So, you’ve decided that you want to enter the weird and wonderful world of stocks and shares?
That’s great! Now you need to find an online stock broker that meets your investment goals.
The good news is that there are now heaps of online stock brokers that allow you to trade at the click of a button – some of which charge very little if any, fees.
Before you get started, be sure to read our comprehensive guide on the best online stock brokers of 2020.
We’ve covered everything you need to know – such as how to get started, fees, payment methods, and more!
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Our Recommended Stock Broker - 0% Fees
- 0% Commission on Stocks
- Trade Stocks, Forex, Crypto and more
- Only $200 Minimum Deposit
Best Stock Brokers 2020 – Best Brokers Compared
Who are the best stock brokers in 2020 and who wins the stock broker comparison?
The table below provides an overview of all the best stock brokers online, showing both the pros and cons of each one.
What we like
- Supports PayPal deposits
- Many assets to trade
- User-friendly app
- European License
Minimum Account Size
Charge per trade
- Variable Spreads
- Credit cards
- Bank transfer
Trading CFDs carries considerable risk of capital loss. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.4% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
What we like
- Paypal available
- Licensed broker
- Real crypto tokens
- User-friendly mobile app
- Has own wallet
Minimum Account Size
Charge per trade
- Wire transfer
- Credit cards
- Bank transfer
eToro is a multi-asset platform offering equity and cryptocurrency investments and CFD trading. CFDs are complex financial instruments. Because of the leverage they carry a high risk of losing money quickly. 75% of private investor accounts lose money when trading CFDs with this provider. Please note that you should be informed in advance about the risks of CFD trading as high losses can not be ruled out. Cryptocurrencies are unregulated and their prices can vary widely. Therefore, cryptocurrencies are not suitable for all investors. The trading of cryptocurrencies is not subject to any supervision by the EU regulatory authorities. Your capital is exposed to risks. Past performance is not indicative of future results.
What is a Stock Broker? Stockbroker Definition
When newbies think of a stock broker, they often imagine a Wall Street trader wearing a pin-stripe suit, buying and selling paper stocks at the top of their voice.
However, think again. Traders invest in the stock market through an online platform that allows you to buy and sell shares at the click of a button.
The role of the broker is to essentially match you up with other buyers and sellers. In return, they’ll charge a commission, which is otherwise known as a trading fee.
The reason that you need to use a stock broker to invest in a company is that they have the legal means to facilitate the buying and selling of stocks on your behalf.
They perform everything from executing trades for clients, distributing dividends, and even processing deposits and withdrawals.
When it comes to paying for your trades, an online stock broker will accept a number of everyday payment methods. At the very least this will include a debit or credit card, and sometimes an e-wallet like PayPal. While some brokers will charge you a few to deposit and withdraw money, others don’t.
In terms of pricing, stock brokers will offer two prices on all of the stocks they list. This is the ‘Bid Price’ and the ‘Ask Price’. In layman terms, the bid price is the price you get if you are selling your stocks, and the ask price is the buying price. The difference between the two is known as the spread – which is essentially a fee charged by the broker.
How do online stock brokers work?
✔️ When you find an online stock broker that you like, you will initially need to open an account. You’ll need to provide some personal information, such as your name, address, date of birth and social security number. Moreover, as per financial regulations, you will also need to provide some ID (such as a passport or driver’s license).
✔️ Once you are all set up, you’ll need to head over to the stock market section, and search for the company that you want to buy shares in. Next, you then need to decide how much you want to invest. Don’t worry about buying a fixed number of shares, as online stock brokers allow you to buy fractional shares equal to the amount you want to invest.
✔️ As soon as you place your trade, you will then be the proud owner of your chosen stocks. At this point, you don’t need to do anything until you decide to sell the shares, which you’ll do via your online stock broker account. In the meantime, any dividends that your stocks pay will be paid straight into your stock broker account.
How do Stock Broker Fees Work?
💵 It is important to remember that in the vast majority of cases, you will need to pay fees when you use an online stock broker. The reason that we say the vast majority is that the exception to the rule is US-based Robinhood – which is essentially a zero-commission stock broker.
