.
Those market makers, meanwhile, can make money off of what’s known as the bid/ask spread — i.e., finding people selling for slightly less than the price you’re buying at to fill the order and then keeping the difference. It’s a form of what’s known as “arbitrage,” and it usually never translates to more than a penny a share. For companies that are handling orders for millions of shares a day, however, it can add up, so they’re willing to pay for the right to fill your order.
The practice is somewhat controversial. The companies that do it would be quick to point out that bid/ask spreads are rarely more than a penny, and if selling order flow means customers don’t pay per-trade commissions, they’re still probably saving money. Critics, though, point out that there’s a clear conflict of interest for the brokers, who will be tempted to sell to the company paying the most rather than the one most likely to get you the best price. What’s more, while brokers have to report how much they sell to the SEC, it’s a much more opaque process once the market makers take over — meaning it’s not entirely clear just what the ultimate cost is for you, the end-user.
It’s unlikely you’re ever paying more than an additional penny a share than you might elsewhere when your broker is selling order flow. If your trades often involve hundreds or thousands of shares, you might be better off paying a $5-per-trade commission at a broker that’s not selling off its order flow. However, for smaller investors, the money you save on commissions is likely making up for the marginal amount you’re missing out on per share.
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While paying no commission might mean totally free trading for many people, it’s always important to remember that it rarely extends to all types of trades. You might still have to pay a fee should you need any number of special services in executing it. Most brokerages will charge fees for doing things like making a trade via phone, for instance.
Likewise, you shouldn’t overlook expense ratios — the ongoing fees charged by ETFs and mutual funds. A $5 commission on a trade is one thing, but an extra half percentage point in fees on your funds can cost you tens, even hundreds of thousands of dollars over the next few decades. So, while avoiding fees during the process of purchasing is one thing, you also need to consider the long term.
It appears as though the penny has dropped, at long last, on trading fees and commissions. Investors looking for brokers that will minimize their costs now have more options than ever. But, keep in mind that there are many other ways your broker can provide you value, and if your only concern is on reducing fees you might end up missing out on services offered by another broker that could help you boost your bottom line. Take the time to explore all of your options to find the broker that’s right for you — and don’t forget that you can always find a place ready to let you trade for free.
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Joel Anderson contributed to the reporting for this article.
Last updated: May 24, 2021