It took me a while to start investing because it seemed so complex. Not only did you have to decide what stock to buy, but you also had to figure out how to buy it! Since you can't deal directly with companies, that means a "broker" — a middleman from whom you can buy any companies' stock or mutual funds that combine a lot of stocks into one basket.
Nowadays, there are a lot of brokers out there, ranging from old-school companies like Charles Schwab where you have a relationship with a local office and a person, to slightly newer behemoths like Vanguard and Fidelity, to upstarts like Betterment that aim to totally automate the process. Plus, there are all the free investing apps out there.
But how do you choose which broker to go with? Since many of these companies are well known and trustworthy (that is, they won't run off with your hard-earned money the way Bernie Madoff did), you need some way to distinguish them.
In my opinion, if you're trying to distinguish between trustworthy companies, there are three things to take into consideration:
- What kinds of fees do they charge? Can you invest for free?
- What kinds of services do they provide?
- What kinds of incentives do they offer to get you to choose their company rather than their competitor?
The Internet age is really making the third factor shine! Practically every month new offers come out as brokers try to entice people to move their investments, or to begin investing for the first time. This is a great time to be thinking about opening a new investment account. Because it's so easy to research fees and offers, many of the big brokerages are matching each other's prices and offers, making the environment better and better for customers.
I took a look around and here are some of the best stock brokers and investing offers out there right now:
Up to $3,500 & 90 Days of Free Trades from Ally
I used to be mostly familiar with Ally as the high-interest online savings account of choice for online bloggers — they almost always offered the highest rates and for years many people have used them for their emergency funds. However, they've recently made a major push into investing and were named Nerdwallet's Top Broker of 2018.
If you can move fast, and especially if you have a lot of money to work with, Ally offers what I think is the best deal out there right now.
First, you have to open a "self-directed" (that is, you decide what to buy rather than being advised) account by 9/30/18. Deposits can range from $10,000 — at which rate you get $50 in cash bonuses — to $2,000,000 (that's two million dollars for those of you who don't want to count zeros!) — at which rate you get $3,500 in free cash, which is nothing to sneeze at even if you're a millionaire. There's a sliding scale of cash bonuses, too: have $1,000,000 to deposit, get $2,500; have $500,000, get $1,200; have $100,000, get $300.
Ally also offers 90 days of free trading up to $500 — since their fee per trade is $3.95 for new customers, that means you can make up to 126 trades in your first three months without paying a dime.
Up to $2,500 & 90 Days of Free Trades from TD Ameritrade
TD Ameritrade is a major brokerage company. Normally it charges a $6.95 flat fee per trade but with its current promotion you get about three months of free trades, along with free cash:
- $100 for a deposit of $25,000
- $300 for a deposit of $100,000
- $600 for $250,000 and up
Last month that was where the promotion stopped. But TD Ameritrade and Ally seem to have gotten into a little bit of a competition and in August TD Ameritrade introduced a better deal that nearly matches what Ally offers:
- $1,200 cash for a deposit of $500,000
- $2,500 cash for a deposit of $1,000,000
Plus, TD Ameritrade added an extra month to its free-trading incentive, so you can now get 90 days of free trades if you open a new account in any amount over $10,000. That means that even if you don't have enough startup capital to get a cash incentive, you can still get something pretty valuable.
If you have a spare $250,000 to invest, the $600 incentive may not seem like much. However, it's not nothing — and the real incentive here is probably the 90 days of free trading. If you're an active trader rather than a buy-and-hold retirement investor, that's a pretty great deal.
(If you have two rather than one million dollars to work with, though, you should go with Ally for the extra $1,000 cash incentive!)
Up to $2,500 and 500 Free Trades with E*TRADE
E*TRADE has gotten in on the incentive war too! If you open a new account with E*TRADE you will need to deposit at least $10,000 to receive incentives, but after that they're matching or beating Ally's offer:
- Deposit $25,000, receive $200
- Deposit $100,000, receive $300
- Deposit $250,000, receive $600
- Deposit $500,000, receive $1,200
- Deposit $1,000,000, receive $2,500
Of special note there is that at the $25,000 level you get a $200 incentive rather than a $100 incentive — all things being equal, if you have a smaller amount of money to work with this is the best offer for that amount.
Even if you only have $10,000 to deposit, you can get 500 commission-free trades within the first 60 days after you open the account. Following that, trades are $6.95 each, or $4.95 after you make 29 trades in a month.
$600 and a Few Great Freebies with Merrill Edge
Merrill Edge is Bank of America's brokerage firm (the result of Bank of America's acquisition of famed trading firm Merrill Lynch during the financial crisis of 2008). It's a fine overall choice for anyone, but if you already have a banking relationship with Bank of America, it might be especially tempting due to the "Preferred Rewards" status you can get.
