The stock market is a good place for investors to build wealth. In the past, retail and institutional investors worked with brokers. You would call and place a buy or sell order. The process was slow, tedious, and expensive. Broker commissions were often more than $20 depending on the number of shares bought or sold.
However, today, if you are a do-it-yourself (DIY) investor, you will need a stock trading platform for buying and selling stocks and possibly other assets. It doesn’t matter which type of investor.
Buy-and-hold investors and active traders need access to online trading platforms. There are many to choose from. However, the best stock trading platform is a matter of debate.
This article outlines how to pick the best stock trading platform, assuming you are a new investor. In addition, we examine the features you should consider. Lastly, we list several leading stock trading platforms to consider.
How Does the Stock Market Work?
As a new investor, you should first understand how stocks work. The basics are simple. Investors buy or sell stocks through a stock trading platform at an elementary level. They place buy or sell orders with their online broker.
In turn, the broker sends the order to a stock exchange, like the New York Stock Exchange (NYSE). The broker has other options, but most orders are executed on exchanges. The trade is usually executed quickly, especially for stocks with high volumes, e.g., Apple (APPLE). Once the trade is completed, the shares are delivered to or removed from your account.
How to Pick the Best Stock Trading Platform?
When picking the best stock trading platform, investors need to consider their needs compared to features. Not all stock trading platforms are the same. For instance, some full-service platforms offer the ability to buy and sell almost any type of security from multiple exchanges. On the other hand, more modest platforms may only offer stocks and exchange-traded funds (ETFs) from a limited subset of exchanges.
The first step in picking the best stock trading platform is determining your needs. Below are several questions to ask yourself.
- What type of investor are you? Are you a buy-and-hold investor, or are you an active trader?
- What kind of securities are you investing in? The main choices for beginner investors are stocks and ETFs. But do you plan on trading options or buying mutual funds. Do you need access to certificates of deposits (CDs), bonds, cryptocurrencies, and more?
- How much are you investing? Is it a few hundred dollars, thousands of dollars, or more?
Features to Consider
Once you ask yourself the above questions, it is time to consider the features found in stock trading platforms.
Commissions and Fees
Today, most trading platforms do not charge for online stock and ETF trades. The commission is often $0 for buying or selling most stock and ETFs. However, some online brokers charge a minimal fee per share or transaction.
A few new trading platforms operate more like a subscription service charging a small monthly fee or a fractional percentage of invested assets.
For instance, you would pay $2.50 on a trading platform with a 0.25% annual fee, assuming you have invested $1,000. In addition, a few platforms have an inactivity fee, meaning if you do not place a trade in a certain period, there is a fee.
Options and mutual funds may have commissions or fees depending on the platform. In addition, more complex or risky securities likely have fees.
If you are a beginner, selecting an online trading platform with no fees for stocks or ETFs is probably the best choice. However, one thing to remember is that if you are using broker-assisted trades, you will pay a much higher commission.
Security Classes
Some trading platforms only offer stocks or ETFs. If you are a beginner, these two choices may be enough. You can always change platforms later. Check to see how many ETFs are offered and their costs.
However, if you are a more advanced investor, you may want a trading platform offering stocks, ETFs, options, bonds, and CDs. An expert investor may desire access to commodities, foreign exchange, cryptocurrencies, and futures. The ability to trade in these types of securities often requires approval and carries more risk.
Account Minimums
Another important criterion to check is the account minimums. The most popular and best stock trading platforms do not have one. However, a few of the smaller ones do.
Trading Platform Differences
Next, look at the differences between trading platforms. Some of the best stock trading platforms allow users to access their accounts by a desktop web browser or mobile phone app. In addition, some platforms cater to a DIY investor while others use Robo-advisors and more automated processes.
An interesting way to evaluate differences between trading platforms is to open a paper trading account. Then, an investor can place simulated trades without risking their money.
Research and Screen Tools
The best stock trading platforms offer research and screening tools. The tools permit you to research individual stocks or ETFs. Investors can compare fundamental metrics like price-to-earnings (P/E) ratios and dividend yields.
They can also look at technical indicators. In addition, the best stock trading platforms provide the latest news feeds, access to Securities Exchange Commission (SEC) filings, quarterly and annual reports, and more.
Investors know that the ability to analyze and screen stocks, ETFs, or other asset classes is a critical function before placing a buy or sell trade.
