Best Brokers for Free Stock Trading

Alright — the economy is way more busted than we want it to be. Times are tough, but not everything is terrible – the stock market is doing great, oddly enough. 

The situation has drawn over a million out-of-work Americans to become traders in this fast-growing market so they can earn a buck (or many, many bucks). Consequently, after this huge influx of new investors, the stock market has reached even greater heights than before COVID-19.

This brings us to the question – do you like free stuff? Yeah, so do we. ✅

If you like investing, you will be delighted to hear that you can trade stocks, ETFs, and other assets with no commissions whatsoever – not even hidden fees that stab you in the back when you’re not looking.

Today’s investing landscape is full of zero-fee brokers that don’t charge commissions on most trades – they are the best way to minimize trading expenses and maximize gains. By the way, these are not some random companies – we’re talking about established top-tier brokers who are competing by driving prices down to zero.

To save you from the hassle of studying every brokerage in the country individually, we’ve made a list of our favorite 5 free brokers with all their pros and cons on display.

If you want a truly free broker and not a “free” one (like so many are), then let’s get to it and see if one of these is the perfect package for you.

1. Robinhood – Best for Beginners

If you ask any investor about free stocks, Robinhood is probably the first thing that will come to their mind. This is because Robinhood is the first free broker of this kind as well as one of the most popular stock trading platforms in the world.

The broker is so famous for one reason other than free stocks and ETFs and that’s its brilliant trading software. Often regarded the top stock trading apps around, Robinhood’s mobile platform is about as intuitive and user-friendly as it gets.

The same stands for the web platform, which has all the features traders need to trade stocks, ETFs, cryptos, and options. However, these 4 asset types are all you can trade using Robinhood. So, no futures, funds, or forex – this is a brokerage specialized for free, easy stock trading.

But how free and easy is the Robinhood trading experience really? Completely – there are zero hidden fees, even for options. What’s more, using the platform is seamless and all new investors also get one free stock as a sign-up gift. This stock can be up to $200 in value but 98% of the time it’s somewhere between $2.5 and $10 so don’t get too excited.

Unfortunately, the only way to reach customer service is by email and Twitter, which is inconvenient – but everything else is there if you’re looking for a broker that’s free and super-accessible. Check out our full Robinhood review if you’re a DIY investor who likes trading to be quick and uncomplicated.

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2. SoFi Invest – Best Robo-Advisor

Making self-directed investing as easy as possible is great, but you can even go one step further. SoFi Invest offers a free stock trading platform but also one of the top robo-advisors – a completely automated investing experience. 

This service is called a robo-advisor because it uses a trading algorithm to build and manage your portfolio which is under the supervision of SoFi’s experts. This means you can have your money managed and invested for you – you need only deposit the money, and check in from time to time to see how things are going. 

If you opt for the self-directed route, trading US stocks and ETFs is completely free but they are your only options – SoFi doesn’t offer other investment types. On the upside, there are no withdrawal and inactivity fees, and you don’t need a minimum deposit to get started.

The trading platform is clean, easy-to-use, and has all the basic features. The platform lacks customizability and only has a couple of order types and pre-set alerts.

All in all, advanced traders have better alternatives than SoFi – but investors who want a more casual, automated experience will feel right at home. SoFi Invest’s full offer includes free stocks and ETFs, very responsive customer support, and a robo-advisor if you ever want to put your portfolio on autopilot. 

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3. Firstrade – Best for Day Trading

Free stuff usually comes with certain limitations, but in this case, the bar is pretty high. Firstrade offers commission-free stocks, ETFs, options, and funds. They also offer bonds, but these will come with relatively high $30-$40 fees.

You can trade these assets from Firstrade’s user-friendly platform which is a very handy tool for advanced traders and beginners alike. The platform’s design might lack the glitz of Robinhood, but it has multiple order types, alerts, charting options, and a clear fee report.

Research is also very solid – you can access fundamental asset data, analyst opinions, as well as news and numerous handy interactive charts. Screening and comparing stocks, ETFs, and mutual funds is easy and comprehensive – this is one of the reasons why Firstrade is popular among day traders.

