Welcome offers make the first year you carry a credit card an especially lucrative one. After that, you’ll earn rewards for your spending, but nothing comes close to that influx of points worth potentially hundreds of dollars upon redemption.
However, a card’s terms and conditions might stop you from getting multiple new cardholder bonuses from the same issuer, which is the case for certain American Express cards. If you open a new AmEx card and earn a welcome bonus, you may not be able to earn a bonus from another AmEx-issued card within the same “family” later on.
Here’s how to navigate AmEx application rules when it comes to restrictions on new cardholder welcome offers.
AmEx card ‘families’
It helps to think of cards that offer similar benefits as “families.” A family of cards has a major thing in common, like what rewards currency they earn (travel points or cash back). They may all be part of a rewards program for a specific airline or hotel brand. Within families, you’ll find different tiers of cards. A more premium card will charge a higher annual fee in exchange for more rewards. A no-annual-fee card provides a lower-cost option, but that card won’t offer as many perks.
AmEx cards fall into several families, each with rules about how many bonuses you can get. If you’re ineligible to get a bonus, you’ll get a notification before your application is processed, so you can decide at that point whether or not to proceed.
These are the AmEx card families.
Membership Rewards cards
A number of AmEx cards earn Membership Rewards points, which can be redeemed for travel (including transfers to airline and hotel partners), statement credits, gift cards or purchases at participating merchants. There are two sub-families within this category:
For travel
The Platinum Card® from American Express: If you had this card before, or other versions of it including the Platinum Card from American Express Exclusively for Charles Schwab, the Platinum Card from American Express Exclusively for Morgan Stanley or previous versions, you may not be able to qualify for a welcome offer by getting it again.
American Express® Gold Card: If you had this card or any versions of The Platinum Card® from American Express before, you may not qualify for a welcome offer.
American Express® Green Card: If you had this card, the American Express® Gold Card or any versions of The Platinum Card® from American Express before, you may not qualify for a welcome offer. (All information about the American Express® Green Card has been collected independently and the card is no longer available through NerdWallet.)
Terms apply.
For everyday purchases
Amex EveryDay® Credit Card: If you had this card or The Amex EveryDay® Preferred Credit Card from American Express before, you may not be eligible for a welcome offer. (All information about the Amex EveryDay® Credit Cardhas been collected independently and the card is no longer available through NerdWallet.)
Terms apply.
Cash-back cards
AmEx issues several cards that earn cash-back rewards. The Blue Cash Preferred® Card from American Express and Blue Cash Everyday® Card from American Express earn elevated rewards in specific spending categories, while the American Express Cash Magnet® Card earns the same rate on all purchases.
American Express Cash Magnet® Card: If you had this card, the Blue Cash Preferred® Card from American Express or the Blue Cash Everyday® Card from American Express before, you may not be eligible for a welcome offer. (All information about the American Express Cash Magnet® Card has been collected independently by NerdWallet.)
Terms apply.
Airline cards
AmEx issues these co-branded Delta cards that earn rewards in the form of Delta SkyMiles:
Delta SkyMiles® Gold American Express Card: If you had this card, the Delta SkyMiles® Reserve American Express Card or the Delta SkyMiles® Platinum American Express Card before, you may not be eligible for a welcome offer.
Delta SkyMiles® Blue American Express Card: If you had this card, the Delta SkyMiles® Reserve American Express Card, Delta SkyMiles® Platinum American Express Card or Delta SkyMiles® Gold American Express Card before, you may not be eligible for a welcome offer.
Terms apply.
Hotel cards
The Hilton cards provide an exception to some of the rules you see with other AmEx cards. You can’t get a welcome offer on a card if you get that exact same card again, but you can get another card in the Hilton family and be eligible for that card’s offer.
Hilton Honors
Hilton Honors American Express Aspire Card: If you had this card before, you may not be eligible for a welcome offer. (All information about the Hilton Honors American Express Aspire Card has been collected independently and the card is no longer available through NerdWallet.)
Marriott Bonvoy
What you can do
Choose your card carefully
If you can only get one welcome bonus per card family, go for the card with the biggest bonus available. That may mean stomaching a higher annual fee (and the annual fees on some of these cards are no joke), but if you choose a card with other perks you’ll actually use, you can get more value out of the card while you carry it.
You can opt to downgrade the pricier card later on to another member of the family with a lower annual fee if you’d like to keep your account open for a lower cost. You won’t earn another bonus this way, however.
Look for targeted offers
Anecdotally, consumers may receive targeted credit card offers from AmEx without this lifetime language, meaning you may be eligible for another bonus despite carrying another card in that family. These offers arrive randomly, so pay attention to what you get in the mail.
Ask for a retention bonus
If you’re considering canceling a card once the annual fee is due again, call the number on the back of your card and ask about retention offers. You’re shut out of bonuses on other similar AmEx cards, but perhaps a kindly customer service representative can convince you to hold onto the card you have now with a waived annual fee or some extra rewards points.
There are more than 20,000 U.S.-listed stocks available to investors. You don’t need to buy all of them, but to build a diversified portfolio, you need exposure to a lot of them.
If you don’t want to spend hundreds of hours researching individual stocks, another option is to buy index funds — baskets of stocks that track broad-market indexes like the S&P 500.
Below, we’re looking at some of the best index funds that track the S&P 500 and Nasdaq-100 indexes.
5 of the best index funds tracking the S&P 500
Index funds work by tracking specific market indices. So you’ll need to know which market index you want your index fund to track before you start investing.
Here are some of the best index funds pegged to the S&P 500.
Index fund
Minimum investment
Expense ratio
Vanguard 500 Index Fund – Admiral Shares (VFIAX)
Schwab S&P 500 Index Fund (SWPPX)
No minimum.
Fidelity 500 Index Fund (FXAIX)
No minimum.
Fidelity Zero Large Cap Index (FNILX)
No minimum.
T. Rowe Price Equity Index 500 Fund (PREIX)
Data current as of market close on January 31, 2024. For informational purposes only.
Vanguard 500 Index Fund Admiral Shares (VFIAX)
This fund is also known as the Vanguard S&P 500 Index fund. It was founded in 1976 and is the granddaddy of all index funds. Like the other S&P 500 funds on this list, this fund gives exposure to 500 of the largest U.S. companies, which make up about 75% of the U.S. stock market’s total value.
Schwab S&P 500 Index Fund (SWPPX)
As research firm Morningstar notes, this is one of the cheapest S&P 500-tracking funds out there. Launched in 1997, this Schwab fund charges a scant 0.02% expense ratio and requires no minimum investment. That makes it attractive for investors concerned about costs.
Fidelity 500 Index Fund (FXAIX)
Founded in 1988 (formerly known as Institutional Premium Class fund), Fidelity removed this fund’s investment minimum so investors with any budget size can get into the low-cost index fund action.
Fidelity Zero Large Cap Index (FNILX)
In the race for the lowest of the low-cost index funds, this Fidelity fund made news by being among the first to charge no annual expenses. That means investors can keep all their cash invested for the long run.
T. Rowe Price Equity Index 500 Fund (PREIX)
Founded in 1990, the fund’s expense ratio is competitive with other providers. However, the $2,500 minimum may be steep for beginning investors.
Top 3 index funds for the Nasdaq-100
Here are some of the best index funds pegged to the Nasdaq-100 index.
Index fund
Minimum investment
Expense ratio
Invesco NASDAQ 100 ETF (QQQM)
No minimum
Invesco QQQ (QQQ)
No minimum
Fidelity NASDAQ Composite Index Fund (FNCMX)
No minimum
Data current as of Feb. 9, 2024. For informational purposes only.
Invesco NASDAQ 100 ETF (QQQM)
QQQM includes 100 of the biggest nonfinancial companies listed on the Nasdaq. It also includes at least 90% of the assets on the NASDAQ-100 index and is rebalanced quarterly.
QQQM has an expense ratio of 0.15%. For every $1,000 invested, you’d pay a $1.50 fee annually.
Invesco QQQ (QQQ)
QQQ holds 101 companies, tracks the NASDAQ-100, and has $151.51 billion in assets under management.
QQQ has an expense ratio of 0.20%. For every $1,000 invested, you’d pay a $2 fee annually.
Fidelity NASDAQ Composite Index Fund (FNCMX)
FNCMX aims to mirror the performance of the Nasdaq Composite index. The fund usually holds 80% of stocks included in the index. In addition to the typical sectors represented by a Nasdaq index fund (such as IT, consumer services and health care), FNCMX also includes the real estate and material sectors.
FNCMX has an expense ratio of 0.37%. For every $1,000 invested, you’d pay a $3.70 fee annually.
Frequently asked questions
What are some of the advantages of index funds?
Exposure to hundreds of stocks with a single purchase.
You can build a balanced, diversified portfolio with just a few index funds.
May be cheaper to buy and easier to research than individual stocks.
What are some of the disadvantages of index funds?
Distributions may generate income tax liability.
Some index mutual funds have large investment minimums.
Index funds can’t beat the market — they deliver the market return.
The author owned shares of Invesco QQQ at the time of publication.
The best travel rewards are the ones that get you where you want to go, and some do a better job of that than others. Airline miles can help you book free flights and hotel points can help you book free rooms, but transferable points (like Chase Ultimate Rewards and AmEx Membership Rewards) can do both — and more.
Here are six reasons why transferable points are at the apex of travel rewards, and why you should prioritize earning them over other types of points and miles.
1. Transferable points provide flexibility
Suppose you’re in the market for a new travel credit card and you’ve narrowed your decision to two choices: the first card earns points that can be redeemed with your favorite airline, while the second card earns points that can be redeemed not only with your favorite airline, but also with your favorite hotel chain. The cards are functionally identical otherwise. Which do you choose?
The second card is the obvious answer. The option to redeem with both airline and hotel partners makes the rewards you earn from it more useful, since they can meet a broader range of award travel needs. In short, the rewards earned by the second card are more valuable because they’re more flexible.
Transferable points programs expand on that premise by partnering with a variety of airline and hotel loyalty programs, giving you a diverse range of redemption options instead of just one.
Flexibility isn’t the only ingredient needed to add value, since making points transferable doesn’t necessarily mean transferring them is worthwhile. For example, you can transfer Hilton Honors points to more than two dozen airline partners, but in most cases the transfer ratio is a dismal 10:1 (i.e., 10,000 Hilton points becomes 1,000 airline miles).
That provides marginal value because it’s only useful in marginal situations, like if you urgently need a small number of miles to book a highly valuable award flight. While Hilton Honors points are technically “transferable,” their transferability doesn’t add much.
In contrast, the major transferable points programs generally offer neutral or favorable transfer ratios, as well as transfers that process quickly (or in many cases, instantly). That kind of flexibility adds more clear and consistent value.
2. Transferable points have greater upside
Suppose you’re booking a long weekend trip from Denver to San Francisco in the spring. You’ll be attending a wedding at the Hyatt Regency San Francisco and plan to pay out of pocket for your room there, but you have 60,000 United Airlines MileagePlus miles you can use to book your flight.
You want to arrive Thursday morning and return Sunday evening, so you search United’s website and find an itinerary that suits your needs for 32,200 miles and $11.20 in fees. You compare that with the cash price of $375.72 and calculate a redemption value of 1.13 cents per mile. That’s quite close to NerdWallet’s valuation of1.2 cents per mile, so you’re satisfied.
Now imagine that instead of United miles, you have a reserve of 60,000 Chase Ultimate Rewards points. Instead of being able to redeem them solely for United flights, you can transfer those points to 11 airlines and three hotels based on which one suits your needs and offers the best value.
For example, instead of booking with United, you could transfer points to Southwest Airlines and book a comparable (though not identical) itinerary for 27,577 points and $11.20 in fees, versus a cash price of $386.97.
Assuming you’re not bothered by the earlier outbound departure and you don’t have a strong preference for one airline, the ability to choose between them saves you about 4,600 points on your flight.
Alternatively, you could transfer points to Hyatt to book your stay at the Hyatt Regency San Francisco. The award cost is 17,000 points per night, totaling 51,000 points for your three-night visit.
Cash rates start at $323 per night, but the cheapest rates require advance purchase and are nonrefundable, while booking with points generally allows you to cancel with no penalty until two days before arrival.
A cash rate with a comparable cancellation policy totals $1,386.22 after taxes and fees, which yields a redemption value of over 2.7 cents per point (more than double what you’d get by redeeming for the United flights above).
This is just one example about a set itinerary, but it illustrates how the versatility of transferable points provides an upside when you’re not locked into specific travel providers.
Having more redemption options yields more opportunities to use points efficiently, which in turn raises the expected value of each redemption.
3. Transferable points have more favorable expiration policies
Many loyalty programs have expiration policies that can cause your rewards to vanish over time. While you’ll generally have 12 to 36 months to keep rewards active, some points and miles expire in as little as six months.
