Don’t own any securities like stocks or bonds? Expect a much harder time saving for retirement — or building wealth at all.
Over time, stocks return around 10% per year on average. Left in cash, your money loses about 3% per year on average to inflation. The Stern Business School at New York University keeps a running record of what a $100 investment in 1928 would have grown to in each year thereafter if invested in stocks in the United States. By the end of 2019, it would have been worth $502,417 if invested in the S&P 500.
But if you’d left it in cash in a savings account, it would still be $100. Except $100 today is worth less than one-fourteenth its value in 1928.
Unfortunately, the Great Recession largely spooked younger adults away from stock investing. Before 2008, the majority of young adults under 35 owned stocks. But a 2018 Gallup poll found that only 37% of that group owned stocks 10 years later.
Whether you’re a student with under $1,000 to your name or a working adult who simply hasn’t taken the plunge to open a brokerage account and start investing, there’s no better time than the present to start catching up.
What Makes a Good Beginner Brokerage Account
Beginner investors don’t necessarily need every bell and whistle in a brokerage account. But they do need certain fundamentals met, and they should ideally open an account they can grow into as they build more wealth.
Start by looking at affordability. Ideally, choose a brokerage that charges no commissions on trades so you can buy and sell at your own pace with no penalties. Also, seek to avoid annual fees.
Beyond affordability, look for a broker that offers plenty of investment options. Some brokers let you buy stocks but not mutual funds or bonds. You want a full suite of investing opportunities at your disposal.
Also, review what types of accounts the broker offers. While you do want a taxable brokerage account for flexible investing, you also need an individual retirement account (IRA) or Roth IRA. You may also want other specialty accounts, like an education savings account (ESA) or health savings account (HSA).
As a beginning investor, you also want a simple interface. Learning how to invest in stocks and other securities is complicated enough without having to figure out a clunky online interface.
Finally, consider choosing a broker that offers an affordable but robust robo-advisor. Robo-advisors recommend broad, diversified investments specific to your goals, age, and risk tolerance. It makes for an easy way to start investing without any specialized knowledge or expertise. You simply fill out a questionnaire, they offer a recommended portfolio, and you set up automatic payments to it. Best of all, you don’t need to spend a lot of money on them — some of the best robo-advisors are free.
Best Brokers for Beginners
You get that you need an investment portfolio that includes stocks and possibly bonds. But where should you open an account?
Choose one of these brokers as an affordable, rounded option for beginning investors, and start building real wealth.
1. Charles Schwab
I use Charles Schwab as my primary broker. There’s very little to dislike about it.
Firstly, it pioneered the trend of eliminating commissions. Many other online brokers reluctantly followed suit, but Schwab was the first to stop charging clients a fee every time they bought or sold a security.
It offers every account type you could ask for, including IRAs, Roth IRAs, ESAs, and HSAs. Likewise, it offers every type of security as well.
I particularly like the robo-advisor, which is free if you invest at least $5,000. It utilizes Schwab’s own index funds, which come with extremely low expense ratios and provide broad exposure to the stock market at large.
If you prefer mutual funds, Schwab offers thousands of mutual funds with no commission or load fee.
Schwab’s online platform offers detailed research on stocks and funds, although it can be a little overwhelming for novice investors. But as a well-rounded brokerage, Schwab is hard to beat.
Following in Schwab’s footsteps, TD Ameritrade quickly cut commissions to $0 as well, making all trades free. It makes for a solid competitor to Schwab, with a similarly well-rounded platform.
Like Schwab, it offers many different account types, including IRAs and ESAs. And it allows you to trade all the same types of securities, including stocks, bonds, ETFs, mutual funds, options, and futures. Among mutual funds, it offers over 4,100 funds with no transaction fee.
New investors particularly appreciate TD Ameritrade’s customer service. It offers 24/7 support by phone, email, text message, and Facebook messenger. It even offers support via Twitter messaging and Amazon Alexa.
TD Ameritrade does offer a robo-advisor service, but it’s not particularly flexible, and the company charges an advisory fee of 0.3%. If automated investing through a robo-advisor interests you, consider free alternatives like Schwab, SoFi Invest, or Ally Invest when you start investing.
See our TD Ameritrade review for more details, and keep an eye on TD Ameritrade’s new-account sign-up promotions, which often offer substantial perks.
