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.
Note: Due to the pricing wars with the major brokers over the last few months, many have changed or eliminated their bonuses. We've worked hard to keep up, but if you notice something different, let us know!
I took a look around and here are some of the best stock brokers and investing offers out there right now:
Ally - Up to $3,500
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.
Ally offers what I think is the best deal out there right now.
They are currently offering you up to $3,500 if open a "self-directed" account with them. Their full promotion looks like this:
Deposit Amount | Bonus Amount |
|---|---|
$10,000 to $24,999 | $50 |
$25,000 to $99,999 | $200 |
$100,000 to $249,999 | $300 |
$250,000 to $499,999 | $600 |
$500,000 to $999,999 | $1,200 |
$1,000,000 to $1,999,999 | $2,500 |
$2,000,000+ | $3,500 |
Ally also a transfer reimbursement promotion of up to $150. Basically, if you are switching brokers, and your old broker charges you a fee to leave, Ally will reimburse that fee up to $150. You simply have to complete an account transfer of $2,500 or more to qualify.
Read our full Ally Invest review here.
Get up to a $3,500 bonus!
TD Ameritrade - Up to $600
TD Ameritrade is a major brokerage company. It recently dropped it's commissions to $0 per trade for stocks, options, and ETFs, and it slightly revamped it's bonus offers.
One thing about TD Ameritrade is that the bonus listed below is the public bonus offer. We've seen reports of targeted bonus offers going up much higher (upwards of $2,500).
Right now, there are offering the following investing bonus:
Deposit Amount | Bonus Amount |
|---|---|
$25,000 to $00,999 | $100 |
$100,000 to $249,999 | $300 |
$250,000+ | $600 |
Read our full TD Ameritrade review here and see what you think.
Get up to a $600 bonus!
E*TRADE - Up To $2,500
E*TRADE has gotten in on the incentive war too! Their bonus structure starts a little higher than Ally Invest, but it matches it at every tier.
If you open a new account with E*TRADE you will need to deposit at least $25,000 to receive incentives, but they are competitive:
Deposit Amount | Bonus Amount |
|---|---|
$25,000 to $99,999 | $200 |
$100,000 to $249,999 | $300 |
$250,000 to $499,999 | $600 |
$500,000 to $999,999 | $1,200 |
$1,000,000+ | $2,500 |
We think E*TRADE is great, especially when it comes to investing in a Solo 401k. Read our full E*TRADE review here and decide for yourself.
Get up to a $2,500 bonus!
Merrill Edge - Up to $600 & Free Trades
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.
Merrill is one of the last remaining brokerages that hasn't adopted commission-free trading for all. However, if you qualify for Bank of America Preferred Rewards, you can get $0 commissions.
Their current bonus offer includes up to $600 in cash. Here are the levels of upfront investment you need to qualify:
Deposit Amount | Bonus Amount |
|---|---|
$20,000 to $49,999 | $100 |
$50,000 to $99,999 | $150 |
$100,000 to $199,999 | $250 |
$200,000+ | $600 |
As you can see, they have one of the lowest minimums to get started - and their top tier bonus of $600 is less of a requirement than most on this list. However, the product and costs don't really align with the rest of the industry anymore.
Read our full Merrill Edge review here.
Get up to a $600 bonus!
Betterment - Up To 1 Year Free
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 ($25 for each $10,000 you have invested). Its 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.
Read our full Betterment review here.
Get up to 1 year managed for free!
Final Thoughts
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!
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