If you’re a new investor or want to improve your knowledge, Firstrade is a sensible choice. The broker offers good educational videos, articles, and webinars, as well as a handy glossary – the only real drawback to this offer is that there’s no demo account.

Firstrade has the full package for advanced investors who want strong research and a powerful, quick trading platform – on top of the commission-free trading, of course. All in all, Firstrade’s trading platform fares well with day traders, as well as beginners who want an easy platform and a place to learn their new craft.

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4. M1 Finance – Best for Passive Investing

If you’re looking for a user-friendly platform with flexibility for both manual and automated investing, M1 Finance is a strong choice. It’s not a robo-advisor, but rather a self-directed investment platform that allows users to create and manage customized portfolios called “Pies.” These Pies can hold up to 100 stocks or ETFs, and M1 automatically rebalances your portfolio to keep it aligned with your goals.

M1 has many handy features, one of them being multiple portfolios – you can create several separate investment pools which allow you to better organize your investments. The platform also offers Model Portfolios (formerly known as Expert Pies) to help users get started with diversified investments.

As of September 2024, M1 charges a $3 monthly platform fee for clients with less than $10,000 in assets or without an active Personal Loan. This fee is waived if your M1 Invest or Earn accounts’ aggregate balance meets or exceeds $10,000 for at least one day within a 30-day period. Clients with an active M1 Personal Loan are also exempt from this fee, regardless of their account balances.

You can also access socially responsible investing which means the platform will give you a list of “green” companies you can buy and sell at your leisure. 

There are no “hidden” fees, but there are some inconvenient non-trading expenses you need to know about. Deposits are free but withdrawals can incur a $25-$200 fee. Withdrawing money in the US costs $25, but if you want to transfer funds to another investing service, that can be quite pricier. 

All things considered, M1’s innovative self-directed platform allows investors to manage their portfolios with ease, combining automation and customization. However, making frequent withdrawals may not be ideal due to associated fees, especially for outgoing transfers. In essence, M1 is great for passive stock and ETF investors but less suited for day traders due to limited trading windows and its focus on long-term strategies.

M1 Finance, LLC does not charge commission, trading, or management fees for self-directed brokerage accounts. Other fees may apply. For more details, visit M1’s Fee Schedule.

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5. Fidelity – Widest Range of Investments

As household names go, Fidelity has been among them since the 1940s – naturally, the brokerage has accumulated a very impressive list of features for its users. The broker offers international stocks, as well as free US stock and ETF trading – even some mutual funds are commission-free.

Moreover, there are no inactivity and withdrawal fees except for outgoing wire transfers ($10). So, the prices are as low as they get – combine that with the $0 minimum initial deposit and you’ve got yourself a very accessible broker.

The trading platform is very easy to use but also has a multitude of handy features – this includes multiple order types, alerts, and two-factor authentication. The mobile app mirrors this wide functionality, so it’s very easy to do more complex trading operations while on the move.

Fidelity also covers all the bases when it comes to research – the fundamental data is very detailed and you can get news and analyst opinions through the platform. There are also many interactive charts and screeners to help you sort out which trades are good and which are not.

So, advanced traders get everything they need, but beginners get something too – Fidelity has a comprehensive list of educational courses and videos, as well as a demo account you can practice on. All in all, Fidelity is well-rounded but also has a very broad range of investments – a characteristic that sets it apart from the competition.

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Why Commission-Free Stocks Matter 📖

So, not paying commissions on trades sounds great – but is it really such a big deal? Let’s see with an example. 

Say you have $1,000 and want to buy 10 stocks with it so your portfolio is nice and diversified. You buy the stocks, they grow 25% in value and you sell. This leaves you with $1,250 in the bag – a  profit of $250. However, this math only applies to free stock trades.

If you had to pay a $10 commission to buy or sell for these stocks, that would leave you with a $200 expense. Also, since you paid a fee when acquiring the stocks, your initial investment would be smaller, and would thus generate lower returns. 

Essentially, investing $1,000 with a commission-free broker would give you $250 in profits. On the other hand, investing that money with an average-priced brokerage would leave you with less than $50 in profits when all is said and done – pretty dramatic difference, don’t you think?