Known for starting the passive index fund investing trend, Vanguard remains an excellent brokerage for long-term buy-and-hold investors.
It charges no commissions and offers some of the best low-cost index funds in the industry. Beware that it does charge a $20 annual fee, although it waives the fee for investors who sign up for electronic statement delivery.
Vanguard lets you buy and sell most security types, including thousands of mutual funds with no transaction fee. And its reliable customer service puts new investors at ease.
Unfortunately, it falls short in several key areas. Not only does its investing philosophy revolve around holding investments for the long term, it doesn’t bother making its platform friendly for day trading and quick market moves. While that doesn’t pose much of a problem for new investors, who should ideally start with long-term investing, it does limit your future use of the account as you become more sophisticated and potentially start exploring more active trades.
The more considerable drawback for new investors revolves around Vanguard’s robo-advisor service. While it claims it will launch a lower-cost digital-only robo-advisor late in 2020, it currently only offers a human hybrid robo-advisor service — with a hefty $50,000 minimum investment. It charges 0.3% for the service, which is inexpensive even by hybrid robo-advisor standards. But many new investors don’t require the flexibility of a hybrid service and just want help automating their investments.
See our Vanguard brokerage review for more information.
4. Stash Invest
Stash differs from a traditional online stock broker in that the platform offers limited trading windows. However, as a hybrid micro-investing app, Stash specializes in working with beginners and aims to simplify stock investing for new investors by encouraging long-term investing and offers investment advice.
In some ways, they succeed. When you create an account, Stash asks you a series of questions about your goals and risk tolerance. They then recommend certain ETFs1 for you and note which you should consider foundational (with a larger portion of your asset allocation) and which you should invest lesser amounts in as supportive investments. It’s similar to a robo-advisor in its recommendations, but there’s no automation — you buy and manage the investments yourself.
Within a single screen, Stash shows you their recommended ETFs, a quick synopsis of why they recommend this portfolio, a visualization bar marking the risk level, the expense ratios of each ETF, and the ticker symbols and last price.
Stash offers over 1,800 ETFs and stocks — nothing to write home about, but not bad either, especially considering they allow fractional share investing2.
In addition to a brokerage account, Stash offers a bank account3 complete with debit card, retirement account4 options, and even custodial account (UGMA/UTMA)5 options for minors. As a nice feature, Stash offers automated savings known as Auto-Stash6 from your linked checking account to your brokerage account by rounding up your purchases and transferring the difference for you.
Stash does not impose a minimum opening account balance2.
Stash charges between $1 and $9 per month7, and their ETFs charge higher-than-average expense ratios. The sign-up process could be smoother as well, especially given that Stash’s target market is beginners. Stash also falls short on investment options, offering only stocks and ETFs, with no mutual funds, bonds, or other securities.
Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.
1 Before investing in any exchange-traded fund, consider your investment objectives, risks, charges, and expenses.
2 For Securities priced over $1,000, purchase of fractional shares starts at $0.05.
3 Debit Account Services provided by and Stash Visa Debit Card issued by Green Dot Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Investment products and services provided by Stash Investments LLC, not Green Dot Bank, and are Not FDIC Insured, Not Bank Guaranteed, and May Lose Value. In order for a user to be eligible for a Stash debit account, they must also have opened a taxable brokerage account on Stash. Account opening of the debit account is subject to Green Dot Bank approval.
4 Stash does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. You should consult with a tax advisor.
5 The adult (or Custodian) who opens the account can manage the money and investments until the minor reaches the “age of majority.” That age is usually 18 or 21, depending on the Custodian’s state. The money in a custodial account is the property of the minor. Money in a custodial account can be used by the parent or legal guardian, but only to do things that benefit the child.
6 The recurring transfers feature is offered by Stash Investments LLC and is not sponsored or endorsed by Green Dot Bank.
7 You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the custodian.
The Money Crashers is a paid Affiliate/partner of Stash.
5. SoFi Invest
As a Silicon Valley disruptor, SoFi Invest does business a little differently — both for better and worse.
On the plus side, it charges no commissions or annual fees and even offers free career counseling. It’s particularly advantageous that SoFi Invest offers its robo-advisor service for free with a minimum investment of only $100. It also includes access to human investment advisors with the robo-advisory, typically a costly premium feature.