It’s easy to let rewards lapse and disappear in that timeframe if you’re not a frequent traveler and you don’t monitor your loyalty accounts vigilantly.
In contrast, transferable points generally don’t expire as long as your account remains open and in good standing. That means you won’t have to keep track of when you last logged activity in each loyalty program or take action to keep dormant rewards from expiring.
4. Transferable points offer lucrative transfer bonuses
Most transfers to airline and hotel partners are done at a 1:1 ratio, so transferring typically gets you the same number of rewards you put in.
For example, transferring 1,000 Chase Ultimate Rewards points to United Airlines gets you 1,000 United miles, or transferring 1,000 Citi ThankYou Rewards points to Wyndham Hotels gets you 1,000 Wyndham points. While exchange rates vary depending on the loyalty program and credit card you’re using, a 1:1 transfer ratio is the industry standard.
However, transferable points programs offer occasional transfer bonuses that boost the exchange rate, commonly by 20%-50%. Instead of the usual 1:1, every 1,000 points you transfer with a bonus could get you 1,200 to 1,500 points with the partner program (or in some cases, more).
These higher exchange rates can save you points when a transfer bonus aligns with your travel plans, since booking the trip you want requires fewer transferable points than it would normally.
Transfer bonuses also create opportunities to top up your loyalty account balances by sending points to the programs you use most (even if you don’t have immediate plans to redeem them).
5. Transferable points reduce the risk of devaluation
Loyalty programs change over time, and while they sometimes add features, lower award prices or introduce new redemption options that make rewards more valuable, the opposite is more common.
Devaluations are a regular occurrence among airline and hotel programs and sometimes take place with no warning. When your points or miles are suddenly in decline, you have little recourse.
Transferable points programs aren’t immune from devaluations; they add, remove and modify features just like airline and hotel programs.
However, transferable points are insulated from devaluation by the sheer number of available redemption options — when a single airline or hotel program devalues, other transfer partners are unaffected, so transferable points retain the bulk of their worth.
In short, earning transferable points is the award travel equivalent of diversifying investments: By having a share of many loyalty programs, you’re less affected by a downturn in one of them.
6. Transferable points offer alternative redemption options
Transfers to airline and hotel partners tend to be the most valuable use of rewards, but transferable points programs feature a variety of other ways to redeem them.
One is to book flights, hotels or other travel directly through the program’s travel portal, especially with programs that offer added value for travel portal redemptions. For example, Chase Sapphire Reserve® cardholders get 1.5 cents per point when redeeming through the Chase Ultimate Rewards travel portal.
Chase Sapphire Reserve®
NerdWallet Rating
Annual fee
$550
Some programs also offer added value when redeeming for cash equivalents like statement credits or gift cards. For example, the American Express Platinum Card for Schwab lets you redeem Membership Rewards points at 1.1 cents apiece for cash deposits to an eligible Charles Schwab account. Terms apply.
Even though cashing out yields a lower average return than transfers to travel partners, it’s nice to be given the option when you need it, as it’s one you generally don’t have with other points and miles programs.
Why you should be using transferable points
Among travel rewards, transferable points have the best chance to provide useful redemption options, yield a high return and retain their value over time.
That’s why they’re broadly prized above rewards from individual airline and hotel programs, and why earning them should be the focus of your award travel strategy.
How to maximize your rewards
You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2024, including those best for:
When it comes to your money, the more you know, the better equipped you are to make informed financial decisions. One piece of your overall financial picture that you may want to understand is how much you’re “worth.” This information can help you understand where you are with your finances now and what you need to do to reach your goals for the future.
Before we look at a net worth growth calculator table that shows you how you compare against other people your age, let’s dive a bit deeper into what net worth is and why it’s important.
What Is Net Worth?
You may hear this term being batted around in conversations surrounding billionaires, but in reality, everyone has a net worth. It’s simply a total of all your assets minus any debts you have.
Those assets can include cash, real estate, intellectual property, and other items like jewelry, stocks, insurance policies, and bonds. The cash may come from a job you have or from unearned income, such as your Social Security payment
Having a lot of assets does not necessarily mean you have a high net worth, particularly if you also carry a lot of debt. For example, you may have a million-dollar mansion, but if you have debts of $500,000, your net worth dwindles rapidly. 💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.
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How Does a Net Worth Calculator Work?
There are many personal net worth calculators available online, though you don’t need one to calculate your net worth. Just take the total amount of all your assets and subtract the total amount of your liabilities:
Assets – liabilities = net worth
Some calculators will also factor in future growth so you can understand what your net worth will be in the future, as the value of your assets grows.
Recommended: What Is Disposable Income?
How to Calculate for Net Worth
As you can see, it’s fairly easy to calculate your net worth, though it may take time to gather the values of all your assets, such as the current value of a piece of high-end jewelry. But once you do, you can add up all your assets and then subtract your liabilities to calculate your net worth.
What Is the Average American Net Worth?
Knowing your own net worth is one thing, but where does it stand against other people in your age bracket? Generally, people see an increase in their net worth the older they get, and it can be helpful to use a net worth percentile calculator by age to see your percentile rank.
For example, if your net worth was $100,000, you would be in the 46.92 percentile for people between the ages of 18 to 100. The median net worth for this age bracket is $121,760.
Here’s the average net worth by different age groups, according to the most recent data available from the Federal Reserve.
Age
Average Net Worth
18-24
$112,104
25-29
$120,183
30-34
$258,075
35-39
$501,295
40-44
$590,710
45-49
$781,936
50-54
$1,132,497
55-59
$1,441,987
60-64
$1,675,294
65-69
$1,836,884
70-74
$1,714,085
75-79
$1,629,275
80+
$1,611,984
Source: Federal Reserve’s 2022 Survey of Consumer Finances
Why Is Net Worth Important?
Calculating your net worth is smart because it can help you understand where you’re strong financially (maybe you have little debt) and where you’re weak (maybe you’ve overextended your credit to buy your home).
It may also help you make plans for the future. For example, if your net worth is high, you might explore strategies for reducing taxable income, such as contributing more to a tax-deductible retirement account. And if your net worth isn’t where you’d like it, you can take steps to improve it. 💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
How to Increase Your Net Worth
If you’ve used a liquid net worth calculator, or compared your net worth to the table above and don’t feel like your numbers are as high as you’d like them to be, you can do a few things to increase your net worth.
If your debt levels are high, you can increase your net worth by decreasing that debt. Get a plan for paying off credit cards, student loans, car loans, and home mortgages. Consider increasing the amount you pay on each slightly to shorten your repayment period and decrease the amount of interest you pay on these loans and credit cards.
Creating a budget is one way to keep tabs on your finances as you’re paying off debt. A money tracker app can help make the job easier.
If you don’t have an abnormally high amount of debt but want to increase your assets, you might explore making more money. If you’re still in the workforce and have the ability to make a career change, you might consider cultivating potential high-income skills that could help you command a higher salary.
If you’re retired, you could take on part-time flexible work.
Recommended: How to Negotiate Your Signing Bonus
Examples of Celebrity Net Worths
Not that you need to compare yourself to celebrities when it comes to net worth, but it can be fun to see how the other half lives. Keep in mind that while A-list celebrities often command millions of dollars for their work, they’re usually also smart with their money. They don’t typically blow their money on sports cars and mansions (though certainly some do). Many are financially responsible, investing in multiple income streams and spending responsibly.
Let’s look at the net worth of a few celebrities.
Reese Witherspoon
Reese Witherspoon didn’t limit her career to acting. She also founded a lifestyle brand called Draper James and a media brand called Hello Sunshine. Today her net worth is about $300 million.
J.K. Rowling
The well-known author of the Harry Potter books has an estimated net worth of $1 billion, and she’s the first author in history to reach this height. Before she was published, however, she struggled financially, which makes hers a true rags-to-riches story.
Jay-Z and Beyoncé
Superstar artists Jay-Z and Beyoncé reign supreme when it comes to net worth. Thanks to touring, albums, clothing lines, movies, endorsements, merchandise, and more, the couple’s combined net worth is $3 billion.
The Takeaway
You may not be able to match the likes of Jay-Z and Beyoncé when it comes to net worth, but knowing yours can help you make smart financial decisions for the future. To figure out your net worth, you can subtract the total amount of your liabilities from the total amount of your assets. You can also use a personal net worth calculator; some will even factor in future growth.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights—all at no cost.
See exactly how your money comes and goes at a glance.
FAQ
How do I calculate your net worth?
Net worth can be calculated by subtracting all your liabilities from your assets. In other words, subtract everything you owe (debts, loans, credit card debts) from everything you have (cash, property, real estate, jewelry, stocks).
What is a good net worth by age?
A “good” net worth depends on your financial goals and age. For example, the average net worth for 40-44 year-olds is $590,710. Yours may be higher or lower than this.
What net worth is considered rich?
According to a 2023 survey conducted by Charles Schwab, Americans need an average net worth of at least $2.2 million to feel wealthy. However, that amount varies based on where you live.
Photo credit: iStock/Kanatip Chulsomlee
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If you’re learning about the investing world, you might come across the term ‘index fund’ as they are a trendy way to invest these days.
Investing powerhouses like Warren Buffett and Tony Robbins wholeheartedly recommend investing in index funds. In fact, LeBron James recently asked Buffet for investing advice on CNBC, and Buffett said James couldn’t go wrong with investing in them for 30 or 40 years.
What is an index fund?
An index fund is a type of investment vehicle, available as either a mutual fund or an exchange-traded fund (ETF), that is designed to track a specific financial market index. Its goal is to replicate the performance of indices like the S&P 500 or Dow Jones Industrial Average.
How do index funds work?
Index funds achieve their goal by mirroring the composition of the index they track. This involves including a range of stocks or bonds in their portfolio that match those in the index, providing investors with diversified market exposure. The fund’s performance is directly tied to the performance of the tracked index, offering a balance of risk and return influenced by the overall market segment.
Index Funds vs. Mutual Funds vs. ETFs: Understanding the Differences
Index Funds: The Basics
Index funds are passively managed and aim to mirror the performance of a specific market index. They offer a diversified portfolio at a low cost, aligning closely with market returns.
Mutual Funds: Active Management
In contrast, mutual funds are often actively managed. Fund managers actively buy and sell stocks or bonds, attempting to outperform the market. This strategy incurs higher fees and presents a greater risk, but also the potential for higher returns.
Exchange-Traded Funds (ETFs): A Hybrid Approach
ETFs combine features of both index funds and mutual funds. Most ETFs are passively managed, like index funds, but they trade on stock exchanges, similar to individual stocks. This provides greater liquidity and trading flexibility. ETFs generally have a lower expense ratio than mutual funds and offer tax efficiency due to their unique trading structure.
Key Differences in Trading
A significant difference between index funds and ETFs is their trading mechanism. Index funds are traded at the end of the day based on their net asset value (NAV), while ETFs are traded throughout the day at market prices, offering more flexibility for investors.
Understanding Key Stock Market Indexes
Before delving into the world of index funds, it’s crucial to understand the benchmarks they often aim to replicate. Stock market indexes like the Dow Jones Industrial Average, S&P 500, Nasdaq Composite, and Russell 3000 serve as key barometers for the overall health and trends of the financial markets.
These indexes, each with their unique characteristics and components, are essential in assessing market performance and guiding investment strategies. In the following section, we will explore each of these prominent indexes in detail, shedding light on their significance and how they influence the composition and performance of various index funds.
Dow Jones Industrial Average
The Dow Jones, often simply called the Dow, is one of the oldest and most well-known stock market indices in the United States. It tracks the performance of 30 large, publicly-owned companies listed on the New York Stock Exchange (NYSE) and the NASDAQ.
The Dow serves as a barometer for the overall health of the U.S. stock market and includes leading companies across various industries, such as technology, finance, and consumer goods.
S&P 500
The Standard & Poor’s 500, commonly known as the S&P 500, is a broader stock market index compared to the Dow. It includes 500 of the largest companies listed on U.S. stock exchanges.
The S&P 500 is widely regarded as the best single gauge of large-cap U.S. equities and is used by investors as a benchmark for the overall performance of the U.S. stock market. The index is diverse, covering multiple sectors, which makes it a popular choice.
Nasdaq Composite Index
The Nasdaq Composite Index represents over 3,300 companies listed on the NASDAQ stock exchange, a global electronic marketplace for buying and selling securities.
This index is heavily weighted towards technology companies, making it a popular measure of the performance of the tech sector. It includes not only large-cap companies but also smaller, innovative firms, reflecting a broad spectrum of the tech industry.
Russell 3000
The Russell 3000 Index is a market-capitalization-weighted stock market index that aims to be a benchmark of the entire U.S. stock market. It tracks the performance of the 3,000 largest publicly-traded companies in the United States, which represent about 98% of the investable U.S. equity market.
