The best online brokerages for investing your money are rated based on the following criteria:
- Ease Of Use
- Cost (should be free in 2020+)
Picking stocks is tough long-term because most people are not professional investors and most professional investors underperform the S&P 500 index. Therefore, it's best for individual investors to stick to low cost index funds and ETFs instead.
You can do so by opening up an online brokerage and investing directly. You can also open up a digital wealth advisor to manage your money for you.
The following are the best online brokerages for investors to leverage today.
The Best Online Brokerages 2020
A robo-advisor (robo-adviser) is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. Robo-advisors (or robo-advisers) use the same software as traditional advisors, but usually only offer portfolio management and do not get involved in more personal aspects of wealth management, such as taxes and retirement or estate planning.
Robo-advisors are typically low-cost, have low account minimums, and attract younger investors who are more comfortable doing things online. The biggest difference is the distribution channel: previously, investors would have to go through a human financial advisor to get the kind of portfolio management services robo-advisors now offer, and those services would be bundled with additional services.
Firms like Raymond James, Edward Jones, BoA Merrill Lynch, and Goldman Sachs charge 1.5% – 3% of your assets under management and often require minimums as high as $500,000 to start. With robo-advisers, the fees are in the 0.15% – 0.5% range, and you can start with as little as $500. In other words, robo-advisers are great for everyday people to get similar investing know-how based on Modern Portfolio Theory for less.
Best Online Brokerages
Betterment – Based in New York City, Betterment is the original robo-advisor and launched in 2011. Its board includes Dr. Burton Malkiel, professor of economics, emeritus and senior economist at Princeton University. He is most known for authoring the classic finance book, A Random Walk Down Wall Street, now in its 12th edition. Betterment charges just 0.25% to manage your money, with the first $15,000 free using my link.
Sign up for Betterment for free and have them construct a model portfolio for you. They recently raised $75 million in funding in 1Q2018 from Tiger Global. They manage over $25 billion in AUM now as of 2H2019.
Read the full Betterment review here.
2) Personal Capital: Best FREE Financial Software
Personal Capital – Personal Capital has the best financial tools for investors and people who are the most serious about planning for a healthy retirement. You can easily x-ray your portfolio for excessive fees, get a snapshot of your asset allocation by portfolio, track your net worth and plan for your retirement. Personal Capital is free and should be used by all serious investors looking to retire comfortably.
Read the full Personal Capital review here.
#3 Ally Invest – Pure online brokerage
Ally Invest (formerly known as TradeKing) is a low-cost online brokerage that has an excellent platform and great overall service.
Going with an online brokerage firm to build your after-tax investment portfolio is critical for achieving financial independence. Your goal should be to not only max out your 401(k) and IRA, but to build as large of an after-tax investment portfolio as possible to spit out as large of a passive income stream as possible.
Ally Invest has been in business since 2005 and merged with Zecco in 2012 to broaden their brokerage offerings. They’re well-known for their social media presence and low-priced stock trades.
TradeKing was acquired by Ally in early 2016, and since then, Ally has continued to improve on their product offering and user experience.
Ally Invest Key Features
Trading Platform:The Ally Invest platform is intuitive and relatively simple to master. They offer free commissions!
Free Streaming Quotes: After placing a trade you can contact them to enable free streaming quotes on your account. This is nice to have if you like to watch the market and are an active trader.
Forex Trading: Just as with Etrade, Ally Invest offers forex trading due to their merger with Zecco. If you’re new to forex, Ally offers a $50,000 virtual account to help you get your feet wet. Nobody should just jump into forex trading, therefore, this feature is excellent for newbies.
Ally Invest Advisors Program: The goal of Ally Invest Advisors is very similar to digital wealth advisors. They act as a low-cost advisor to management your retirement portfolio for a fee.
With Ally Invest Advisors you can start with portfolios as low as $5,000 in low-cost ETFs. These portfolios are based on your specific goals, needs and circumstances. The Ally Invest Advisors program is free of charge for the first year when you open a new account.
The Benefits Of Ally Invest
Wide Variety Of Mutual Funds: If you like to invest in mutual funds, you’ll enjoy Ally Invest's offering of over 8,000 mutual funds from a variety of fund families. Only the more expensive online brokerage accounts like Charles Schwab have a similar or greater amount. But you really only need at most 10 mutual funds in your portfolio for diversification purposes.
Solid Customer Service: They are there for you 24/7. Every time I’ve dealt with Ally Invest I’ve been satisfied with my experience. They’re also been consistently honored by Smart Money magazine as one of the top brokers in the industry for customer service. If you like low-cost, but also Apple store type service, Ally Invest is a good fit.
Free Online Support: One thing that sets Ally Invest apart is their use of social media and forums on their site. They take to heart offering real-time support to their clients and think outside the box to do so. They also provide free classes and webinars for new investors, or those new to the platform.
No Minimum to Open: Ally Invest does not have a minimum opening balance requirement. For those who are getting their feet wet with online investing, it's great that you can start with $100 and start trading. When investing, it's always good to start small and work your way up.
Commission-free ETFs: Ally Invest now offers over 500 commission-free ETFs! This is a huge offering as they had zero commission-free ETFs a couple years ago, and less than a hundred commission-free ETFs a year ago.
Ally Invest Final Verdict
Ally Invest offers excellent service, a great user interface, and very competitive pricing. Ally Invest continue to improve their product offerings and user interface in a very competitive online brokerage environment.
With the addition of the Ally Invest Advisors platform, Ally Invest is evolving into a full-service online brokerage to help you manage your money better. Whether you are a do it yourself investor or need help, Ally Invest is positioning to be there for you.
Before you make any investment, make sure you understand what you are investing in, have stated financial objectives, and are focused on the long term. Too many people hurt their returns by trading in and out of stocks too much. The key to great wealth is to buy and hold for the long term. Focus on buying low-cost index funds and ETFs. A proper asset allocation is the way to go.
Sign up with Ally Invest here.
About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at Goldman Sachs and Credit Suisse. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered.
In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.