💵 When you do pay fees, this can come in a number of different ways. Usually, you will pay a fixed trading fee every time you buy or sell a stock. Cheaper stock brokers such as Ally Invest charge just $4.95 in this respect.
💵 Alternatively, other low fee stock brokers like Stash Invest will simply charge a monthly fee for using its platform, which amounts to just $1. This is more beneficial if you plan to trade frequently, rather than paying a fixed fee for every trade you make.
💵 An additional way that you might be charge is via the spread. For example, while no commission stock brokers will not charge a fixed or monthly fee to trade, they instead make their money on the difference between the ‘Bid’ and ‘Ask’ price.
What Types of Stock Broker Accounts are There?
If you’re just a regular trader that is looking to use your own savings to trade, then you’ll simply need a traditional cash account. This means that you can only buy and invest stocks with the money you have in your stock broker account.
A margin account is where an online stock broker allows you to trade with more cash than you have in your balance. As you are effectively borrowing the funds from the stock broker, you will need to pay a small amount of interest on a margin account.
If you’re interested in buying and selling options, then you will likely need a specialist options account with your chosen stock broker. This is because options trading is considered a higher risk in comparison to simply buying traditional stocks.
Some stock brokers will allow you to open an IRA account. This is only relevant if you are looking to invest for your future retirement fund. In doing this through an IRA account, you will be accustomed to a number of tax benefits.
Factors to consider when choosing an online stock broker
- Account minimum – Most brokers today have no required minimum starting balance, which is great for new traders and those with restrained budgets. However, some accounts require from 500 dollars up to 10000 dollars as starting balance. This can help you take options down from your stock broker list.
- Fees or commissions – Before starting out, ensure you are aware of all the fees that your platform charges, and the percentage commission they take upon buying or selling. Some platforms may not charge fees but that does not mean everything is free.
- Availability of stock analysis tools – Does the stock broker provide stock analysis tools? Are they free? – some brokers offer the analysis tools for free, others at a fee and some have limited resources for analysis. If you have other analysis tools, you may choose a broker with less if you like their other features.
- Customer service and support – the ability to contact customer service is an important factor trader needs to consider when choosing an online broker. if overlooked, it can prove to be very frustrating later on when you are in need of assistance.
Stock broker reviews
Best Stock Brokers for Beginners
If you’re a newbie investor, then we would suggest using one of the following online stock brokers, most of which also offer investing apps to facilitate your trading experience.
Best UK Stock Brokers for 2020 - UK Stock Broker List
If you're based in the UK, the following stock brokers provide the best platform, fees and customer service for stock trading. After all, investing in the stock market is considered to be one of the 15 best ways to make money.
Most of the recommended platforms are also considered valid for forex trading if you are interested in expanding your trading portfolio.
How We Rank Online Stock Brokers
If you've read our guide up to this point, then you'll know just how competitive the online stock broker arena has become.
On the one hand, this is great for you as the consumer, as you have heaps of platforms to choose from. On the other hand, it can be really difficult to know which platform to pick! That's why we decided to independently test and review all of the brokers that we recommend.
To make the best stock broker comparison, there are a few factors to consider. Here's how we ranked them:
What to Look for When Choosing a Stock Broker?
✔️ Fees: You need to assess how the stock broker charges its fees. They might impose a fixed fee every time you trade, a monthly or annual fee, or they might charge you in the form of the spread.
✔️ Reputation: Ideally, you want to be choosing a broker that is highly established, and with an excellent reputation in the public domain. You should also check to see what regulatory licenses the broker in question holds.
✔️ Security: Always choose a broker with excellent security safeguards. This should include enhanced login controls like two-factor authentication (2FA).
✔️ Number of Shares: You will want to choose a broker that offers a huge list of stocks and shares. Not only should this cover the US markets, but, if possible, foreign markets too. As an added bonus, the broker will also list ETFs, mutual funds, options, futures, cryptocurrencies, and indices.
