Best Online Brokers

Best online brokers for long-term investors

Among online brokers that offer a full range of financial services and are geared toward buy-and-hold investors, Fidelity is top-ranked most often. Kiplinger.com's 2011 review, for one, names Fidelity the top online broker, citing its range of investment options and access to international exchanges. The reviewer also writes that "Fidelity rules when it comes to stock research." SmartMoney magazine also ranks Fidelity number one in its 2010 rankings of 17 brokers. SmartMoney's survey names Fidelity the best broker in the area of trading tools, and one of the two best for banking services. Barron's 2010 review rates Fidelity the best online broker for long-term investors. Reviews routinely praise Fidelity's user-friendly website; Barron's writes that it is "a very deep offering with numerous portfolio analysis tools." The site offers other amenities, including tools for retirement planning, asset allocation and investment selection. Fidelity's customer service is rated among the best as well, and users give it great ratings at Epinions.com.

Like other online brokers, Fidelity has lowered its commissions. In 2010, the firm eliminated its tiered commission structure, and now charges $7.95 per online trade, with no account inactivity, handling or maintenance fees. Although a $2,500 minimum is required to open an account -- with a $250 minimum for additional investments -- customers are not penalized for dropping below that minimum. Trades can be made on the website or via Fidelity's downloadable trading platform, Active Trader Pro. Fidelity also offers before-hours and after-hours trading and free apps for the iPhone and iPod touch.

Charles Schwab is also ranked at or near the top in many 2010 and 2011 ratings of online brokers. Reviewers point to Schwab's wide range of investment products, in particular its large offering of no-load, no-transaction-fee funds. In 2010, the firm further simplified its commission structure and lowered costs. Investors now pay $8.95 per online equity trade, regardless of the balance in their accounts, how often they trade or how many shares they trade. There is still a required $1,000 minimum deposit to open an online brokerage account, which may be waived if you open a linked checking account or establish a minimum monthly direct deposit of at least $100. Investors who want advice from a professional may contact someone via the website free of charge or visit one of Charles Schwab's many branch locations in person.

Charles Schwab comes in a close second to Vanguard in the J.D. Power and Associates 2010 online broker satisfaction survey, "performing particularly well in interaction and information resources," according to the company's news release (see below). Kiplinger.com says Schwab offers "the broadest list of funds with no loads or transaction fees" of the 14 online brokers included in the magazine's 2011 review. SmartMoney magazine's 2010 broker survey names Charles Schwab best in the area of mutual funds and investment products and fourth best overall of 17 discount brokers, while Forbes.com names Schwab a Forbes Favorite. Meanwhile, Barron's praises the online broker's range of investment products and its trading platform, but notes that the website seems a little "dated."

The big news for online broker TD Ameritrade since its 2009 buyout of ThinkOrSwim is that the new platform "Thinkorswim from TD Ameritrade" is now available to all Ameritrade customers on the Ameritrade website. Barron's terms this move a big plus for TD Ameritrade, saying the firm and its customers will continue to benefit from ThinkOrSwim's sophisticated trading technology. TD Ameritrade has also moved up in Kiplinger.com's rankings; the site's 2011 review has Ameritrade tied with Fidelity for the number one spot. This review singles TD Ameritrade out for its range of investments, noting in particular that it "is now the clear leader for no-fee ETFs."

SmartMoney magazine ranks TD Ameritrade third overall out of 17 brokers surveyed in 2010, noting that it has moved up two spots since last year "with a big improvement in customer service." Commissions at TD Ameritrade are a flat $9.99, no matter how many shares are traded, and there is no minimum investment to start. On the down side, reviewers say its banking services are minimal, and its commissions and fees are still on the high side. Customers give it good ratings on Epinions.com, though most of the reviews there date back to 2008 and earlier.

Though it doesn't place at the top of any rankings for this year or last, E*Trade still gets high ratings from many experts as one of the best online brokers. Barron's singles it out for its "terrific mobile-trading applications" and notes its enhanced services, including tools for research, retirement planning and active trading.  However, Barron's 2010 review still ranks E*Trade 11 out of 22 brokers overall. SmartMoney magazine's 2010 online broker survey ranks E*Trade second, behind Fidelity, naming it one of the two best brokers for online banking services, and Kiplinger.com pronounces it "solid in all areas." The firm has improved its customer service ratings over the past year, but it does not earn top marks in the J.D. Power and Associates 2010 Self-Directed Investor Satisfaction Study. Stock and options trades are $9.99 unless you make more than 150 per quarter, and a minimum of $500 is required to open an account.

OptionsXpress gets good marks from reviewers for its research and education resources, a virtual trading tool that lets you simulate trades and see the results risk-free and its easy-to-use website. Barron's names it one of the best brokers for long-term investing, for options traders and for international traders, but faults it for its high costs. Kiplinger.com, on the other hand, rates OptionsXpress one of the two best online brokers in terms of overall costs. We suspect the difference is that Kiplinger.com considers all costs, not just commissions, and likes the fact that OptionsXpress has no "nuisance fees" -- charges for things like account inactivity or account maintenance. Stock trades are $9.95 for up to 1,000 shares; there are tiered commission structures for options and futures trading.

Other review sites give OptionsXpress generally high marks. SmartMoney magazine's 2010 survey rates it the worst broker for online banking services, but it praises the firm's mobile applications. Review site Stockbrokers.com ranks OptionsXpress fifth of 23 online brokers, giving it high marks for its website and mobile trading platform.

Mutual fund pioneer Vanguard ranks first in the J.D. Power and Associates 2010 Self-Directed Investor Satisfaction Study, and it does reasonably well in the customer satisfaction survey conducted by ConsumerReports.org in May 2009. However, most experts don't include Vanguard in their reviews because its online brokerage mainly supports its fund business. Vanguard is known for its proprietary mutual funds with low expense ratios, but the cost to trade individual stocks via its site is relatively high (*Est. $20) if you make more than 25 trades per year. Kiplinger.com does note that Vanguard has among the fewest hidden fees, however, and says that Vanguard's customer service is impressive. According to reviews, the Vanguard trading platform works best for fund investors who want to buy a few blue-chip stocks to supplement their Vanguard funds. Fees are $7 per trade for the first 25 trades in a calendar year, but those with substantial holdings in Vanguard's mutual funds qualify for reduced commissions or commission-free trading.