Their current offer as of August 2018 includes up to $600 in cash. Here are the levels of upfront investment you need to qualify:
- Deposit $20,000, get $100
- Deposit $50,000, get $150
- Deposit $100,000, get $250
- Deposit $200,000, get $600
As you can see, you can get the top-tier bonus with less upfront investment than you can with either TD Ameritrade or Ally, making this a nice deal for those of us with less capital.
Merrill Edge doesn't offer several months of free trading — instead, each trade is a flat $6.95 — but, and here's where it gets interesting, if you're a Bank of America customer you can get preferred status with Merrill Edge. That qualifies you for up to 100 free stock trades per month, for as long as you retain preferred status.
Merrill Edge also gives its customers some fun freebies and discounts. Right now they're offering a $15 discount on TurboTax and free admission on the first weekend of every month at hundreds of museums around the United States.
Up to One Free Year on Betterment
Betterment has become a darling of the personal finance community on the Internet for its "robo-advising" service. Unlike other brokers on this list, Betterment doesn't charge a flat fee for individual trades. You can trade as much as you want for free.
Instead, Betterment makes money by charging an annual fee on your overall investment portfolio. For most of its customers, that's 0.25% annually (about $25 for each $10,000 you have invested). Its 2018 promotion doesn't include cash back, but instead offers to waive the 0.25% fee for a certain amount of time depending on how much you deposit:
- Deposit $15,000, get one month free
- Deposit $100,000, get six months free
- Deposit $250,000, get one year free
As a "robo-advisor," Betterment recommends a portfolio based on questions you answer about your goals, age, and so on. After that, it does automatic rebalancing to keep your portfolio in line with your stated goals, moving money back and forth between investments without your having to do anything active (unless you want to). It also automates tax-loss harvesting, which might be of interest if you're investing outside a tax-advantaged retirement account.
500 Free Trades for Two Years at Fidelity
A lot of online brokerage promotions involving free trades depend on you trading pretty extensively for the first few months. But what if you'd prefer to be somewhere in the middle — not a buy-and-hold investor, but not a day-trader either?
Fidelity, one of the biggest brokerages, has an offer that might fit your needs. Instead of needing to be used within the first 60 or 90 days the account is open, if you open a new account at Fidelity you can trade for free during your first two years. There are two tiers to this offer:
- Deposit $50,000, get 300 commission-free trades
- Deposit $100,000, get 500 commission-free trades
If you exceed these limits, or continue after the first two years, you'll pay $4.95 per trade. But Fidelity also offers access to a number of commission-free ETFs. All in all, this is a trusted low-cost platform. (You may well have your retirement account with them already, since a lot of companies use them to manage 401(k)s and similar accounts.)
Up to $300, Plus 500 Free Trades, at Firstrade
Firstrade (make sure you spell it right — it's not "First Trade," but instead, it's missing one of those "t"s in the middle) is a discount stock broker. I'm including it on this list even though the amount of cash back available in its promotion isn't quite as good as the others, because once you have gone through the promotional period its fee for trading is very low at $2.95 per trade. It also offers service in Mandarin and Cantonese if you prefer!
It does have a cash-back promotion right now, as follows:
- Deposit $25,000, get $100
- Deposit $50,000, get $200
- Deposit $100,000, get $300
In addition, you can get 500 free trades with a minimum deposit of only $2,000 — much less than the $10,000 minimum elsewhere on this list. They offer other smaller incentives, too, like a $200 rebate for any transfer fee you incur switching from another broker, and $50 for successfully referring a friend to the service.
500 Free Trades with an Existing (or New) Account with Charles Schwab
Most bonuses are designed to get you to open a new account, so you'll have to switch. But what if you don't want to? Charles Schwab is one of the few companies out there that's offering an incentive for existing clients to deposit new money.
If you're an existing Schwab client, you need to make a $100,000 net deposit of new money during the 45 days following your enrollment in the offer. At that point, you receive 500 free trades which can be used any time over the course of the next two years. (You can also get the same incentive with a new account, but if you're open to switching accounts anyway, one of the other offers on this list might be a better deal.)
As you probably know, if you're a Charles Schwab client already, normally trades are $4.95 each, so this could be worth over $2000 to you — just in exchange for not moving accounts and getting to know a new platform, etc.
There are a lot of brokers out there that didn't quite make the cut for this list. Either they aren't offering cash promotions right now, or they're offering much smaller promotions that didn't seem as worth it.
However, my research shows that right now, with the stock market fairly hot and several newer entrants into the stockbroker business (including Betterment, which is on this list, and others, like, say, Motif, which is not) stockbrokers are pretty keen to offer incentives.
My guess is that cash back, free trades, and other incentives to switch services are going to keep improving for a while. Just in the last month, Ally, TD Ameritrade, and others are starting to offer really significant cash back if you move a lot of money to their platform. I think others are going to be compelled to at least consider keeping up.
All in all, it's a pretty good time to be shopping for a new stock broker!