The index is comprehensive and includes both large-cap and small-cap companies, offering a broad view of the U.S. stock market. The Russell 3000 is further divided into the Russell 1000 (large-cap companies) and the Russell 2000 (small-cap companies).
Pros and Cons of Investing in Index Funds
Pros:
Diversification: By investing in an index fund, you gain exposure to a broad array of securities, which mitigates the risk of focusing too heavily on individual stocks or sectors. This diversification is a key advantage, especially for risk-averse investors.
Cost-effectiveness: Index funds are known for their lower management fees, as their passive strategy requires less intervention and research, making them a cost-efficient choice for long-term investment.
Ease of use: These funds are straightforward, ideal for both novice and experienced investors. They eliminate the complexity of selecting individual stocks, providing a simple yet effective investment option.
Consistent returns: Historically, they have demonstrated a consistent performance, often rivaling or surpassing actively managed funds, especially when considering the impact of lower fees over time.
Cons:
Capped growth potential: While index funds aim for market-matching returns, this approach limits the potential for significantly outperforming the market, a possibility in more aggressive investment strategies.
Vulnerability to market shifts: Being tied to market indices, index funds are subject to the ups and downs of the market. During market downturns, these funds will also experience declines.
Static strategy: The passive nature of index funds means they don’t capitalize on short-term market opportunities that active managers might exploit, leading to potential missed gains.
Performance deviation: Some tracking error is possible in index funds, where the fund’s performance might slightly differ from that of its benchmark index, due to various factors like fund expenses or timing issues.
Overconcentration risk: Certain index funds, especially those weighted by market capitalization, may have significant exposure to larger companies, potentially overlooking smaller, yet promising, market segments.
How to Invest in Index Funds
Investing in index funds can be a straightforward process if you follow these steps:
1. Define Your Investment Goals
Consider what you aim to achieve with your investment in index funds. Are you seeking long-term growth for retirement, or are you interested in short-term gains? Understanding your financial goals will guide your choice of index funds.
2. Conduct Thorough Research
Research various index funds to find the one that best matches your investment goals. Look at factors like company size, geographic focus, industry sectors, and asset types. Remember, even a broad market index fund can offer ample diversification, as suggested by investment experts.
3. Choose the Right Index Funds
When selecting an index fund, prioritize low costs. Even small differences in fees can significantly impact long-term returns. Compare funds with similar objectives, and pay attention to their management costs.
4. Select a Purchase Platform
Decide whether to buy index funds directly from a mutual fund company or through a brokerage. Also, consider ETFs, which are similar to mutual funds but trade like stocks. Assess factors like fund selection, convenience, trading costs, and availability of commission-free options.
5. Make Your Purchase
Open an investment account (such as a brokerage account, IRA, or Roth IRA) to buy shares of the index fund. Determine the amount you want to invest based on your budget and the fund’s share price.
6. Monitor Your Investments
Regularly review your index funds to ensure they are performing as expected and align with your investment goals. Keep an eye on the fund’s fees and performance compared to its benchmark index. Adjust your investments if necessary.
Final Thoughts
Many financial experts, like Warren Buffett, highly recommend index funds as a way to invest. They offer the advantage of being liquid assets, and it may not require a significant amount of money to begin investing in them. Furthermore, as mentioned previously, they typically have low fees.
Index funds are also a conservative way to invest. Because they follow indices made up of many companies, you spread out the risk. If one company in the index has a terrible week, chances are there’s another company doing well enough to balance it out. When you invest in individual stocks with just one company, you don’t have that cushion if a company starts to do poorly.
Of course, as with any investment decision, do your research. Learn as much as you can about them and the costs associated with buying them before investing.
Frequently Asked Questions
Are index funds a safe investment option?
Yes, they are generally considered a safe investment choice. They offer diversification by tracking a broad market index like the S&P 500, which spreads risk across various stocks. This means if one stock underperforms, others may balance it out.
Additionally, their low expense ratios make them a cost-effective option. While no investment is risk-free, index funds tend to provide stable, consistent returns over the long term, making them a favored choice for many investors.
What is the average rate of return on index funds?
There are many index funds, so it’s impossible to list the rate of return as a whole. You can research the history of a particular index fund to see the returns in a specific year. However, it’s more beneficial to look at returns over the long term.
Historically, the market as a whole averages from 7-10% in returns. Some years, like during the 2008-2009 recession, show terrible returns, while others show spectacular returns.
Can you lose money with an index fund?
Yes. When you buy an index fund, you’re investing in the stock market. The market is unpredictable. You could lose money one day and earn money the next. Either way, financial experts still point to index funds as a good investment option, as they usually have substantial long-term returns and low expense ratios.
What is the best index fund?
There are many top-rated index funds. Of course, the best one depends on the timeframe in which one measures it. However, there are some that have shown a strong rate of return with low fees. Here are some examples:
Schwab S&P 500 Index Fund
Fidelity Spartan 500 Index Investor Shares
Vanguard 500 Index Fund Investor Shares
Vanguard Total Stock Market Index
Fidelity Total Stock Market Index
Again, no one knows which funds will perform the best in any given year. However, some of the companies listed above are known for low fees and solid financial products. Take your time to research the best brokerage company for you. Some require very little money to start investing, while others might require a lot more.
How do you make money with an index fund?
You earn money from an index fund primarily through capital gains and dividends. As the fund’s underlying stocks or bonds increase in value, the value of the fund rises, leading to capital gains.
When you sell your fund shares at a higher price than you bought them, you realize these gains. Additionally, many index funds distribute dividends received from the stocks within the fund to shareholders, which can be reinvested or taken as cash payouts.
Can I invest in index funds with a small amount of money?
Yes, you can invest in index funds with a small amount of money. Many of them have low minimum investment requirements, making them accessible to investors with limited capital.
As we near the end of year, it’s a good time to take stock of our credit cards and review which ones have benefits, requirements, or limits that reset at year-end. We’ll also examine which cards give you a quick double-dip credit when applying at year-end, and take a look at which cards to apply for now.
I’ve been doing this write-up with updates each year for the past number of years (2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015). This year again there were many changes. I updated what came to mind, and there are probably some we missed. Please drop a comment below if you notice any changes or inaccuracies changes and we’ll update accordingly.
Calendar Year Spend Limits
Blue Business Plus and Blue Business Cash cards earn 2x/2% everywhere on up to $50,000 in purchases per calendar year. (A report indicates this resets on January 1st, not the December statement close.)
Amex Gold card earns 4x points at US grocery stores up to $25,000 per calendar year. (Resets with December statement or December 31?)
Amex SimplyCash Plus earns 5% at office/wireless and 3% on your chosen category, up to $50,000 per calendar year for each of those. This resets on January 1st each year.
Amex Everyday Preferred $6,000 limit on the 3x grocery store category per calendar year. (Resets with December statement or December 31?)
Amex Everyday $6,000 limit on the 2x grocery store category per calendar year. (Resets with December statement or December 31?)
Blue Cash Preferred $6,000 limit on the 6% grocery store category per calendar year. This resets January 1 each year, not on the December close date.
Blue Cash Everyday $6,000 limit on the 3% grocery store category per calendar year. This resets January 1 each year, not on the December close date.
The Old Blue Cash card does not reset with the calendar year, it goes with your card anniversary.
The INK Plus/Cash and the INK Preferred years do not reset with the calendar year, it goes with the card anniversary.
Also, remember that the annual limits on points earned for credit card referrals by Chase (50,000-100,000 points, depending on the card) and AmEx (55,000 points/$550) will reset on January 1st. If you’re someone who does a lot of referrals, be sure to max out what you can before December 31 and then start referring again on January 1st.
Q4 Categories: Chase Freedom, Discover, Citi Dividend, and U.S. Bank Cash+ and a few other cards have quarterly categories. The current categories for Q4 will end on December 31. More details here. Likewise, the quarterly $2,500 limit on the Bank of America Cash Rewards card will renew on January 1. There are also some spend offers from Chase, notably the 10x Gas offer, which ends on December 31st.
You have until December 31st to max out your I Bonds purchases which are limited to $10,000 each calendar year.
List of all deals ending on December 31st can be found on our Deals Calendar.
Calendar Year Spend Requirements
Amex Hilton Surpass gets a free weekend night with $15,000 in spend within the calendar year, and gets Diamond status with $40,000 in spend within the calendar year.
Amex Hilton Honors business card gets a free weekend night with $15,000 in spend within the calendar year, it gets a second weekend night with a total of $60,000 in spend within the calendar year. It also gets Diamond status with $40,000 in spend within the calendar year.
Amex Hilton Honors gets Gold status with $20,000 in spend within the calendar year.
Amex Hilton Aspire gets a second free weekend night with $60,000 in spend within the calendar year. (First weekend night comes as a card benefit, and is based on card anniversary, not calendar year.
Amex Delta Reserve – both personal and business versions – earn 15,000 MQMs (18,750 MGMs for 2021 due to temporary bonus) and 15,000 bonus miles $30,000 in spend within the calendar year, and an additional 15,000 MQMs and 15,000 bonus miles if you spend a total of $60,000 within the calendar year.
Amex Delta Platinum – both personal and business versions- earn 10,000 MQMs and 10,000 bonus miles when you spent $25,000 in a calendar year, and an additional 10,000 MQMs and 10,000 bonus miles if you spend a total of $50,000 within the calendar year.
Amex Platinum consumer and business cards – spend $75,000 or more during a calendar year and receive complimentary Centurion lounge access for up to two guests per visit.
Barclay Jetblue Plus card earns Mosaic status with $50,000 in spend per calendar year.
Chase British Airways card gets the Travel Together Ticket benefit when spending $30,000 in a calendar year.
Chase Hyatt card gets an additional night if you spend $15,000 in the past year. This one has now changed to go based on the calendar year. Finish up your spending now if you’re trying to get the additional night and begin your spending for next year on January 1st.
Chase Hyatt cards offer elite nights with spend: the Hyatt consumer card gets 2 nights for every $5,000 spent; this does not reset at all. The Hyatt business card gets 5 nights for every $10,000 spent; this resets with the calendar year.
Citi American Airlines AAdvantage Platinum Select card gets $125 flight discount certificate after spending $20,000 or more – this goes with the cardmember year (based on 12 billing statements), not based on calendar year.
American Express Cards
Airline Credit
Amex Platinum personal, Platinum business, and Hilton Aspire cards have an airline incidental credit each year: $250 for the Hilton Aspire and $200 for the Platinum cards (see what counts here). Unfortunately, gift cards no longer trigger the airline incidental credits.
With these cards, the airline credit is based on the calendar year, not on the statement closing. You can put the airline incidental charges anytime until December 31 and have it count toward the current year. It might have to actually post before year’s end, though; give a few days for that to happen.
The Amex airline credit is different than the others in this list in that you only get reimbursed for incidental spend on your designated airline. Be sure to designate that before putting the charge on the card.
If you’re looking to apply, there is still time to do so and get the airline credit for the current year. The annual fee usually hits around a month after card approval – useful to keep in mind for maximizing the travel credits without annual fees and for triple-dipping. (For those applying in the final few days of the year, see this tip.)
Related: Opening a Schwab Brokerage, Checking, and Amex Platinum Credit Card before Year’s End
Platinum Hotel Credit
The Platinum personal card comes with a $200 annual hotel credit on select prepaid bookings with American Express Travel. Be sure to book before December 31st. You don’t need to complete your travel by that date.
Platinum Uber Credit
The Platinum personal card also comes with a monthly $15 credit, remember that it gets increased to $35 during the month of December.
Platinum Saks Credit
The Platinum personal card also comes with a $50 Saks Fifth Avenue credit twice per year: one from January to June and one from July to December. Be sure to use that up before the end of December. They only charge you after the item ships, so give some leeway here.
Platinum Business Dell Credit
The business Platinum card comes with a $200 Dell credit twice per year: one from January to June and one from July to December. Be sure to use that up before the end of December (along with the Amex Offer at Dell which expires then). Give some leeway for the charge to post by December 31.
Hilton Aspire
The Hilton Aspire card also comes with a $250 Hilton Resort Credit and a free weekend night. Those are based on the cardmember year, not calendar year.
2024 Changes:
The Hilton Aspire $250 resort credit is changing on 1/1/24 to become a $200 resort credit twice per year. This goes based on the calendar year – once for January through June and once for July through December.
The $200 airline incidental credit is also changing to become a $50 airline flight credit each quarter – this goes by the calendar quarter.
The Hilton Surpass card also now has a quarterly $50 credit purchases made directly with a property in the Hilton this goes based on the calendar quarter.
Amex Green
The Green personal card comes with an annual $189 CLEAR credit and annual $100 LoungeBuddy credit. These reset each calendar year, so you should be able to use the credit for this year anytime until December 31.
