The Best Brokerages of 2019

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.

We looked at the 10 largest brokerages in the United States and settled on three as the best brokerages to use in 2019.

Vanguard

Vanguard has long been the leader in low-cost investing.

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.

Fees for individual trades however, are on the high end.

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

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

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.

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

Brokerage
Vanguard
Fidelity
Charles Schwab
TD Ameritrade
Merrill Edge
E*TRADE
Ally Invest

These are the major factors that we compared.

Investment options

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 what types of mutual fund a brokerage offers 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.

A fund’s expense ratio is the annual fee that you pay to invest in the fund.

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.

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.

Research tools

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.

What type of research tools you can use will depend on the brokerage you’re working with.

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.

Conclusion

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.

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