When it comes to tradable securities, it earns mixed marks. On the plus side, it allows investors to buy fractional stock shares, which is uncommon. That means it lets you purchase portions of shares if the price of a single share is more than you can afford. Intriguingly, it also offers access to buy several cryptocurrencies directly from the brokerage rather than having to go through a potentially risky crypto exchange. Very few brokers offer that service currently.
But it doesn’t offer staple investments like bonds and mutual funds, which leaves it unfeasible for many investors.
6. Ally Invest
Ally Bank’s Ally Invest makes another worthy brokerage for beginning investors. It charges nothing in commissions, features robust stock research tools, and often offers a new-account sign-up bonus.
Its web-based platform is relatively easy to navigate and use without sacrificing features. In fact, Ally Invest shines as a trading platform, with foreign exchange (aka “forex”) and options trades allowed. Not that you should start there as a novice investor.
Ally also offers a free robo-advisor service, a far more useful feature for new investors.
It falls short on account types and doesn’t offer specialty accounts like ESAs and HSAs. Ally does offer IRAs, though.
The broker does charge transaction fees for mutual fund purchases, so if you like mutual funds, look elsewhere. Read our full Ally Invest review for more details.
While Robinhood has its limitations, it excels in several areas.
It offers commission-free stocks, ETFs, and options. But where Robinhood sets itself apart is in offering a wide range of cryptocurrencies, with more selection than rival SoFi Invest. I even opened a brokerage account with Robinhood specifically for cryptocurrency speculating.
But that’s where its securities end. It doesn’t offer mutual funds or bonds, taking them off the table for many investors.
Nor does Robinhood offer any other types of accounts beyond taxable brokerage accounts. No retirement or education accounts and no robo-advisor service.
Still, Robinhood does keep its web interface and mobile app extremely simple and clean, which many new investors appreciate.
See our Robinhood review for more details, and keep an eye out for Robinhood’s new-account sign-up bonus offers.
If you want to completely automate both your savings and your investments in one swoop, check out Acorns.
First, it creates a checking account for you and gives you a debit card. When you make purchases, it rounds up the cost to the next dollar and transfers the difference to your brokerage account or IRA. By automating your savings, it helps you boost your savings rate to set aside money faster.
Its robo-advisor steps in to invest that money automatically for you based on the investing strategy you select. While it doesn’t offer many options, those options are easy to understand and work for most investors.
Acorns does charge for their services, but not much, with prices ranging between $1 to $3 per month.
Keep in mind that Acorns does one thing well, and one thing only: automation. If you want any control over what you invest in, or you want an account other than a brokerage account or IRA, look elsewhere.
Similar to Acorns and Stash, Qapital is best known for its savings automation, which it does winningly.
Qapital allows you to set up a wide range of savings triggers to move money automatically from your checking account to your brokerage account. In fact, they offer more flexibility in this regard than Acorns. You get to customize these rules as you see fit when you set up your account.
In addition, the app allows you to create savings goals and split your paycheck toward those goals. At more expensive levels, you also get access to their “Spending Sweet Spot” (a budget assistant) and their “Money Missions” feature with financial challenges created by behavioral economists.
Also similar to Stash, Qapital operates on a robo-advisor model. You choose one of a handful of asset allocations, and they invest your money in it automatically. You don’t pick and choose individual investments.
Qapital charges between $3 and $12 per month, significantly higher than their competitor Acorns. To use their brokerage and robo-advisor service, you need at least their middle-tier account, costing $6 per month. While not an outrageous amount, it adds up to a lot for investors with relatively small balances — which, to be honest, is their target market.
Qapital also offers no phone support, which comes as a disappointment for beginner investors.
A mobile-only app, Public.com lets you pick and choose your investments rather than following the robo-advisor-only model. They don’t require a minimum opening deposit, and they offer a simple setup process — both nice boons for new investors.
The mobile brokerage allows investing in fractional shares, which investors with less cash to invest can appreciate. As its most unique feature, Public lets users share their portfolios with their friends as a social angle to investing. In fact, every user’s profile is made public under their (usually anonymous) username. You simply share that profile handle with anyone you wish.
As novel as that is, it doesn’t make up for Public’s more conventional shortcomings. They don’t offer retirement account account options, nor do they allow you to invest in anything other than stocks and ETFs — no mutual funds, bonds, options, or futures.