Other Credits
Bank of America
Premium Rewards
TheBank of America Premium Rewards card comes with $100 airline incidental credit (see what counts here). This resets based on the calendar year. Finish up your statement credit with this one by December 31 (buying AA gift card or United Travel Bank credit is easiest), and start using your new credit on January 1. I’ll buy a gift card right away in case they close that loophole. (Note, the airline incidental meter seems to take a few days/weeks until it shows the reset. While it should be internally reset on January 1st, you might want to wait until you see it reset to zero for the avoidance of doubt.)
Premium Rewards Elite
The Bank of America Premium Rewards Elite Visa card comes with an annual $300 airline incidental credit and $150 lifestyle convenience credit (including streaming services, food delivery, fitness subscriptions and rideshare services). These reset with the calendar year.
Be sure to use up your credits from this year now, and begin using next year’s credits after the new year begins. It can also make sense to apply now and try for a triple dip on the card benefits.
Barclay JetBlue
The Barclay JetBlue Plus card gets $100 calendar year credit for JetBlue Vacations bookings.
Capital One Venture X
The Capital One Venture X personal card offers a $300 credit for bookings made on Capital One Travel. This renews each cardmember year, it’s not based on the calendar year. Same on the Venture X Business card.
Chase Cards
Southwest
Earning 135,000 Southwest points earns you the Southwest Companion Pass. Credit cardholders only need to earn 125,000 miles. The best way to time yourself is to earn the miles at the beginning of the calendar year since Companion Pass continues for the next entire calendar year. For example, if you earn 125,000 Southwest miles during January 2024, you’ll have the Companion Pass for the rest of 2024 and the entire 2025.
The easiest strategy to earn the Companion Pass has always been by getting a credit card signup bonus on the Southwest credit card. In our case, you’ll want to apply sometime in the next couple of months, taking care to ensure NOT to meet the spend requirement until after January 1st. (Technically, you can meet the spend requirement during December, so long as the statement won’t close until after the 1st.) The signup bonus points on the two cards will post after you complete the spend in early 2024, and you’ll have a Companion Pass for nearly two years.
Southwest is currently offering a signup bonus of 75,000 points with $3,000 spend. You can also signup for a Chase Southwest business card and get 80,000 points after $5,000 spend. Or you can earn points by referring friends to the Southwest card, doing category spend, shopping portal spend, or an actual flight. Again, be careful with the timing on ALL points earned.
Many of us are not eligible for any of the Southwest cards at all due to the 5/24 rule, or because you’re a current Southwest cardholder of any version or because you got a bonus within the past 24 months.
$75 Southwest Priority Credit
The new Southwest Priority card comes with a $75 annual Southwest travel credit which runs on the cardmember year, not the calendar year. No need to use it up now, specifically.
Sapphire Reserve
TheChase Sapphire Reserve card comes with a $300 travel credit (see what counts here). This used to be based on the calendar year, but now it’s based on the cardmember year – no specific need to use this now.
And if you’re applying for a new CSR card, there’s no special reason to apply before year’s end. Whenever you apply, you’ll get just one travel credit during the first year (maybe you can squeeze a second credit in right after the year renews).
Those who got the CSR before May 21, 2017, are grandfathered into the old system where the travel credit renewal goes with the calendar year. (It’s based on the December statement closing, not December 31.) Be sure you’ve already used up your credit for this year, and remember that you’ll soon be able to begin using 2020’s credit.
The Chase PYB 1.25 redemption categories ends on December 31, though they are likely to get extended.
Also, remember each quarter to use up your $15 in DoorDash credits.
Sapphire Preferred
The Chase Sapphire Preferred card comes with a $50 annual hotel credit via the Chase travel portal. This resets based on the cardmember year, not the calendar year.
Ritz-Carlton
The Chase Ritz-Carlton card offers up to $300 reimbursements for airline incidental charges (see what counts here). Chase counts the benefit based on the calendar year, not cardmember year. (It goes based on the actual calendar year, not based on your statements.) Use the credits before December 31 and begin using next year’s credit on January 1.
IHG Cards
The Chase IHG card gets a free night each year. This does not reset with the calendar year, it goes with your card anniversary.
IHG cards also have spending thresholds of $10,000, $20,000, or $40,000 to earn Gold/Diamond status for the following year and to earn 10,000 bonus points (and on the Premier $100 credit). These spend requirements go by the calendar year.
The IHG Premier personal and business cards get $25 in United TravelBank credit twice per year: one $25 United TravelBank gets deposited around January 5, and another $25 around July 5. Requires registration first.
Hyatt
The Chase Hyatt cards get a free night each year. These do not reset with the calendar year, it goes with your card anniversary.
The Hyatt Business card gets $100 in Hyatt credits each year. This is based on card anniversary.
United Quest
The United Quest card gets up to $125 in statement credits as reimbursement for United purchases. This goes based on the card anniversary year, not calendar year. The card also offers up to 10,000 miles back for award flight bookings. Again, this goes with the cardmember year, not calendar year.
Citi
Prestige
The Citi Prestige card comes with a $250 travel credit (see what counts here). The year resets on January 1st. Be sure to give a few days leeway for the charges to go from pending to settled.
If you have a Prestige card, use up the credit now, there’s only a few weeks remaining. The Prestige card is not available for new cardmember signups at this time.
Rewards+
The Citi Rewards+ card comes with a 10% rebate on redemptions, up to 10,000 points bonus per year. This is based on your December statement close. Be sure to max out your 100,000 points redemption before your December statement closes so as to get the full 10k bonus. Redemptions that post on your January statement will count toward next year’s allotment.
Expedia+ Voyager
Those who have the Citi Expedia+ Voyager card get $100 annual credit toward airline incidentals on qualified airlines, Wi-Fi carriers, or for the Global Entry application fee. This credit resets each calendar year; be sure to use it up before your December statement closes as any purchases on your January statement will count toward next year’s benefit.
AAdvantage Platinum Select
The Citi American Airlines AAdvantage Platinum Select card gets $125 American Airlines Flight Discount certificate after spending $20,000 or more during your credit cardmembership year (every 12 months from the billing cycle after your anniversary month through the billing cycle of your next anniversary month).
Citigold
Those with Citigold relationship status with Citibank get an annual credit of either $200 or $400 toward subscriptions for Amazon prime, Spotify, Hulu, TSApre/GE, and Costco membership. This credit renews at the end of the calendar year. Be sure to use up your allotment before December 30th.
US Bank Altitude Reserve
The US Bank Altitude Reserve card comes with a $325 annual travel and dining credit. In this case, the travel credit goes based on the cardmember year, not the calendar year. No specific reason to use this now.
Wells Fargo Propel World
The Wells Fargo Propel World card has a $100 airline incidental credit (see what counts here).This credit goes based on the cardmember year, not the calendar year. Check when you applied and be sure to use it up by your anniversary date.
Smaller Banks
CNB Crystal
The CNB Crystal card offers a $350 annual incidental charges (see what counts here). CNB counts this based on the calendar year. Any spend until December 31 will count as part of the current year, and January 1 begins the next year. Be sure to complete your spend before December 31. Give a few days for the charge to settle before year’s end (though it reportedly works on the last day too).
HSBC Premier
The HSBC Premier World Elite comes with $120 annual Lyft credit which is based on the calendar year. Be sure to use these up before December 31.
PenFed Pathfinder
The PenFed Pathfinder comes with $100 annual air travel ancillary credit (see what counts here). The credit is based on the calendar year, be sure to use yours before the year is up.
As anyone savvy in personal finance knows, it’s never too early or too late to start thinking about retirement. An individual retirement account, or IRA, is a retirement account that allows you to save money for your golden years in a tax-advantaged way.
There are several types of IRAs—Traditional, Roth, SEP, and SIMPLE—with varying rules and benefits. With the right account, you can grow your savings, manage your tax burden, and prepare for a comfortable retirement.
6 Best IRA Accounts
Check out our top 6 picks for 2023‘s best IRA accounts. Let’s examine each one so you can decide quickly and easily which is best for you.
Charles Schwab
Charles Schwab offers one of the best IRA accounts available thanks to its superior customer service. The company offers 24/7 customer support as well as extensive resources about retirement planning.
Charles Schwab recently eliminated its commissions on stocks, EFT, and options trades. Standard trades are $4.95. So, you can begin investing commission-free, and there’s no account minimum to get started.
The company also offers a robo-advisor called Schwab Intelligent Portfolios. The company will invest your money in up to 20 different asset classes at no annual charge.
This feature alone makes Charles Schwab one of the best options for new investors and anyone who is looking for a low-cost investing option.
Merrill Edge
Merrill Edge is one of the best brokerages for hands-on investors. The company is owned by Bank of America, so it’s a great option for anyone who is already a customer of the bank.
And this means Merrill Edge customers also have the option to receive in-person customer service. If you live near any of the bank’s locations, you can receive in-person assistance at the bank.
Merrill Edge offers unlimited $0 online stock and ETF trades with no trade or balance minimums. The company also offers mutual funds for $19.95 per purchase, though some mutual funds are available for free.
And the online broker doesn’t have a minimum deposit requirement to open an account. So, it’s an excellent option for new investors and anyone who is looking for in-person customer support.
Betterment
Betterment works to automate and simplify the investment process and offers traditional, SEP, rollover, and Roth IRAs. This robo-advisor makes managing your IRA extremely hands-off while helping you save money on excessive fees.
What’s the pricing structure like?
You have two levels of service to choose from. The first is the Digital level, which comes with a 0.25% annual fee and no minimum balance. So if your first year’s balance is $5,000 your fee would be $12.50.
Because Betterment is a robo-advisor, it offers automatic rebalancing so that you’re always hitting your target allocations, even with a shifting market.
Their portfolios are globally diversified, and you can adjust your risk tolerance based on your preferences. Plus, Betterment implements automatic tax-loss harvesting to boost your after-tax returns.
Need to talk to a certified financial planner?
No problem, you can chat online with a licensed expert with no limit on the number of questions you ask. If you want even more advice and support, you can upgrade to the Premium level. The annual fee jumps to 0.40%, and you’ll need at least $100,000 to start your retirement account.
But you get holistic advice on all of your financial questions, not just those related to your Betterment investments. So in addition to chatting about retirement, you can also talk to your advisor about joint financial goals with your spouse.
You can also discuss college savings plans for your children, and new and existing investments.
If you’re interested in a “set it and forget it” mentality for your IRA, Betterment certainly provides that option.
Ally Invest
Ally Invest is a great option if you’re just starting to build out your IRA rather than rolling over existing funds. It’s also directed to individuals who want to manage their own investments.
There’s no account minimum to get started, and you can choose from multiple types, including Roth, traditional, rollover, SIMPLE, and SEP IRAs.
Account fees are fairly limited as well. You don’t have to pay anything to set up the account, and there’s no minimum account opening, so it’s easy for anyone to start saving. Ally also doesn’t charge an annual fee or an inactivity fee.
There’s a $50 fee if you decide to terminate your IRA account with Ally Invest. If you transfer your funds, you’ll have to pay an additional $50 as a transfer fee — plus the first $50 termination fee. There’s also a $50 conversion fee if you want to change from a traditional IRA to a Roth IRA or the other way around.
If you’re an active trader even with your IRA, then you’ll appreciate Ally’s low trading fees.
Stocks and exchange-traded funds (ETFs) are $4.95 per trade, but you can get that lowered to $3.95 if you trade at least 30 times each quarter or have a balance of $100,000 or more. Options fees start at $4.95 each plus $0.65 per contract, and that price also lowers with heavy quarterly trading activity.
If you don’t want the burden of actively trading your IRA portfolio, then look elsewhere for an IRA account. But if you like handling your investments regularly, then Ally Invest could be a strong contender for your IRA account.
Wealthfront
Wealthfront is a robo-advisor that’s growing quickly. Your first $10,000 is managed for free. Thereafter, you’re charged an annual management fee of 0.25%, regardless of how much you have in your account.
You do have to open an IRA with at least $500. The more friends you refer to Wealthfront, the more you access free services, like getting an additional $5,000 managed for free. You can choose from a few different IRA types, including traditional, Roth, SEP, and rollovers.
Where does Wealthfront shine?
The answer is in retirement analytics. Wealthfront has a retirement planning tool called Path. It lets you integrate your various retirement accounts across financial institutions so you can see an accurate and comprehensive picture of your overall retirement plan.
Wealthfront economists use projects for things like inflation and Social Security to help plan for a realistic future.
Considering a major life event or financial change?
Wealthfront’s Path program lets you see potential impacts of these types of scenarios, so you’re not surprised at how your retirement savings are affected. Plus, like other online robo-advisors, all Wealthfront investments provide tax-loss harvesting and portfolio rebalancing.
You don’t have to worry about tracking individual stocks and funds. Instead, you get to invest passively while Wealthfront’s analytics keeps track of your portfolio. With IRA options and other tools at your disposal, Wealthfront is a solid choice for hands-off retirement investing.
E*TRADE
E*TRADE offers a ton of financial products, and their IRA offerings are straightforward with low fees.
