Online Investing For Beginners

When you are new to investing, the stock market can be intimidating and a bit hard to grasp: all this technical lingo, complicated trading platforms, the crazy swings up or down, and a lot of generally unpredictable behavior. Many beginners also feel more than a little apprehension: who wants to lose their hard-earned money? But investing is just a skill that can be learned, and the more time and effort you put into your investing education and real-life practicing, the better you become.

It’s also important from the start to choose a brokerage firm that is friendly to entry level investors. Some brokerage houses target wealthy clients who want to let the firm manage their money. Other companies are after customers, such as day-traders and professional money managers, who are already knowledgeable and comfortable with advanced trading tools and account management.

However, there are also online brokerages that are great for beginners. that welcome new investors, and offer them comprehensive educational materials, online webinars and classes, and trading simulation tools to practice trading (also known as virtual or paper trading). Some firms even have helpful online communities, where customers can ask questions, learn from more experienced members, and get investing ideas from fellow users. A few of these companies don’t even charge additional commission if a client wants to call a broker and place a trade with the broker’s help.

Best Online Brokers for Beginners

Below we list three discount brokerage firms that are the best for beginner investors, for both regular brokerage and various IRA accounts:

- TradeKing (TradeKing Review ) charges just $4.95 per stock or ETF trade (even for broker assisted trades!), and $9.95 for mutual funds transactions. The firm created the best investor community of all brokerages. TradeKing offers plenty of educational materials on its website, and has the highest rated customer service. Investors can open an account with this sixth largest brokerage house in the U.S. and give it a try with $0 down and no obligation.

New customer promotion link: (Refer a friend and both receive $50)

- OptionsXpress by Charles Schwab (OptionsXpress Review ) is part of one of the most well-known and user-friendly investment firms in the country — Charles Schwab. The company charges flat $8.95 per trade stock/ETF commission, only $9.99 for no-load mutual fund transactions, and has $0 account opening minimum. Broker-assisted trades are priced at the same rate as online trades — $8.95 per trade. There are tons of educational resources on the company’s website, and the firm offers free streaming quotes, investor community, virtual trading, dividend reinvestment, and instructor-led online classes.

New customer promotion link: Open OptionsXpress account and get 50 free trades.

- Scottrade (Scottrade Review ) offers a flat $7 commission per stock or ETF trade, a $17 per transaction rate for no-load, no-transaction fee mutual funds, and $2,500 is required to open an account ($0 for IRA). It is one of the largest online brokers in United States, with great customer service, largest network of local offices for in-person visits, and good banking services (savings, CDs, money market and free checking accounts). Broker-assisted trades are not cheap at $32 per trade.

New customer promotion link: $100 in Transfer Fees Refunded. No set-up fees. No Annual Fees.

Our Recommendations

If you are completely new to investing and looking for the best overall package (especially if you want to practice online trading without risking real money — virtual trading), then go with OptionsXpress by Charles Schwab. Read full OptionsXpress Review.

TradeKing is the best entry level broker if you want bargain pricing or to participate in very helpful online investor community. You can read full TradeKing Review here.

Open an account with Scottrade if:

• you are only comfortable investing with one of the oldest, most established and largest online brokerage houses;
• you want to invest mostly in mutual funds;
• you are looking for an IRA account (there are no IRA fees at Scottrade).

About the Companies

The best online brokers for beginners enable their clients to buy and sell stocks listed on NYSE, NASDAQ, and other exchanges. Some of these stocks are included in S&P500 and Dow indexes. Of course, the customers also have an ability to invest in literally thousands of various mutual funds from most major mutual fund families including Vanguard and Fidelity. The types of mutual funds available are no-load, load, NTF (no transaction fee), index funds, bond and target retirement funds, and others. The firms also allow options trading as well as investing in in ETFs and a majority of available bond securities.

All companies mentioned in this article are members of FINRA and have to comply to strict government rules. The client accounts are insured by SIPC for up to $500,000 per customer, including up to $250,000 in cash.

This article was updated on 3/3/2015.