The Best Brokerages for Investing in 2021
Your brokerage account is one of the recommended places to keep money that you want to invest for the future.
Brokerage accounts can be used to invest in a variety of financial products, including stocks, bonds, and mutual funds.
Every brokerage account provider has its own benefits, drawbacks, and unique features.
Best Brokerages for Investing in 2021
- Vanguard: Low-cost index funds and ETFs
- Fidelity: $0 commission fees to trade U.S. stocks, ETFs, and options
- Charles Schwab: Fractional trading with no minimum deposit
- SoFi Invest: Invest in stocks and cryptocurrencies in one place
We looked at the 10 largest brokerages in the United States and settled on the best brokerages to use in 2020.
This company is focused on providing cheap index funds that look to track the market rather than beat it.
At Vanguard, you can find a mutual fund for nearly any strategy.
Some of the brokerage’s most popular funds are its all-in-one funds, including its Target Retirement Date and its Life Strategy funds.
These funds automatically split your money between stocks and bonds, allowing you to adjust the amount of risk you’re willing to take on.
Many of the company’s funds are also offered as exchange-traded funds (ETFs).
You can also invest in individual securities, including stocks, bonds, CDs, and options.
When it comes to costs, Vanguard has long been the king of low expense ratio mutual funds. The company’s unique structure means that the investors in the funds are the owners of the company, so the funds always charge the lowest fees they possibly can.
Other fees are also low, with a $20 annual account maintenance fee that can be waived with a $10,000 balance or by signing up for paper statements.
Vanguard is also very fee-friendly to investors who want to trade actively. For instance, it is free to perform online trades of stocks and ETFs.
The company’s focus on getting customers to invest in its mutual funds also means that it does not offer the best research options of the three.
Fidelity offers a full suite of investment services, including low-fee index funds and actively managed funds that you can use if you want to try to beat the market.
With Fidelity, you have more than 200 mutual funds to choose from. The company excels at letting you choose exactly what you want to invest your money in, allowing you to create a portfolio that is customized to your investment plan.
If you’d rather invest in ETFs, Fidelity also offers a number of commission-free ETFs that it manages. If you can’t find a Fidelity ETF that meets your needs, you can also invest in iShares ETFs without paying any commission.
Other options available include internationally focused funds and ETFs, and the option to trade securities in 25 different countries and 16 different currencies. You can also round out your portfolio with stocks, bonds, CDs, and options.
One exciting product line that Fidelity offers is its fee-free mutual funds. These funds charge no expense ratio, so you don’t pay anything to invest in them.
However, there may be hidden costs involved. Expense ratios are the cost of keeping a fund going and making sure it is properly tracking its index.
A no-fee fund may have to track a simpler index to keep costs low, which could affect returns. Still, you’d be hard-pressed to find a better deal than Fidelity’s no-fee funds.
Fidelity offers a full suite of research tools for its customers.
Charles Schwab is a brokerage that is known for working well with customers of all kinds.
Beginners can invest in its low-fee, commission-free funds while more seasoned investors can use its research tools to devise and execute their own investment strategies.
Schwab manages many funds on its own, including both index and actively managed funds. This allows you to choose your own strategy based on whether you want to follow an index or attempt to beat the market with a specific strategy.
Schwab’s actively managed funds employ top investment managers with years of experience at picking investments that are likely to outperform the market.
The company’s funds offer very low expense ratios.
Often, Schwab and Vanguard’s funds will be in a tight race to for the title of cheapest fund for a specific sector of the market.
You can also invest in both taxable and tax-free bond funds, allow you to manage your risk and your tax liability.
If Schwab’s funds aren’t enough for you, you can invest in thousands of other companies’ mutual funds with no load or transaction fees. Many of them require an investment as small as $100.
The account doesn’t charge any annual maintenance fees and its stock trade fees are also quite low.
This pairs well with the company’s intensive research tools that let you quickly learn everything you need to know about a company or market sector.
SoFi Invest provides an automated investing platform in addition to self-managed brokerage accounts.
The platform caters most to investors who want to trade individual stocks and ETFs without any commission fees. Additionally, you are allowed to own fractional shares.
Notably, SoFi Invest lets you invest in cryptocurrencies -- the increasingly-popular investment sector.
There is also a feature-packed mobile app that allows investors to manage their portfolios easily.
How We Picked
When looking at the country’s top brokerages, we compared a number of factors to determine which is the best.
Brokerages That We Analyzed
These are the major factors that we compared.
The most important factor that we looked at is the investment options offered by each brokerage.
The entire point of a brokerage account is to invest your money for the future, so you want to have as many options available to you as you possibly can.
Every brokerage will give you the option of investing in individual securities such as stocks, bonds, CDs, and options. Where they offer the most difference is in their access to mutual funds.
Mutual funds allow you to invest in a single fund that will then purchase multiple securities on your behalf. They make it easy to diversify your investment over a wide swath of the market.
Brokerages manage their own mutual funds and provide incentives for their customers to invest in their funds over their competitors’ funds.
Knowing the types of mutual funds offered by a brokerage is an important part of choosing which brokerage you should work with.
Are you looking for actively managed funds that aim to outperform the market, or do you simply want to track an index?
Fund expense ratios
One of the most important aspects of a brokerage’s mutual funds, other than what securities they invest in, is their expense ratios.
For example, if you invest $100 in a fund that has a 1% expense ratio, and the securities that it invests in grow in value to $110, your account’s balance will be $108.90 at the end of the year.
Typically, actively managed funds will have higher expense ratios than passive funds, which aim to track an index.
You need to decide what investment strategy you’re aiming for, and what you’re willing to pay to invest in a fund.
The lower the expense ratio of a fund, the more money that stays in your pocket.
When comparing the performance of two funds, you should always compare the after-fee performance to get a true picture of how an investment would have performed.
Account maintenance fees
Just like expense ratios, you should also be looking at the account maintenance fees you’ll have to pay to keep your brokerage account open.
Every dollar you pay in fees is a dollar that isn’t earning investment income, so you should work to minimize the fees you pay.
Some brokerages charge annual account maintenance fees. Often, these fees can be avoided by maintaining a certain minimum balance or jumping through a few hoops.
Other common fees include trading fees. Every time you buy or sell a stock, you’ll have to pay a commission fee.
The size of this fee can vary based on what brokerage you use, what type of security is involved in the transaction, and what level of customer you are at the brokerage.
Many brokerages charge lower fees to customers with higher balances.
For people who want to invest in individual securities or specific sectors of the market, research tools are an essential part of the investing process.
They give you all the information that you need to have about the economy, individual companies, and different parts of the market.
The type of research tools you can use will depend on the brokerage you’re working with. They might allow you to perform more in-depth analysis and/or gather key financial details more easily.
A company that is more focused on getting customers to invest in passive index funds won’t offer the same research tools as a company that wants to encourage its customers to invest in individual stocks and bonds.
All three brokerages, Vanguard, Fidelity, and Charles Schwab rank among the best in the United States.
You’ll be hard-pressed to find a better deal than you would from one of these companies.
Each has its own unique strengths, but you could open an account at any of them and be quite successful.
Look at the features offered by each and decide which will best suit your needs.