There’s a great balance of getting access to in-depth research and resources, while also having the option to let E*TRADE take on your account management.
You can choose from a traditional IRA, Roth IRA, rollover IRA, or one-stop rollover IRA. That last one lets you transfer existing IRA funds in a diversified ETF that is managed by professionals.
This adaptive portfolio takes advantage of the automation processes. It requires a $5,000 minimum deposit to get started and comes with an annual advisory fee of 0.30%.
If you’re an avid ETF trader, you can trade for free on more than 100 funds; otherwise, it’s $6.95. Like Ally, that number drops if you make 30 or more quarterly trades, costing just $4.95 per trade at that point.
Stock trades also cost $6.95 each, with the same discount available as ETFs. Fees vary on mutual funds, but E*TRADE offers more than 4,400 no-transaction-fee mutual funds.
If you’re happy working with certain restrictions on the funds you choose, you can get away with a lot of fee-free trading via E*TRADE. Plus, you don’t have to worry about a minimum opening balance for most IRA accounts.
The company has been around for decades and consistently gets strong ratings from external sources, so they have a strong reputation in the industry, which can be comforting for beginning investors.
Understanding Different Types of IRAs
Now that we’ve explored the best IRA accounts of 2023, it’s crucial to understand the differences between the various types of IRAs. Each one comes with distinct advantages and rules tailored to unique financial circumstances and retirement goals.
Whether you’re just starting your retirement journey or you’re well on your way, familiarizing yourself with these options can help you make informed decisions about your future. Here, we delve into Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs.
Traditional IRAs
Traditional IRAs provide a way to save for retirement with tax-deductible contributions. The contributions you make to a traditional IRA may lower your taxable income, meaning you’ll pay less income tax in the year you make the contribution.
You’ll pay taxes on your withdrawals in retirement. This type of IRA might be beneficial if you anticipate being in a lower tax bracket during retirement than you are now.
Roth IRAs
With Roth IRAs, you make contributions with after-tax dollars. This means you pay income taxes on contributions upfront, but qualified withdrawals in retirement are tax-free. Roth IRAs are attractive if you expect to be in the same or higher tax bracket in retirement.
Additionally, Roth IRAs don’t have required minimum distributions (RMDs) during the owner’s lifetime, a feature that can provide significant tax advantages.
SEP IRAs
SEP (Simplified Employee Pension) IRAs are for self-employed individuals and small-business owners. They work like a traditional IRA, allowing you to contribute pre-tax money, which grows tax-deferred until you withdraw it in retirement.
SIMPLE IRAs
SIMPLE (Savings Incentive Match Plan for Employees) IRAs are also for small businesses and self-employed individuals. They offer higher contribution limits than traditional and Roth IRAs but come with mandatory employer contributions.
Criteria for Selecting the Best IRA Accounts
As you embark on IRA investing, there are a few key factors you should consider when selecting the best IRA accounts.
Fees: Look for IRA providers with low or no annual account fees, low expense ratios on mutual funds or exchange-traded funds (ETFs), and no transaction fees. Even small fees can add up over time, eroding your investment returns.
Investment options: The best IRA accounts offer a broad array of investment options, including mutual funds, index funds, ETFs, bonds, and individual stocks. More options mean more opportunities to create a diversified portfolio.
Minimum balance requirement: Some providers require a minimum deposit to open an account, while others don’t have account minimums. This can be a barrier for new investors who want to start small.
Customer support: Excellent customer support can be invaluable, particularly if you’re new to investing. Look for providers that offer easy-to-use platforms, comprehensive educational resources, and responsive support.
Additional services: Some IRA providers also offer services like automated investing, financial planning, and wealth management, which can help you craft and stick to a retirement savings strategy.
Taxation: Understanding how different IRAs are taxed can help you optimize your retirement savings. For instance, traditional IRAs provide a tax deduction on contributions, but you’ll pay taxes upon withdrawal. Roth IRAs, on the other hand, don’t offer a tax deduction on contributions, but the growth and withdrawals are tax-free.
How to Open an IRA Account
Opening an IRA account is a fairly straightforward process, similar to opening a regular savings or brokerage account.
Choose an IRA provider: Decide whether you prefer an online bank, an investment firm, a robo advisor, or a traditional bank for your IRA. Each of these financial institutions offers unique benefits, so choose the one that fits your needs best.
Decide the type of IRA: Choose between a Roth IRA and a Traditional IRA based on your current income, future income predictions, and tax considerations. If you’re self-employed or a small business owner, you might consider a SEP or SIMPLE IRA.
Open an account: Visit your chosen provider’s website and select ‘open an account.’ You’ll need to provide some personal information, including your Social Security number, date of birth, mailing address, and employment information.
Fund your account: Decide how much you want to contribute to your account. Be mindful of the annual IRA contribution limits set by the IRS. You can fund your account through a transfer from a bank account or rollover from another retirement account.
Select your investments: Choose how your money is invested. Depending on the provider, you might be able to choose individual stocks and bonds, or you might select from a list of mutual funds or ETF trades. Some providers also offer target-date funds, which automatically adjust your asset allocation based on your age and retirement timeline.
Set up automatic contributions: If possible, set up automatic contributions to your account. Regular, consistent contributions can help your retirement savings grow over time.
Remember, it’s essential to regularly review your IRA to ensure it aligns with your retirement goals. Over time, you may need to adjust your contributions or rebalance your investment portfolio.
Common Mistakes to Avoid When Investing in an IRA
Procrastinating on opening an account: The sooner you open an IRA and start contributing, the more time your money has to grow. With the power of compounding, even small contributions can grow significantly over time.
Not contributing enough: Try to contribute the maximum amount to your IRA each year to take full advantage of the tax benefits and growth potential. If you can’t afford the max, aim to increase your contributions over time.
Investing in high-fee funds: Fees can eat into your retirement savings. Be sure to understand the expense ratios, management fees, and any transaction fees associated with your investments.
Not considering your tax situation: The tax benefits of Traditional and Roth IRAs are different, so consider your current and future tax situation when choosing an account. If you anticipate being in a higher tax bracket when you retire, a Roth IRA may be a better choice since withdrawals are tax-free.
Ignoring the income limits: Roth IRAs have income limits that can affect your ability to contribute. If you earn too much, you may be unable to contribute directly to a Roth IRA, though you might still be able to contribute to a Traditional IRA or execute a backdoor Roth IRA conversion.
Failing to update your beneficiary designations: Life changes, and so should your beneficiary designations. Make sure to review them regularly, especially after major life events like marriage, divorce, or the birth of a child.
Bottom Line
When it comes down to picking your IRA account, two of the most important factors are cost and your preferred management style. The two generally go hand in hand.
Do you want a DIY IRA that lets you do your own trading? You’ll need to compare online brokers and robo-advisors that offer free trades or lower-cost trade fees based on your trading activity.
Prefer a hands-off style? Think about how much money you’re likely to invest in the near term. Then, pick an IRA account that lets you go on autopilot while charging a flat annual fee.
For these types of IRA accounts, you’ll definitely want to dig deeper into how the financial advisors’ portfolios are chosen and whether their investment styles agree with your own.
Having any type of IRA can help you prepare for retirement. You can always transfer or roll over your funds into another IRA. However, choosing the best account in the first place can help prevent unnecessary fees.
And once you’re ready to retire, you’ll have a healthy nest egg helping you to finance your daily expenses.
Frequently Asked Questions
What is the maximum contribution limit for IRAs in 2023?
The maximum contribution limit for IRAs in 2023 stands at $6,500 for individuals who are under 50 years of age, and it’s $7,500 for those who are 50 or older. This represents a $500 increase from the 2022 limits for all age groups. It’s important to remember that these contribution limits apply collectively to your contributions to both traditional and Roth IRAs.
Can I have both a traditional IRA and a Roth IRA?
Yes, you can have both a traditional IRA and a Roth IRA. However, the total amount you can contribute to both accounts combined cannot exceed the annual contribution limit.
What is a backdoor Roth IRA?
A backdoor Roth IRA is a strategy for people whose income exceeds the Roth IRA income limits to still contribute to a Roth IRA. It involves contributing to a traditional IRA and then converting that contribution to a Roth IRA. There may be tax implications with this strategy, so it’s recommended to consult a certified financial planner or tax advisor.
Is the money I contribute to an IRA protected from loss?
No, the money you contribute to an IRA is not protected from loss. The value of your IRA is subject to market fluctuations and the performance of the investments within the account. It’s important to diversify your investments and align them with your risk tolerance and retirement goals.
Can I withdraw money from my IRA before retirement age?
Yes, you can withdraw money from your IRA before reaching retirement age. However, early withdrawals are subject to income tax and potentially a 10% early withdrawal penalty. There are some exceptions to the penalty, such as using the funds for qualified education expenses or a first-time home purchase. Be sure to understand the rules and potential tax implications before making an early withdrawal.
Are there any penalties for not taking distributions from my IRA?
Yes, there are penalties for not taking required minimum distributions (RMDs) from your traditional IRA. The penalty is 50% of the amount you should have withdrawn but didn’t. Roth IRAs, on the other hand, do not require minimum distributions during the owner’s lifetime.
Investing in the stock market has never been more accessible than it is today. Thanks to a wide array of online brokers, you can now trade stocks, ETFs, and other securities right from the comfort of your own home or even on the go. But with so many options available, how do you choose the right one?
We’ve broken down the top online brokers for stock trading, considering factors such as cost, user interface, customer service, and the range of available investments.
Whether you’re a seasoned investor or a beginner just looking to dip your toes into the financial markets, our guide will help you navigate this essential decision. Let’s get started!
7 Best Online Brokers
Check out our list of 2023‘s best stock trading platforms. You’ll find all the details you need in this accessible guide so you can get right to the good part: starting your trades.
Robinhood
Robinhood is a trading app that provides commission-free options, ETF, and cryptocurrency trades. For a long time, the company stood out as one of the few online stockbrokers offering commission-free trades, but it has become more common in the past year.
Robinhood is still one of the best online brokers for anyone looking to get started with investing. And it’s still one of the few apps that allows you to trade cryptocurrency.
Many people like Robinhood for its simplicity. There is no account minimum to get started and no annual fees. In addition, the company offers a web-based and mobile app and customer support options.
However, a common complaint about Robinhood is that the company’s offerings are very light on the research. And while the app is easy to use, there is very little offered in customizations.
Learn more by reading our full Robinhood review.
Charles Schwab
Charles Schwab requires you to start with a bit of skin in the game, with a minimum opening deposit of $1,000.
You can, however, check for promotions that often allow you to waive the minimum if you sign up for monthly $100 deposits. It’s an easy entry point for beginning trade enthusiasts.
When you’re ready to start trading with Charles Schwab, you can enjoy lower costs of just $4.95 per trade and $4.95 plus $0.65 per contract for options trading.
ETF lovers will appreciate the 200+ commission-free funds in addition to 3,000+ mutual funds with no transaction fees. In addition, you get to skip any kind of annual or inactivity fee on your account, but it’s $50 if you ever decide to close your account.
While you can choose from two different trading platforms, StreetSmart Edge is the more sophisticated version for frequent stock traders.
Don’t let the easy customization fool you. You can perform in-depth research and monitor your stocks with features like streaming market data and your account buying power.
Additionally, they provide countless reports, from its own equity ratings to third-party data from industry stalwarts like Morningstar, Market Edge, Capital IQ, and more.
For access to all of this at your fingertips anytime, anywhere, the mobile app carries just about all the same features as the web version.
Data-centric traders could definitely gain many insights by choosing Schwab for their online stock trading.
Fidelity
Fidelity may require a rather hefty minimum deposit of $2,500 but makes up for it with its attractive commissions.
It’s just $4.95 for each trade and the same amount for options, plus $0.65 per contract. This is a recent drop, so if you previously discounted Fidelity, it’s time to take a second look.
Do you want extensive NTF mutual funds? You’ll find about 3,600 with Fidelity. There are also about 91 commission-free ETFs, which is certainly encouraging but not the most we’ve seen.
One interesting feature with Fidelity is that you can do forex trading along with more standard securities. Like many of the brokerages we’ve reviewed, there are no account fees or inactivity fees.
Looking for a robust trading platform?
Check out Fidelity’s Active Trader Pro. To get access, you will need to make at least 36 trades in a 12-month period. If you fit the bill, you’ll get a fully customizable account with real-time streaming and market updates.
You can also look at historical trends and use the Strategy Ideas tool. It can even help you craft an exit strategy when the time comes.
In terms of additional research, Fidelity actually gets its research from over 20 firms, such as Recognia, McLean Capital Management, and Ned Davis. You can even get an aggregate picture from all the data available through Fidelity’s Equity Summary Score on each stock quote page.
Merrill Edge
Owned by parent company Bank of America, you can actually access all of your accounts from the same login if you’re a B of A customer.