A $10 commission might not be a huge deal if you’re trading pricey stocks like Tesla ($2,280) or Amazon ($3,400). But if you’re trading 3-digit stocks, a commission will hurt your returns a lot – that’s why you should trade with a zero-commission brokerage, regardless of whether you’re a beginner or a pro.

How To Trade Stocks Online 📈

The ways to buy and sell stocks legally are limited, but the most sensible method for individual investors is to use an online broker. Brokers are a medium between traders and market assets, and they are there to facilitate trade. If you’re new to all of this investing stuff – here’s how you can start trading stocks online.

1. Open an Account With a Commission-Free Broker 👥

If you want to invest, it’s better if your broker doesn’t take a bite out of every single trade you make. Opening an account with these services is simple – you just need to go to their website and give them your personal info, including some financial data.

But before you do that, make sure you read a review or two or ask around. Investors usually have very specific wants and needs, and no single broker can please everyone – try to find the perfect one for you before you sign up.

2. Deposit Funds Into Your Account 👤

OK, so the account is set up and ready to go – now, you just need some money to trade with. The amount you should deposit to start trading depends on your plans, but it’s best to start with at least $500. This amount will allow you to buy a few reasonably-priced stocks.

3. Pick a Good Stock 📒

Buying only makes sense if you can sell later at a higher price – that’s why you need to make sure you buy into a good company with the potential to grow. Knowing how to buy great stocks is a rewarding and complex craft – but just knowing a few basics can make your trades very profitable.

A logical first move would be to look at a company’s fundamentals – this means how much they make, how much they owe, how much they’ve grown, etc. If a company has solid cash flow, that’s a very good sign. Also, look at trends – tourism isn’t exactly flourishing in the COVID-19 era but online services like Netflix and Amazon sure are (their stock prices have been going bananas since March).

4. Buy In 💲

When you find your golden goose, buy it and wait for the golden eggs to start rolling in. You can sell the stock later at a profit and buy something else or just keep it so you know your money is growing rather than getting gnawed on by inflation.

Some Brokers Are More “Free” Than Others 💰

The term “free broker” commonly applies to brokerages with no commissions on stock and some other trades. However, these “free” services might sometimes have hidden costs like inactivity and withdrawal/deposit fees. 

If those are low as well, then you’re pretty much in the clear. But, fees aren’t the only determining factor of a good broker – it’s just the base on which everything is built. Here are a few boxes you need to tick before you know a broker is really free and good for you.

Are Stocks Free Permanently? 💸

Some companies say that stock trades are “free” but their ads don’t mention that this is a limited-time offer. Needless to say, before buying in, make sure your broker really offers free stock trading that will remain free for the foreseeable future.

Large Selection of Free Options 🤑

Brokers always boast about having commission-free options on ETFs, but most of the time, these ETFs are the most passive and boring kind (a bunch of big US corporations bundled together randomly). The interesting, new, and possibly very profitable stuff might not be free at all – make sure you check before buying.

No Crafty Hidden Fees 💳

As we mentioned before, don’t let the title “free broker” fool you – there might be fees hidden in the fine print of whatever contract you signed. Most commonly, these are inactivity fees that start once your account has been inactive for months or years on end. Also, brokers usually have withdrawal fees which can be a deal-breaker if the cost is too high.

What You Should Look For in a Free Broker 💵

If a broker is free, that’s great – now you have to figure out if it has everything else. What “everything else” means depends on what kind of trader you are.

If you’re a beginner, you might want a simple, user-friendly service with good educational content. There are a number of brokers that offer great platforms for beginners.

Pro traders, on the other hand, need a quick platform, comprehensive research, as well as a bucket load of trading options. Let’s go over a few factors that make a good broker.

User-Friendly Platform 🪙

This goes without saying but if your trading platform is hard to use, your life will be that much more difficult. Investing need not be hard at all and most brokers nowadays have very clean, logical trading software that allows you to buy, sell, and manage your portfolio with ease. 

However, some platforms are better than others and can include advanced research functions and other handy features. Since competition is huge and you have a choice in the matter, it’s always a good idea to go for brokers with top-notch stock trading platforms.