Anyone who enjoys desktop access will also be disappointed, as Public operates only as a mobile app.
11. M1 Finance
Like Acorns, M1 Finance is more robo-advisor than traditional stockbroker. But it still offers some neat features.
M1 Finance combines a free checking account with a robo-advisor account, where you can set up automated transfers. It gives you more control over your investments than Acorns does, letting you choose individual stocks as part of your portfolio if you like. You can even buy fractional shares as part of your portfolio.
Alternatively, you can pick among 80-plus model portfolios designed by financial advisors. You choose the portfolio template you like, and it invests your money to mimic it. M1 Finance classifies many of these portfolios as “socially conscious” if you want to put your money where your mouth is.
But don’t expect spectacular customer service. And while it does offer an IRA option, it doesn’t offer many other specialty account types.
For more details, read our M1 Finance review and check M1’s current promotions.
Billed as a robo-advisor built specifically for women, Ellevest does some things well but has some limitations. Their money membership also includes capabilities outside of just investing, including banking with access to a spend & save account and debit card*, 1:1 coaching sessions at a discount and learning resources.
Like M1 Finance and Acorns, Ellevest doesn’t offer a traditional brokerage where you invest manually. As a robo-advisor, it created your investment plan based on your goals and manages them over time based on your investor profile.
Ellevest does offer retirement accounts with certain membership plans, but not other account types. Its investing portfolios include both stocks and bonds.
In its marketing materials, the robo-advisor and money membership says it takes women’s unique financial needs into account with its financial recommendations. Members and non-members can also purchase 1:1 sessions with CFP’s and executive coaches to get more specific advice, and members receive 20-50% off the retail price.
In June 2020, Ellevest overhauled its fee structure to become much more competitive. They ditched the percentage advisory fee model in favor of a flat-fee monthly membership model, which includes more features for less money. In addition to its flagship robo-advisor service, Ellevest now also offers online banking*, the option for savings automation similar to Acorns through roundup**, no ATM fees***, and a wealth of online learning modules. Plans start at $1 per month.
The pricing shift isn’t all upside for clients though — Ellevest now charges by the hour for access to financial planners and executive coaches which was previously included in their Premium model for a higher percentage advisory fee with a minimum of $50,000. It no longer requires a minimum balance for any membership plan, however. Members do receive 20-50% off the retail prices of these sessions.
Note that Ellevest does allow men as clients, although it doesn’t offer any gender-specific features or advice for men, which removes the differentiator and selling point.
*Banking products and services are provided by Coastal Community Bank, Member FDIC, pursuant to license by Mastercard International.
**If you opt into the Roundup Program for debit card purchases, each settled (i.e. fully completed) purchase transaction made with your Ellevest Debit Card will be rounded up to the nearest whole U.S. dollar. The Roundup amount will be transferred from your Spend account to your Save account. Foreign purchases are rounded up to the nearest whole dollar after the purchase is converted to U.S. dollars. ATM withdrawals and transactions in whole US dollars, e.g. $20.00 are excluded from the Roundup program. If, at the time of settlement of a purchase, your Ellevest Spend Account has insufficient available funds to cover the full amount of the Roundup transfer, the Roundup Transfer will not be made.
If a purchase is canceled or reversed for any reason (including disputes), the corresponding Roundup Transfer will not be reversed. You can opt out of the Roundup Program at any time.
***Domestic ATM transaction fees will be reimbursed if a payroll direct deposit has been received within the prior 30 days of the ATM transaction settlement. International ATM withdrawal fee of $5 will apply.
If you’re new to stock investing, start with a robo-advisor.
You have several strong free and low-cost options to choose from and can start investing with little knowledge or skill. The automation leaves you free to invest your free time elsewhere rather than learning how to pick stocks or set an ideal asset allocation.
Consider starting with an IRA or Roth IRA if you don’t currently have a retirement plan. Might as well save some money on taxes while you’re saving money.
The younger you start investing, the more you can lean on compounding to do the heavy lifting for you. To reach a million dollars in 10 years, it takes $5,467 invested per month at an 8% return. To reach a million dollars in 40 years, it takes only $287 per month — a dollar difference of roughly 20 times to account for a time difference of only 4 times.
Start investing now. Enjoy real wealth later.
What’s holding you back from investing? What concerns do you have about opening a brokerage account and investing in stocks?