This can be a huge draw for some, but Merrill Edge comes with both pros and cons, just like any other trading platform.
Let’s take a look.
First, Merrill Edge has excellent customer service and powerful research and trading tools.
Commissions are somewhat high, coming in at $6.95 for stock trades plus an extra $0.75 per contract for options. They offer 2,000+ NTF mutual funds, but unfortunately, don’t have any commission-free ETFs. This may be a deal-breaker for some traders.
You can, however, qualify for 30 commission-free trades on individual stocks or ETFs each month by meeting a balance minimum.
You can qualify if you have at least $25,000 in either a Merrill Edge self-directed account or a Bank of America cash deposit account.
E-Trade
You will need at least $500 to open up an E-Trade account, but many traders agree that the volume discounts and easy-to-use platforms are well worth it.
In fact, each platform appeals to two types of investors: beginners and more seasoned pros. So, it’s a great place to start with a bit of cash, which also allows you to take advantage of more sophisticated tools as needed.
But, there is a catch.
To upgrade from the basic E-Trade Web platform to the E-Trade Pro platform, you’ll need either a large account or an active trade history.
So, you’ll either need a minimum of $250,000 in your account or make 30 or more trades per quarter. If you do make that amount of quarterly trades, you can still qualify for some other benefits as well — including discounted commissions.
Just how much?
For stock trades, your commission per trade will drop from $6.95 to $4.95. For options trading, it’s typically $6.95 plus $0.75 per contract, but for active traders, your fee drops to $0.50.
And while you’ll enjoy 100+ commission-free ETFs and 2,500 no-transaction-fee mutual funds, any others cost $19.99.
Ally Invest
Known for their great customer service that’s available 24/7, Ally Invest is one of the best online brokers providing low barriers to entry in the trading game.
There are no account minimums and low commission fees. Not only are stock and ETF trades just $4.95 each, but you can also receive a discount when trading in volume.
The bottom line for getting cheaper trades?
Make either 30+ trades per quarter or keep a minimum of $100,000 in your brokerage account. That drops the commission fee to just $3.95 per equity trade. The standard options trade of $4.95 plus $0.65 per contract drops to $3.95 plus $0.50 per contract for active traders.
In addition to the traditional securities found at most online brokers, Ally Invest also offers forex and futures trading.
You can take advantage of free data if you make at least one forex trade within a 90-day period. Instead of paying a trade commission, you’ll instead be charged on your forex trades based on the spread markup.
What kind of platform can you expect from Ally?
There’s just one web-based trading platform, so you can log in from any device. Like most other online trading platforms, Ally’s gives you live-streaming of quotes and data plus a dashboard you can completely customize.
You can also access your brokerage account through their iPhone or Android mobile app.
Ally also shines when it comes to investing tools. Options traders, for example, can utilize the pricing calculator to compare current prices to forecasts.
You can also pick your own criteria within the strategy scanner to help identify various options strategies.
Interactive Brokers
Beginners beware: Interactive Brokers is an advanced online broker with a high account minimum to the tune of $10,000, so don’t jump into this one until you’re ready.
But if you’re 25 or younger, you can open an account with just $3,000. Still, you need to know what you’re doing because Interactive Brokers doesn’t house a huge resource pool for beginners.
Unlike most other online stock brokers on this list, Interactive Brokers charges commissions per share rather than per trade. So while you can get a volume discount, the standard stock trade costs are $0.005 per share.
There’s a minimum charge of $1 and a maximum of 0.5% of your trade value. Options trades also carry a $1 minimum and charge $0.70 per contract.
You may also be charged fees for certain situations. For example, if you have an IRA, you’ll be charged a quarterly fee of $7.50. If you’re inactive in your account, you may be charged a fee between $3 and $20.
Interactive Brokers has about 30 ETFs to choose from that you won’t pay commissions on. There are, however, almost 3,000 NTF mutual funds available for trading. They also offer forex trading, but you’ll need at least $10 million in assets to access this feature.
Best Online Stock Trading Platforms FAQ
How much do online brokerage firms charge?
For active traders who want to minimize costs, an online stockbroker can save you a lot compared to a traditional brokerage. When you go with a full-service brokerage, you’re usually charged a percentage of the trade amount. With a discount brokerage account, you pay a low commission on every trade.
But with an online brokerage account, you typically get charged a flat fee for each trade, which can save you a lot over the long run. Depending on the type of transaction, you can expect to pay anywhere between $5 and $20 per trade.
What is the best stockbroker for beginners?
Most beginner traders incur losses because of several factors, including choosing an unsuitable online broker. Consequently, it is advisable to start with a platform designed to make trading easier. Some factors to consider when choosing an ideal platform for beginners may include:
Dedicated advisers to help you make better decisions through comprehensive analysis and one-on-one guidance.
A demo account with which you can practice as you learn and prepare for real-life trading.
A dedicated customer support desk to help you overcome complications with the platform or the markets.
Learning materials to familiarize you with the platform and the markets (fortunately, most offer updated learning materials).
A diverse range of trading options.
An easy-to-use trading interface.
Affordable fees and account minimums.
This guide includes excellent online brokers for beginners, such as Robinhood and Charles Schwab. However, don’t be afraid to cast your net further as you look for the ideal platform for your needs.
Which online trading platform is best?
All online trading platforms advertise themselves as the best. However, some offer better trading options and overall superior quality of services than others. Additionally, you will find that some platforms suit your investment needs and preferences better than others.
Consequently, it is advisable to consider what each platform offers based on your needs. Some questions to ponder when choosing an ideal online brokerage platform may include:
What do I know about online trading?
Will I need someone to guide me through some (or all) of my trades?
How much money do I need to invest?
Can I trust the platform with my money?
For example, you will need a beginner-friendly online broker if you are new to trading. Additionally, a platform that requires a high account minimum may not be right for you if you don’t have a lot of money to start with. You will also benefit from our guide on choosing a suitable online broker as you continue reading.
What is the most profitable trading platform?
It is true that some trading platforms offer better investment options and terms than others. However, it is a common misconception that some platforms can make you more money than others. While some platforms can save you money, but they will not automatically make you more money.
How much money you make on any trading platform depends on your overall trading strategy and accuracy. Online brokers don’t influence market directions—the markets do!
Here are some tips on how to develop a winning and profitable trading strategy:
Take classes about stock trading (and investment in general) before diving in with the sharks. You want to continue to learn throughout your trading career.
Always have a trading plan, including comprehensive money management criteria for every trade. It is also a general rule of thumb never to trade more than you can afford to lose.
Leave emotions out of trading and treat it like a business (one that can change your life if managed well).
Take advantage of trading tools and other technologies to improve your accuracy and timing.
Know when to stop trading and always use a stop loss.
This FAQ includes a comprehensive guide on choosing an ideal online trading platform. Fortunately, there are hundreds of high-quality online brokerage platforms.
Which online broker has the lowest fees?
Some online brokers charge exorbitant fees, while others charge pennies. To this end, you can save thousands of dollars per year by choosing an online broker that offers affordable fees.
With such variation, it is critical to identify your broker’s fees for different services and do the math. Most people focus on commissions. However, it’s also important to consider charges such as margin rates, finance rates, spreads, and conversion fees.
Traders looking to work with online brokers charging minimum fees may be interested in discount brokers. This is because a discount broker executes orders at a fraction of what other stockbrokers charge. As a result, discount brokers are wildly popular and constitute a considerable portion of the fintech industry.
However, it is worth noting that discount brokers don’t offer a full range of services. Most notably, they don’t provide investment advice, unlike full-service brokers. Consequently, the cost savings may not be worth it unless you are an excellent trader with a winning strategy.
What does a stockbroker do?
A stockbroker executes orders in the stock market on behalf of clients like yourself. Stockbrokers also offer their clients sound financial advice, but they are obligated to follow their clients’ directions. They are also commonly called investment advisors or registered representatives.
You must be fully qualified and licensed to work as a stockbroker. Additionally, you must be a member of a stock exchange (such as the New York Stock Exchange) to buy or sell on their platforms. Consequently, not everyone can buy or sell directly from the platform. Stockbrokers function as the go-between as their license automatically qualifies them as members.
Interestingly, many stockbrokers today mainly specialize in financial advisory and planning, thanks mostly to the rise of online stockbrokerage platforms. These platforms have eased access to the stock markets. Essentially, anyone with access to the internet and genuine interest in the markets (and some capital) can start trading in minutes.
Should I hire a stockbroker?
Trading stocks and other securities has never been easier, thanks mainly to the rise of online brokerage platforms. To this end, it is common for many people to view stockbrokers as redundant. However, they are not. Even experienced traders ensure that they always have a stockbroker on speed dial.
So, why should you hire a stockbroker? Here is an overview of three irrefutable reasons why a stockbroker could be invaluable:
First, stockbrokers can read the markets with accuracy. They can also give you tips on profitable trades before the rest of the market can dilute the trend.
Second, stockbrokers can manage all of your investments if you don’t have the time to do it yourself. This allows you to facilitate a passive investing strategy and potentially lucrative passive income.
Finally, stockbrokers can give you deep financial advice that extends beyond investing. This can help you better manage your personal and business finances.
Ultimately, a stockbroker’s services pay their fees several times over if you put their advice to good use. However, it is prudent to pick a competent and intelligent stockbroker to ensure that you get sound investment and financial advice.
How do I choose an online brokerage?
Online brokerage platforms make it easy and affordable for anyone to trade stocks and other securities. There are hundreds of online brokers, and some offer better terms and services than others. Hence, it is advisable to choose your online brokerage platform wisely. Here is an overview of three factors to consider when choosing one:
Account Fees & Minimums
All online brokers charge fees to use their platforms, just like you would pay a stockbroker. Additionally, many online brokerage firms require their clients to maintain a minimum amount of money in their accounts. Therefore, it is advisable to ensure that the amounts in both cases are low and affordable.
Investment Options
It is always advisable to diversify your investments across multiple securities and other investment options to spread (and minimize) risks. Consequently, it is vital to ensure that your chosen online broker provides access to as many securities as you need. Some of the main investment options include stocks, mutual funds, ETFs, bonds, and cryptocurrencies.
Support
Trading stocks can prove complicated, and most people find themselves wishing that they had a professional to guide them. Fortunately, many online stockbrokers offer access to individual stockbrokers for one-on-one investment and financial advice.
Stock Trading Fees Explained
You have to pay to play in the stock market, metaphorically speaking. You pay for the services provided by online brokers or brokerage platforms when you trade stocks. Stock trading fees come in varying types, and some of the most notable ones include:
Commission
Most brokerage platforms charge a commission for every trade, which is usually a dismal fraction of the trade’s cost. The commission can be charged as a flat fee or based on the volume of your trades. However, it is worth noting that more and more online brokers are eliminating commissions.
Spread
The spread is the difference between the bid and ask prices. Ideally, you would incur a loss if you bought and sold a trade simultaneously. This loss depends on the difference between the sell and buy prices.
Finance Rate
A finance rate refers to the cost incurred when you hold a leveraged position for longer than 24 hours. A leveraged position essentially is borrowed money, and your broker will charge you interest for this loan in the form of a finance rate.
Margin Rate
Trading on margin entails trading using money borrowed from the broker. The broker will also charge interest on this money in the form of a margin rate.
Conversion Fee
Do you need to convert your money to another currency to start trading? The broker will charge you a small conversion fee every time you convert currency for deposits or withdrawals.
How much money do you need to start investing?
It is easier than ever for folks to start investing, and often you can start with as little as $500. Some online stock brokers don’t require any account minimums at all. Where they do, the minimum investment amount will depend on your broker and the type of investment.
For example, most mutual funds have minimum investments of around $1,000, so if mutual fund trades are a priority for you, keep that in mind.
Is Stock Trading Safe?
While it is generally safe to trade stocks, that doesn’t mean there aren’t risks involved. The best trading platforms will work hard to keep you informed and minimize those risks.
As an online trader, it is also your responsibility to practice good security habits. Use the same security steps with a brokerage account that you would with your bank account. Additionally, always use common sense when trading.
What Are the Risks of Online Trading Platforms?
By virtue of being an online activity, there are several risks involved when you trade with online stock brokers. Let’s take a look at the most common risks:
Identity theft: As is the case for any online account you use, it is possible for your brokerage account to be hacked by scammers who obtain your personal identifying information. This is why it’s always vital to keep your passwords secure. You should also use two-factor authentication wherever possible to protect your accounts.
Computer viruses and malware: It’s important to ensure that the computer you use to access your brokerage account is always clean, secure, and free of malware. Hackers can use spyware to gain access to your passwords and personal information. So, protecting yourself means using a quality anti-virus program and performing routine checks.
Data breaches: Data breaches are a major risk for companies and customers alike, and unfortunately, they seem to be on the increase. As a customer, the most critical step you can take to protect yourself here is to only do business with reputable companies. Ideally, you want to choose one that has never had a previous data leak.