✔️ Payment Methods: Try to choose a broker that offers a number of different payment options. This should cover debit/credit cards, bank transfers, and e-wallets like PayPal or Skrill.
What to Avoid When Choosing a Stock Broker?
❌ Hidden Fees: Always avoid an online broker that is not transparent on its fees. You might find that while the stock broker claims to offer 'Zero Commission Trades', you might end up paying huge fees via the spread.
❌ Unregulated Broker: Under no circumstances at all should you ever open an account with an unregulated stock broker. Ultimately, if anything went wrong, you could end up losing your entire balance.
❌ High Withdrawal Fees: It is all good and well when online stock brokers offer zero-fee deposits, but what about when it comes to withdrawing your funds back out? Avoid brokers that charge really high withdrawal fees.
❌ Poor Customer Service: There might come a time where you need to contact customer support. Whatever the issue might be, never choose a broker that offers poor support. In fact, you should try to use a broker that offers 24/7 support across both live chat and telephone.
Stock Broker Apps
If you are a very active trader and want to trade on the go, we would strongly recommend a stock trading app. There are a plethora of stock broker apps in the market today both for U.S. and UK traders, including the Robinhood trading app.
For a full list of our recommended apps and tips to choosing a reliable platform, be sure to read our guide to the top 5 stock trading apps for 2020.
Stock Broker Education
If what you're looking for is to become a stock broker yourself, there are plenty of stock broker training programs and courses you can take.
Typically, you will need a high school diploma and a bachelor's degree in finance or business administration to become a stock broker.
A finance degree will prepare you to work as a stock broker by learning the foundations of economics, financial forecasting, and planning. Typically, degrees will last between 3 and 4 years, depending on your country of residence.
Although a major part of your stock broker education will come from studying, most of your learning will be achieved through brokerage experience. Employers tend to hire stock brokers with at least 1-3 years of experience. You can get started with your stock broker job by applying for a free stock broker internship which will allow you to gain knowledge and learn the ropes.
For more information on this topic, we recommend giving the following articles a read:
Choosing the best stock broker can be a hard task to handle especially in this technology era where you are spoilt for choice.
It is important that you consider several factors including the fees and commissions, analysis tools, minimum amounts required to open an account, and your investment style. Ensure that the broker is legitimate, especially if the fee is too good to be true.
Remember, your first broker won’t necessarily be your broker for all your life, but if you choose the right one, you may have a chance to make money as an investor.
What is an investment broker?
An investment broker, or simply stock broker, in an individual or company that allows you to access the stock markets. Effectively, they will buy and sell stocks on your behalf, subsequently charging a fee in the process.
Must I make my investment through a broker?
Yes. If you want to invest in stocks, you will need to use a broker. The only exception to the rule is institutional investors, who are able to trade without a third party on the OTC (over-the-counter) markets.
Can I use a different stockbroker from the one I have been using?
Yes, you can open accounts with as many stockbrokers as you want.
Are brokerage firms regulated?
Yes, they are, in the U.S, brokerage firms are regulated by the SEC (Securities and Exchange Commission), state government, and a Self-Regulatory Organization (SRO) such as FINRA, National Association of Securities Dealers (NASD) and New York Stock Exchange (NYSE). In the UK, the Financial Conduct Authority (FCA) regulates the stock market.
What happens if my stockbroker goes bankrupt?
Brokerage firms are required to segregate investor’s money from the firm’s assets. In most cases, your money should be safe. The Securities Investor Protection Corp (SIPC) protects cash and securities including bonds and stocks held at troubled firms. However, there are limits of coverage per customer. SIPC can only cover the replacement of stocks and other securities up to $500,000 including $250,000 in cash claims.
What if I need to quickly cash my stock investments out?
You can sell your investments at any time, as long as it is during standard market hours. Once you do, you will then need to withdraw the money out of your stock broker account. The amount of time it takes to receive the cash will depend on the stock broker in question, as well as the type of payment method you used.
Can my investment broker direct my funds at international markets?
The modern-day online stock broker will make it just as easy to invest in international markets as it is buying shares domestically.