Best Stock Trading Platforms for Beginners
There are plenty of choices for the best stock trading platforms for beginners. You are probably looking for no fees, no account minimum, access to stocks and ETFs, and room to grow if you are starting. Below we talk about the four largest and most popular ones that offer different features.
Fidelity Investments
Most investors may know of Fidelity, which was founded in1946. The privately held firm is one the most significant asset managers for retirement accounts. According to the website, the firm has approximately 40 million investors and more than $11 trillion assets under administration.
The firm is also known for its stock trading platform. Investors buying and selling stocks and ETFs online pay $0 for commissions. Other trading costs are low. Additionally, there is no account minimum. These two points alone make Fidelity a good choice for new investors.
In addition, Fidelity has a lot of educational material allowing beginners to learn about investing. Complementing the educational offerings are research and screener tools with charts, quotes, news, ideas, and more, making it one of the best stock trading platforms for beginners.
Fidelity’s trading platform has more capabilities and the ability to trade other asset classes making it a good choice for more advanced investors and traders. However, it currently does not offer cryptocurrencies or futures.
The Fidelity stock trading platform can be accessed from a desktop web browser or a mobile phone app.
Vanguard
Vanguard was founded in 1983 by John Bogle and is known for its passive index funds, which it pioneered. However, the firm offers a brokerage account with a relatively robust trading platform. It is not as well-known as offerings from other firms, but it can be a good stock trading platform if you are a buy-and-hold investor in stocks or ETFs.
Similar to other platforms, there are no commissions for stocks or ETFs. Additionally, there is no account minimum. Vanguard has the advantage of being an asset manager with many mutual funds that are transaction free. The firm also offers CDs, bonds, and options. Furthermore, Vanguard’s ETFs and mutual funds have extremely low expense ratios.
One con is that Vanguard has an annual service fee for smaller-sized accounts. In addition, Vanguard does not offer much research and screener tools compared to its competitors. However, the focus of this platform is long-term investing and not trading.
The Vanguard stock trading platform can be accessed from a desktop web browser or a mobile phone app.
TD Ameritrade
TD Ameritrade was one of the earliest discount brokerages. Today, the firm is one of the largest stock trading platforms and arguably one of the best. It offers many features and capabilities that other platforms don’t and combined with low costs; thus, TD
Ameritrade is on the best list of many stock trading platforms reviews. One crucial fact is that Charles Schwab acquired TD Ameritrade, but the latter still operates as a separate entity.
Like other platforms, stocks or ETF trades have no commission or fees. Additionally, there is no account minimum. TD Ameritrade offers a wide range of asset classes to buy and sell besides stocks and ETFs.
The list includes mutual funds, bonds, CDs, options, IPO shares, Forex, commodities, penny stocks, and Bitcoin futures. The ability to trade some of these securities requires approval for advanced traders.
TD Ameritrade is known for its wide range of educational options for investors. There are workshops, webcasts, courses, videos, magazines, and live events. Beginners trying to learn about investing or trading need to look no further. For more advanced traders, there are research and screener tools.
The TD Ameritrade stock trading platform can be accessed from a desktop web browser or a mobile phone app. In addition, there is a docking tool with a customizable dashboard for your desktop computer.
Robinhood
Robinhood is the newest stock trading platform on this list. The company was founded in 2013 and disrupted the fee structure for most brokerages and platforms. Robinhood launched its app in 2015 and introduced zero commissions, free trades, and no account minimums.
As a result, the platform became very popular with millennials. Reportedly, the platform has 22+ million accounts with an average age in the young 30s.
As mentioned above, Robinhood has no commissions and no account minimums. There are also no annual or inactivity fees. Besides stocks and ETFs, the platform offers options and cryptocurrencies.
The other advantage is Robinhood allows investors to buy fractional shares. This point comes in handy when buying stocks with a high price per share, e.g., Amazon (AMZN). The main advantage of this platform is the no-frills and straightforward approach.
Robinhood does not offer mutual funds, bonds, Forex, or futures. However, the choices are enough for most new investors, and more advanced traders will likely move to another platform.
There are few research and screener tools available. Though, users who pay for the premium Robinhood Gold service can view market data and access research reports from Morningstar.
The Robinhood stock trading platform can be accessed from a desktop web browser or a mobile phone app.