Phishing schemes: This often comes in the form of an email or text message which claims to be from your brokerage firm, but is actually an elaborate scam. Always pay close attention to the details in any communication you receive from your online stock broker. Never click on any links until you are certain the sender is legitimate.
Bottom Line
Your online stock broker is your gateway to investing, so it’s not a decision to take lightly. When searching for an online stock broker, it’s important to consider your unique investment needs.
You’ll need to compare costs, available investment options, account types, and how well the stock broker works for your investment style. Any of the online stock brokers above could be a great fit for your investing and trading goals.
In your search for online brokers for stock trading, make sure you take the time to figure out your priorities. Then, you can find a brokerage account that truly serves you. There are a lot of great online stock brokers out there, but being clear about your goals will make it easier to choose.
Ready to get started investing but not sure where to start? We’ve compiled a list of the best online stock brokers for beginners that we recommend for 2023.
Whether it is customer service, affordability, or platform versatility, each of these online brokers shines in its own way.
Be sure to compare the most important differentiators, such as trading costs and account minimums before you make your choice. As a beginner, you may also place more value on educational resources and customer support while you’re still learning the ropes.
6 Best Online Stock Brokers for Beginners
Robinhood
Robinhood is aptly named, offering commission-free stock and ETF (exchange-traded funds) trades. Not just some of the time—all the time.
On top of this, they don’t have an account minimum. If you want to get started trading, there’s no reason to wait. Robinhood also offers fractional shares.
Robinhood has a great mobile app team. It’s so good there’s no reason for you to ever hop on a PC. It takes new investors five minutes to set up and only an hour for them to activate your brokerage account.
By industry standards, that’s pretty fast. (Keep in mind this is a brokerage account, not a Twitter account you’re setting up.)
When you transfer $1,000 to Robinhood, it is available immediately for you to invest. If you upgrade to Robinhood Instant (a free upgrade), any proceeds you make from selling stocks or ETFs can be immediately used to buy stocks or ETFs elsewhere.
Read our full review of Robinhood.
Merrill Edge
Merrill Edge is a great option for beginning investors. You can open an account with $0 minimum investment. They also offer excellent customer service, strong education and research, and low fees.
You can get unlimited free online stock, ETF, and options trades with their Preferred Rewards program, or pay just $2.95 per trade with no trade or balance minimums.
Merrill Edge offers flexible tools with customizable features and the best part is they are there to guide you step-by-step.
They have dedicated advisors who will work with you one-on-one to help you build a comprehensive financial strategy.
Their advisors can give you recommendations based on your needs to help you grow and preserve your wealth.
If you prefer to meet with them in person, Merrill Edge has over 2,000 Bank of America locations where an advisor will be more than happy to work with you.
Charles Schwab
There are only a few online brokers out there where we can honestly say are well suited for both beginning and advanced investors, but Charles Schwab is one of them. It has the tools to satisfy anyone, no matter their level of expertise.
Are ETFs your thing? Charles Schwab offers over 200 commission-free ETFs. Are you an absolute beginner? Schwab objectively selects what it believes to be the best ETF in every category, so you don’t have to go down rabbit holes of information and research.
On top of this, if you are just starting to build your portfolio, Schwab also offers recommendations based on your chosen risk tolerance. Take the safe road and know that your money is in good hands.
If you need to speak with a representative, you may do so no matter the time of day, via phone or online chat. That said, Schwab is a full-service broker that has a pretty large brick and mortar presence. You can schedule an appointment to speak with a representative or attend invaluable workshops.
A downside to Schwab is that they do have an account minimum. While several online brokers we’ve discussed require no account minimums, Schwab does require that its investors maintain at least $1,000 with them.
If you don’t have that, you can have the minimum waived when you sign up for an automatic monthly deposit of $100.
Vanguard
Perhaps one of the best online stock brokers for low-cost investing, Vanguard is frequently utilized by buy-and-hold and retirement investors with high account balances.
Its expense ratios on index funds and ETFs are quite below the national average, so it is the go-to broker for long-term investors.
Retirement-minded investors can find many resources with Vanguard through its website. They list safe and healthy investment options that promise long-term growth.
It also gives helpful hints on where you should prioritize your time and energy if you’re just getting started.
They also have a sophisticated program that can estimate when you’ll be able to retire and can help calculate your monthly expenses (sudden or otherwise) once you do.
If you have some money to invest, you can save by choosing Vanguard. For brokerage accounts with at least $50,000, trades only cost $7 regardless of how big they are. When the brokerage account hits $500,000, trades only cost $2. When it surpasses a million dollars, many trades become free.
Want to make active trades? Keep looking.
If you’re an active trader and don’t have nearly that amount of money lying around, however, Vanguard isn’t the best stock broker. It doesn’t have any software to support its traders (meaning there aren’t any trading tools or platforms to utilize).
Furthermore, investors who frequently trade (say, more than 25 times a year) are penalized with fees (assuming, of course, they don’t have $1 million invested with Vanguard).
Fidelity
With low $4.95 commissions per trade, Fidelity is one of the most affordable online stock brokers, considering what it offers to its customers.
Utilizing top-notch research from over 20 companies, Fidelity provides its investors with some of the best investment advice that money can buy.
It could be a lot of information to wade through, but after a few quick questions, Fidelity can match you up with providers that resonate with your personal investment style.
Though it’s not considered the best customer support in the industry, Fidelity still offers some pretty sharp service for its customers. Investors can meet with representatives in physical branch locations, as well as attend investor seminars throughout the year for free.
The seminars cover a wide array of topics, such as Social Security and technical analysis. Plus, if in person doesn’t appeal to you, you can still study and expand your knowledge via webinars.
Looking for a solid online broker? Fidelity is truly among the best.
It offers both online and mobile support, and if you are an active trader, you can even get real-time feeds displayed on your desktop. Each trading platform is intuitive and easy to use and provides tools to help you get a leg up on your competition.
For those interested, Fidelity also offers a premium tool called Wealth Lab Pro, which offers customizable strategies and 20 years of historical data.
Ally Invest
If you’re a seasoned investor, you may never have heard of Ally Invest, but its newness to the scene shouldn’t make you discredit it.
In 2016, Ally invest bought out TradeKing and has only recently emerged into the online brokerage game. That said, it’s quickly become very clear that everything that was great about TradeKing has only gotten better.
Ally offers automated portfolio management and forex trading. There is no account minimum, commissions on trades are $4.95.
Are you a frequent investor?
Ally Invest offers discounts to members who trade 30 or more times per quarter. At that point, the fee drops to $3.95.
Whether you use a PC or a smartphone, Ally has a great online stock trading platform for its users. Trade fast, get current, 24-hour quotes and data, make your own unique dashboard, and get a diverse set of trading tools at your disposal.
Here are some of our favorite helpful features:
Profit-and-loss calculator
Maxit Tax Manager, which informs you of any changes to your taxes based off of trades
Probability calculator to tell you of the likelihood of your desired targets for each share
Worried about trading from work? Don’t be. Ally Invest’s web platform doesn’t require you to download anything.
Simply log in and you are ready to trade. Considering everything they offer online, this is quite an achievement in and of itself.
Why Beginners Should Consider Online Stock Brokers
Diving into the world of stock trading can be both exciting and intimidating. As a beginner, you might have certain apprehensions, especially with traditional stock trading often being associated with experienced and wealthy individuals.
However, with the advent of online brokerages, the investment landscape has dramatically transformed, making it more accessible for everyone. So why should you, as a beginner, consider going the online route? Let’s break it down.
Leveling the Playing Field
Traditionally, stock trading was a complex system with many barriers to entry. It was time-consuming, requiring regular phone calls with brokers, and often demanded a substantial initial investment.
However, online stock trading platforms have simplified this process, allowing anyone with an internet connection to participate in the market. They’ve effectively democratized stock trading, enabling a broader demographic to engage in investment activities.
Cost-Effectiveness
Cost has been one of the biggest hurdles for beginners interested in stock trading. High brokerage fees were once a significant barrier to entry. Online stock brokers have dramatically reduced this burden by offering lower trading fees compared to their traditional counterparts.
Many even offer commission-free trades, which is especially beneficial for those who are just dipping their toes in the investment waters and may not have a significant amount to invest yet.
Flexibility and Control
With an online broker, you get the advantage of real-time trading from the comfort of your home, or anywhere else for that matter. You have more control over your trades, with the ability to review and modify your orders whenever you see fit. This flexibility can be a game-changer for beginners who are still learning the ropes and need the freedom to make adjustments as they see fit.
Access to Tools and Education
Most online brokers provide a wealth of resources to help you understand the stock market better. These resources often include educational articles, webinars, video tutorials, and even simulated trading environments. You can learn at your own pace, apply your knowledge in a risk-free environment, and then proceed with more confidence when you’re ready.
Busting the Myth: Stock Trading is Not Just for Experts
You might be thinking, “Sure, these benefits sound great, but isn’t stock trading still a field best left to the experts?” This is a common misconception, but it couldn’t be further from the truth. While knowledge and experience undoubtedly play a role in successful investing, the barrier to entry has significantly decreased with online brokerage accounts.
They’ve built platforms that cater to investors of all experience levels, with easy-to-use interfaces, educational content, and customer support to guide you through your investment journey. In fact, the rise of online trading has given birth to a new generation of investors who’ve started with little to no knowledge of the stock market.
Choosing Your Online Broker: Essential Criteria to Consider
Selecting an online broker as a beginner can seem daunting. However, by focusing on the right criteria, you can make a well-informed decision that suits your individual needs and goals. Here are the key factors you should consider when choosing your online stock broker.
User-Friendly Platform: Navigate with Ease
As a beginner, the last thing you want is to grapple with a complicated platform while trying to understand the intricacies of stock trading. Hence, a user-friendly interface is essential.
An intuitive platform will make navigation a breeze, allowing you to focus on your investment decisions rather than struggling with complex tools. Look for brokers that offer clear layouts, easy-to-find features, and streamlined processes for trading.
Educational Resources: Your First Step Towards Mastery
Education is paramount when you’re embarking on your investment journey. The best online brokers provide a variety of learning materials, including tutorials, webinars, articles, and even a glossary of trading terms.
These resources can help demystify complex financial concepts, making it easier for you to understand market trends and make informed decisions. Ensure the broker you choose places a strong emphasis on education and continuous learning.
Customer Support: Guidance When You Need It
No matter how user-friendly a platform is, you’re likely to encounter queries or issues that need resolution. This is where robust customer support comes in.
A good online broker should offer responsive, efficient, and friendly customer service, ready to assist you via multiple channels – be it phone, email, or live chat. Remember, as a beginner, having readily available support can be a significant confidence booster.
Fees and Commissions: The Impact on Your Investments
Even the smallest fees can add up over time and eat into your returns. So, it’s essential to understand the fee structure of any online broker you consider. This can include trading fees, account maintenance fees, withdrawal fees, and more. Many online brokers now offer commission-free trades, which can be particularly advantageous for beginners starting with a smaller investment.
Account Minimums: Barrier or Welcome Mat?
Some online brokers require you to deposit a minimum amount to start trading. This can be a hurdle for beginners who are looking to start small. Therefore, finding a broker with low or no account minimums can be a significant advantage when you’re just getting started. It allows you to dip your toes into investing without committing a substantial sum upfront.
Diverse Investment Options: The Power of Choice
While you might start with trading stocks, having a range of investment options can be beneficial as you grow and diversify your portfolio. Look for an online brokerage account that offers a variety of investment products, such as bonds, ETFs (exchange-traded funds), mutual funds, and more. Having these options at your disposal allows for more flexibility in your investment strategy.
Security: Safeguarding Your Investments
With the increasing number of cyber threats, security has never been more critical. You want to ensure that the online broker you choose uses top-tier encryption and security measures to protect your personal information and investments. This can include two-factor authentication, biometric recognition, and advanced encryption technologies.
Tips for Getting Started With Online Stock Trading
Stepping into the world of online stock trading can be thrilling. The possibility of seeing your money grow can be enticing, but it’s also crucial to approach this journey with a strategic and educated mindset. Here are some practical tips to get you started on the right foot.
Understand Your Investment Goals
Before you make your first trade, take some time to understand your investment goals. Are you saving for retirement, a down payment on a house, or your child’s college education? Having a clear idea of your goals will help you make informed decisions about the type of investments you want to make.
Start Small and Gradually Increase Your Investments
As a beginner, it’s wise to start small. You might be eager to dive in, but starting small allows you to get a feel for trading without risking too much. As you become more comfortable and experienced, you can gradually increase your investments.
Diversify Your Portfolio
Don’t put all your eggs in one basket. Diversification, or spreading your investments across a variety of assets, is a key strategy to manage risk. By diversifying your portfolio, you can protect yourself from significant losses if one of your investments underperforms.
