There can be a lot of costs associated with investing. One of the most obvious expenses is trade commissions, which can quickly eat into a newbie investor’s returns.
Then there are account maintenance fees, expense ratios and other hidden costs of owning various securities.
While it’s pretty near impossible to have a well-diversified portfolio that costs $0 to maintain, there are many brokerages that allow investors to buy and sell investments at no cost (and many also waive other common fees). Here’s a look at nine companies that do just that.
1. Charles Schwab
Charles Schwab is a major brokerage firm that provides a wide variety of services to investors, so you might be a bit surprised to find them on this list. Though investors do have to pay commissions on most trades, Schwab does offer many funds at no cost.
What’s free: Schwab charges no commission on trades of Schwab exchange-traded funds and about 500 additional ETFs through its online ETF OneSource platform. Phone or broker-assisted trades of these funds do include a fee, however.
Best for: Investors who want access to Schwab’s top-notch trading platforms, education and customer service.
E-Trade is one of the most well-known online brokerages and provides three different trading platforms to users, in addition to free streaming market data, quotes, analysis and more. Usually, commissions on stocks, options and ETFs are $6.95 per trade (the fee is reduced to $4.95 when you perform 30 or more trades per quarter), but E-Trade offers plenty of commission-free funds, too.
Best for: Beginner investors who want to get started free but may wish to eventually trade at a high volume.
Fidelity is another major brokerage that offers comprehensive services and robust investing tools. Customers, who range from beginner investors to active traders, can visit a branch or manage their portfolios online.
What’s free: There are a few ways to invest through Fidelity without paying fees. First, Fidelity allows its customers to trade 329 different iShares ETFs commission-free. Additionally, individual retirement accounts don’t charge account maintenance fees or require a minimum balance. Fidelity also recently launched two Zero funds, which are its zero-expense-ratio index mutual funds, allowing investors to avoid both commissions and management fees. And finally, new customers can also take advantage of an offer for up to 500 free trades for two years on eligible accounts.
Best for: A wide range of investors who plan to focus on ETFs.
4. M1 Finance
This app allows you to create a custom portfolio of stocks and funds, or choose from one of their 80 expert portfolios, which M1 Finance then manages automatically as you deposit money. The company allows users to buy fractional shares to help with diversification. Additionally, M1 Finance offers a checking account and lending options.
What’s free: The free version of M1 Finance includes unlimited free trades, custom portfolios, built-in tax efficiency and more. For $75 a year, users can upgrade to access features such as interest-bearing checking and lower rates on loans.
Best for: Investors who want to take the guesswork out of building a portfolio.
Robinhood is one of the more well-known free investing apps that lets users buy everything from stocks to cryptocurrencies. Investors can also get easy-to-understand snapshots of their portfolio’s performance over time and customized investment news and alerts. Robinhood will be adding a cash management feature soon as well.
What’s free: All trades through Robinhood are commission-free, and there’s no account management fee. However, users who want to trade on margin must pay for the service, which starts at $5 a month.
Best for: Investors who want a sleek interface and are interested in trading a wide variety of securities.
6. TD Ameritrade
TD Ameritrade is a national discount brokerage that offers both physical branches and an online trading platform. Normally, customers pay a flat rate of $6.95 for all trades of equities that aren’t one of its commission-free funds.
What’s free: Similar to Charles Schwab, TD Ameritrade allows customers to trade select ETFs commission-free. However, it offers only about 300 of these funds. TD Ameritrade also has IRAs with no account minimums or maintenance fees. Currently, it’s also offering 60 days of commission-free trading for new accounts with a minimum deposit of $3,000.
Best for: New investors who want to ease into trading before upgrading to more robust services.
Vanguard has a long-standing reputation as one of the most affordable brokerages in the industry. Not only are commissions waived on Vanguard funds, but the average expense ratio is just 0.10%.
What’s free: All Vanguard mutual funds and ETFs are free to trade within a Vanguard account. Additionally, about 1,800 non-Vanguard funds are commission-free, while some others cost only $2 per trade.
Best for: Investors who are looking to keep total investing costs down.
Webull is a fairly new commission-free investing app. What sets it apart from similar companies is its focus on in-depth investment research and analysis, which it says was traditionally only available to wealthy investors.
What’s free: All trades made through the Webull platform are $0 commission. There is also no fee to open or maintain an account. Webull does explain that the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) charge very small fees, but these do not benefit Webull in any way. Investors who want to trade on margin do need to pay a rate of 3.99% to 6.99%, depending on the size of the transaction.
Best for: Technical traders who want access to a wealth of market data.
WiseBanyan bills itself as “the world’s first free financial advisor.” However, this robo-advisor is a bit more limited than competitors in that it focuses only on ETFs, including partial shares. Users answer a few questions related to goals and risk tolerance when setting up an account, and WiseBanyan recommends a portfolio based on their answers.
What’s free: Thanks to the low operational cost of its automated service, WiseBanyan doesn’t charge any fees for trading, investment management or portfolio rebalancing. Users can choose to upgrade their accounts and pay a fee to access premium features, such as tax loss harvesting.
Best for: Beginner investors who want to create a simple but well-diversified portfolio.
Is free trading ever really free?
You might be wondering how these companies can afford to offer so many free services to customers. After all, brokerages are for-profit businesses. So you’re right to ask.
“Free-to-invest companies are wonderful for people just getting started with investing or wanting to get their feet wet, but as your account balance grows, so should your caution,” said Joshua Escalante Troesh, founder of financial planning firm Purposeful Strategic Partners. “As broker-dealer companies, they have no legal obligation to do what is in the best interests of their users.”
In order to offset the cost of letting users trade for free, these companies make money in other ways. For some, it’s about upselling customers on premium services or offering additional tools for a fee. However, Troesh said that revenue sources can also include selling aggregated investor data to high-frequency traders or other parties, charging slightly higher buy prices or offering lower sell prices for securities and some other questionable strategies.
“Personally, I would be skeptical if someone offered to clean my house for free each week ― and I’m equally skeptical of any company offering to provide their services for free,” Troesh said.
Again, commission-free trading apps, robo-advisers and brokerage companies can help you get started investing at a low cost. However, you should always read the fine print and be on the lookout for other hidden costs of investing. And as your portfolio grows and you become a more savvy investor, you might find it’s worth paying for some types of service and tools.