A Huge Selection of Tradable Assets 💴

Who needs free trading if there’s nothing to buy? The low-cost investing model only makes sense if you have many markets and products at your disposal. For instance, most names in the list above give users access to the full breadth of the US Stock Market – this means you can diversify, adapt strategies, and invest in companies you like.

Good Customer Service 📞

The amount of money traders have on their brokerage accounts usually isn’t a small sum – more often than not, it’s the majority of money in their possession. Naturally, if a broker is holding a huge chunk of your wealth, you want it to be very, very responsive to all your inquiries.

The ideal broker’s customer service should look something like this: This customer support should be available via phone, live chat, and email 24/7 if possible. Also, they should be able to solve your issues and answer very quickly – this means less stress for you, as well as a better trading experience overall.

Fees You’ll Have to Pay Either Way 💶

A free broker is a company that doesn’t charge you for its services – but even if they don’t, investing can still cost you. Here are a few expenses you’ll encounter while trading, no matter which broker you turn to.

Interest on Margins 💷

Most brokers offer margin investing – this means they will let you trade with their borrowed money and expect an interest payment after the fact. Margin rates aren’t high usually – for example, Robinhood will only charge you $5 in interest for every $1,000 borrowed.

However, if you let the interest pile up for months on end, it can become 10-15 times higher. This is why you should be careful with margin investing and pay off all obligations to your broker ASAP to save money.

Fund Costs 💱

If you’re a passive investor looking at some juicy mutual funds and ETFs, then you must know they don’t come for free. Even if your broker doesn’t charge commissions on these trades, funds have “expense ratios” – this is a percentage that will get subtracted from your annual returns automatically. The lower the expense ratio, the better.

Taxes 🤲

Ah yes, everyone’s favorite thing ever – taxes. To be precise, the capital gains tax. Paying taxes is something you have to do if you don’t want the IRS to rain fire from the sky upon you (or whatever they do in such scenarios). Basically, all profits you make will get taxed, usually between 15% and 25%, depending on your tax bracket – let’s talk about that in more detail.

How Do Taxes on Stocks Work? 🧾

All taxes associated with investing are called capital gains tax but some are higher than others – short-term investments are taxed at much higher rates than long-term trades.

This tax applies to the difference between the buying and selling price – If you bought something for $1,000 and sell it later for $1,200, only the $200 profit will get taxed.

This also depends on which tax bracket you belong to. Short-term (higher) capital gains tax ranges from 10% if you’re filed as low-income, up to 37% for very high-income individuals. On the other hand, the long-term (lower) tax ranges from 10% to 20%.

The table above shows the rate at which individual filers are taxed in each bracket. Keep in mind that if you make, for example, $50,000 a year, only the money over $20,126 will be taxed at a 22% rate – each bracket is taxed individually. Contrary to this, all brackets are two times larger for married couples – e.g. the first bracket is $0 – $19,750 and so on. 

How Do “Free” Brokers Make Money? 🆓

Not from commissions, apparently – but through other means. Most of their revenue comes from interest rates. Free brokers usually offer margin trading, which means they lend traders money to invest, expecting a repayment later. 

The interest on margin trading is low, but it can pile up very nicely. For example, Robinhood’s revenue in the second quarter of 2020 was over $180 million – most of which came from margin trading.

Also, brokers can try to upsell you superior services like premium accounts and research providers – all of which might very well be worth their price. Finally, a small part of a broker’s revenue comes from non-trading fees like inactivity and withdrawal fees.

How COVID-19 Has Impacted the Stock Market 💉

If the stock market can be described as a children’s toy, it would probably be a bouncing rubber ball. After the huge drop in late February, the US market has shot right back up – reaching an all-time high despite the weakened economy.

The sensible question here is – how come the market is growing so fast when the economy is in such bad shape? There are multiple reasons, one being a combination of unemployment and social benefits – Americans are using the federal funds they get to make money in the market since employment and demand are low.

This has boosted the markets tremendously, but that growth probably won’t last long. Although, experts believe that the new COVID-19 vaccines might stabilize the markets. 

All in all, the Coronavirus stock market is extremely bullish, but for all we know, it might suddenly turn very bearish. This might happen if the FED and Uncle Sam stop being so accommodating with low-interest rates and social benefits – which has to happen eventually.