Practice with a Demo Account
Many online brokers offer demo or “paper” trading accounts. These accounts allow you to practice trading with virtual money. It’s a great way to learn the ropes, try out different strategies, and understand the dynamics of the market without risking real money.
Keep Emotions in Check
Investing can be an emotional rollercoaster. The value of your investments can go up and down, but it’s crucial to stay calm and stick to your investment plan. Avoid making impulsive decisions based on short-term market fluctuations.
Develop a Disciplined Investment Strategy
Having a disciplined investment strategy means making thoughtful and researched decisions rather than chasing ‘hot’ tips or trends. This strategy involves regularly reviewing and adjusting your portfolio, reinvesting dividends, and not being swayed by market volatility.
Embrace Continuous Learning
The investment world is dynamic and ever-changing. Make an effort to learn continuously about different investment products, market trends, and trading strategies. Take advantage of the educational resources offered by your online broker.
Consult a Financial Advisor
While online stock trading can be done independently, consulting a financial advisor can be beneficial. They can provide personalized advice tailored to your financial goals and risk tolerance.
Frequently Asked Questions for Online Stock Trading Beginners
Here are some commonly asked questions that beginners often have when they’re starting out with online stock trading.
What is a brokerage account?
A brokerage account is an arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through it. Essentially, it’s the account you use to make trades and hold your investments. The brokerage acts as the intermediary between you and the markets.
In a typical brokerage account, you can invest in a wide variety of securities, including stocks, bonds, mutual funds, and ETFs (exchange-traded sunds). There are also different types of brokerage accounts, like individual or joint accounts, retirement accounts, and education savings accounts, each serving different investment purposes and offering varying tax benefits.
Why should I consider online stock trading?
Online stock trading offers a host of benefits, including easy access to financial markets, lower transaction costs, real-time trading, a wealth of educational resources, and the ability to trade at your own pace and convenience.
How much money do I need to start online trading?
The amount needed to start online trading can vary greatly depending on the broker you choose. Some online brokers require minimum deposits, while others do not. It’s possible to start trading with a small amount, but remember that it’s crucial to only invest money that you can afford to lose.
What are the risks of online stock trading?
Like any investment, online stock trading comes with risks. The value of your investments can fluctuate based on market conditions, which can lead to losses. It’s also possible to lose money due to poor investment decisions. It’s important to educate yourself, develop a solid investment strategy, and consider diversifying your investments to manage these risks.
What is a stockbroker?
A stockbroker is a professional who executes buy and sell orders for stocks and other securities on behalf of clients. Online stock brokers offer platforms where you can conduct these transactions yourself.
How do online stock brokers make money?
Online stock brokers make money in several ways. Some charge commissions on trades, while others offer commission-free trades but may charge other types of fees, such as account maintenance fees or withdrawal fees. Some brokers also earn money from interest on cash in trading accounts or by lending out securities in margin accounts.
What is diversification?
Diversification is a risk management strategy that involves spreading your investments across various types of assets, such as stocks, bonds, ETFs, etc. The idea is to reduce risk by investing in different areas that would each react differently to the same event.
Is my money safe with online brokers?
Most reputable online brokers are members of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which provide certain protections for investors. However, while these protections can safeguard your money if the brokerage fails, they do not protect against losses from trading.
Are you wanting to invest in the stock market but don’t know where to start? You’re not alone. Buying stocks online is a simple process. But doing the research can be a bit overwhelming if it’s your first rodeo. But don’t fret. Read on for a step-by-step guide on how to buy stocks.
Mastering the Basics: A 4-Step Guide to Buying Stocks for Beginners
Embarking on your stock trading journey can be both exciting and overwhelming. With this concise 4-step guide, we’ll help you navigate the essentials of stock trading, from setting up a brokerage account to making informed decisions on stock purchases.
Step 1: Set Up a Brokerage Account
To buy stocks, you’ll need to apply for a brokerage account. With an online brokerage account, you can transfer funds into your account electronically from a linked bank account to fund any future investment orders. And upon making a purchase the stocks will remain in the account until you trade them.
Types of Brokerage Accounts
The basic types of brokerage accounts are:
Discount Broker
Common amongst online brokers
Similar to a do-it-yourself option with limited support
Minimal fees and commissions
Some don’t have a minimum deposit requirement
Full-Service Broker
Designed to help investors from start to finish with planning and execution of trading goals
Offers extensive support from financial advisers at brokerage firm
Commission or fee-based structure
When analyzing brokerage firms, you want to consider the following:
Minimum deposit requirement: if you’re just starting out, you may only want to invest a small amount to get your feet wet. Once you’re acclimated with buying and selling stocks online, you’ll beef up your stock portfolio. But until you reach that point, a discount brokerage with minimal fees and little to no deposit requirement may be best.
Short term goals: do you plan to hit the ground running? Do you need all the support you can get to maximize your investment in the shortest amount of time possible? If so, a full-service brokerage may be the better choice.
Some of the most popular online brokers include Ameritrade, Charles Schwab, E*Trade, Fidelity, Merrill Edge, Robinhood, and Vanguard.
Direct Stock Purchase Plan
Some publicly-traded companies also offer a direct stock purchase plan (DSPP), which allows you to buy stock from them. This is another way to buy stocks that require using online brokers. Instead, the company’s transfer agent manages the transaction.
Check Out Our Top Picks for 2023:
Best Online Stock Brokers for Beginners
Step 2: Evaluate Your Options
There are tons of individual stocks to choose from. So how do you narrow down your options and select the best fit for your financial situation? You can sift through mountains of financial data inundated with jargon you’ve never seen a day in your life.
A better idea: think about industries or businesses you have a keen interest in. Are there a few that you’d like to own a piece of? If so, start there. Otherwise, you can always ask your financial adviser for data on up-and-coming companies or pay attention to market trends in the media.
Get a Copy of the Annual Report
Once you have a list of top prospects, head on over to the company’s website and download a copy of the annual report. It’s an extensive document that provides an overview of how the company performed in the last year, along with detailed financial reports.
The U.S. Securities and Exchange Commission (SEC) mandates that public companies provide this report to shareholders on an annual basis.
But it’s usually available through the company’s website as well for the public to see. If you’re unfamiliar with any of the terms listed, the broker’s website should have information and resources that can assist.
Monitor the Company’s Performance
You may also want to consider monitoring the company’s performance before making a purchase decision. Steep fluctuations or signs of declining revenues could indicate that it may not be the right time to invest.
(Most brokerage firms will also offer tools and resources to help you stay on top of what’s going on with the companies you’re considering).
Step 3: Get a Quote
You’ll want to pay close attention to the information presented in the quote. Stock quotes, which are represented by ticker symbols that are abbreviations of the company, include:
Bid: highest price per share a buyer wants to pay per share
Offer or Ask Price: lowest price per share a seller will accept per share
Historical information on trading volume
Interactive resources to help gauge projected performance
Contact your online broker to learn more or visit Nasdaq.com to retrieve a real-time quote.
Step 4: Place an Order
Now that you’ve gotten all the technical/admin duties out of the way, it’s time to buy stock. But before you get too excited, it’s important to familiarize yourself with order types.
Market Order
A market order ensures you get the amount of shares requested, even if the asking price is a bit higher than your bid. This is usually the case when your primary concern is the share volume and not stock price.
This type of order is best for investors who are in it for the long haul. Why so? Well, a slight spread, or the difference between the asking price and bid, shouldn’t make that much of a difference over time.
Let’s say you want to buy 75 shares at $150 and the quote states:
Bid: $149 (75)
Ask: $150 (60)
Last: $151 (100)
If the seller agrees to issue 75 more shares at $153, your market order will be for 60 shares at $150 and 15 at $153.
Limit Order
A limit order ensures the broker purchases shares at the desired price point. So there’s a possibility you may not receive the number of shares you want until the price point decreases.
Let’s say you want to buy 80 shares at $160 and the seller is only offering 45 at that price point. If you decide to execute a limit order, you would get 45 shares and wait for sellers offering at least 35 or more shares at $160 to reach 80 shares.
No Guarantees
When you place a limit order, understand that there are no guarantees your order will be filled since market orders are executed first.
If it takes several rounds of trading to get the desired volume of shares, expect a hefty amount of broker fees because commissions are tacked on after each transaction.
In this case, it may be in your best interest to execute a market order and pay a bit more per share since the cost of commissions may wipe out the cost-savings per share of stock.
AON Limit Orders
You should also be mindful of all-or-none (AON) limit orders, which indicate to the seller that you’ll only purchase if the price is at or below the amount of your bid. Furthermore, the requested amount of shares must be offered during that specific bid.
If you want to leave the order on the table for an extended period of time, it can be coded as good till canceled (GTC). The timeframe can span from a few to several months.
Stop Orders
Stop orders are driven by price and are only filled when the requested amount of shares reaches the stop price. There are two types of stop orders you should be aware of:
Stop-limit order: functions like a limit order because it’s only executed at the “stop-price”. However, you may not get the number of shares you want.
Stop-loss order: functions like a market order, but the primary difference is the entire order will only be filled when the price is at or below the “stop level”.
How many shares will you be purchasing?
Before you can execute a market or limit order, you’ll need to decide on the number of shares you wish to purchase. There’s no right or wrong amount, and some newbies prefer to start small and scale up once they’re a bit more comfortable with how stock trading works.
The Next Steps
Kudos to you on your first stock purchase. It’s a great first step toward building wealth and helping secure your financial future.
And even if your first round doesn’t turn out as planned or your experience steep market downturns, don’t throw in the towel right away. Remember why you started and focus on the light at the end of the tunnel, or your future earning potential.
If you are unsure of which stocks to pick, you might want to consider buying mutual funds or ETFs.
Best Online Brokers and Trading Platforms for Buying Stocks
The best online brokers offer low commissions and fees, and great research tools, such as charts and stock screeners. You will also want to choose a brokerage platform that is easy to use and intuitive.
Good customer service is also essential when considering an online brokerage account. Check to see if the broker offers phone and email support, as well as live chat. Here are some of the most popular brokers to look into:
Robinhood is a good choice for buying stocks with zero commissions. It offers a simple mobile app with a limited selection of commission-free ETFs and no-transaction-fee mutual funds.
Charles Schwab offers a comprehensive trading platform with powerful research capabilities. You also get access to a wide variety of financial products, and Schwab offers 24/7 customer service.
Fidelity offers comprehensive research and market analysis tools, low trading fees and commissions, and a dedicated customer service team.
With E-Trade, you can easily invest in stocks and other financial instruments online or on your mobile device. They also offer advanced trading tools and charting.
How to Buy and Sell Stocks FAQ
How do I buy and sell stocks?
You can buy and sell stocks through a stockbroker or online trading platform. A stockbroker can help you with the purchase and sale of stocks and provide advice on the best investments for your portfolio. If you decide to use an online trading platform, you’ll need to research and choose one that best meets your needs.
What is the best way to buy stocks?
The best way to buy stocks is to do your research and learn about the different stocks and companies you’re interested in. Then, choose the ones that best fit your investment goals and risk tolerance.
You should also consider the fees associated with trading and the terms of the broker you plan to use when making your purchase. Additionally, it is important to practice patience and discipline to avoid making rash decisions.
How do I choose which stocks to buy?
When choosing which stocks to buy, you want to consider a variety of factors. You should look into the company’s financial health, its competitive advantage in the market, its management team, the industry it operates in, and its earnings potential.
Additionally, you should consider your own financial goals, risk tolerance, and investing timeline. Before you start buying stocks, it is important to do your own research. You may even want to consult a financial advisor to ensure that the stocks you are considering are appropriate for your individual financial situation.
What is the risk associated with investing in stocks?
Investing in stocks carries a certain level of risk, as the stock market can be volatile and movements in stock prices can be unpredictable. It’s critical to understand that stocks have the potential to both increase and decrease in value.
What are the costs associated with buying and selling stocks?
The costs associated with buying and selling stocks include commission fees, taxes, and any other applicable fees. Depending on the broker, commissions can range from a flat fee to a percentage of the total trade value.
Taxes, such as capital gains taxes, may also be applicable when selling stocks. Other fees such as account maintenance fees, custody fees, and margin interest may also be applicable.
How old do you have to be to trade stocks?
You must be at least 18 years old to open a brokerage account and trade stocks in the United States. However, some brokers, and in certain states, you need to be at least 21 years old to trade stocks.
How much money do I need to start investing in stocks?
The amount of money needed to start investing in stocks will depend on the types of stocks you plan to buy and the amount of money you are comfortable investing. Generally, you should expect to start with at least $1,000. However, some online platforms require a minimum of $500 or less.
How much money can I make from investing in stocks?
The amount of money you can make from investing in stocks depends on the types of stocks you invest in, the amount of money you invest, and the success of your investments. It’s important to remember that stock investing can also result in losses as well as gains.