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Online Brokerage Accounts

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Online brokerage accounts allow you to buy and sell investment vehicles easily and quickly. In simple terms, a brokerage account acts as the middle man between you and the market.

To get started with an online brokerage account, there a few steps:

  1. Select an online broker (which this post will help you do!)
  2. Open an investment account
  3. Deposit funds into your account (through a check, online transfer or other method)
  4. Lastly, invest in various investment vehicles

There are two major types of online brokerage accounts: Traditional Brokers and Robo-Advisors. We’ll dive into the pros and cons of both of them further below. In general, Traditional Brokers are better suited for more active investors while Robo-Advisors are great for new or hands-off investors.

Traditional Brokers

Traditional online brokerage accounts give you control over your investments – you can select exactly which investment vehicles to purchase. Plus, if you choose an online broker like Charles Schwab or Vanguard, fees will be very low – making it easy to set up an efficient lazy portfolio on your own.

There are a few pros and cons to Traditional Online Brokers compared to Robo-Advisors (more details on Robo-Advisors further below):

  • Pros:
    • Low fees
    • 100% control over your investments
  • Con:
    • Requires slightly more oversight

Two great online brokers are Charles Schwab and Vanguard. Both are reputable, established firms, and they are great choices for a few reasons:

  • Best in class fees / expenses
  • Wide variety of index funds and ETFs
  • Easy to use online platforms

Charles Schwab:

Online Brokerage Accounts: Charles Schwab
  • Fees:
    • $0 per online trade Charles Schwab funds, ETFs, and stocks
  • ETFs/Index Funds:
    • 20+ top tier funds with expense ratios as low as 0.02%
  • Other Notes:
    • Great customer service

Vanguard:

Online Brokerage Accounts: Vanguard
  • Fees:
    • $7.00 per trade ($0 for Vanguard funds)
  • ETFs/Index Funds:
    • 20+ top tier funds with expense ratios as low as 0.04%
  • Other Notes:
    • Founder of Vanguard, John Bogle, invented the low cost index fund

Other reputable online brokerage accounts:

  • TD Ameritrade
  • E-Trade
  • Fidelity
  • For those up in Canada, you can check out some other Canadian Brokerages if interested
  • For international readers, here are some additional European Brokerages to explore

Robo-Advisors

Robo-Advisors are online platforms that do 99% of the work for you. In most cases, you start by answering a set of questions before opening an account. Then, the Robo-Advisor recommends an investment strategy and selects investment vehicles for you based on your answers. Robo-Advisors are relatively new platforms, but are gaining in popularity due to their ease of use. 

There are a few pros and cons compared to traditional online brokerage accounts:

  • Pros:
    • Easy to use
    • Tax loss harvesting software (in most cases will save you money in the long run)
    • Automatically rebalances portfolio
  • Con:
    • Slightly more expensive

Two great Robo-Advisors are Betterment and Wealthfront. They are both great choices and leaders in the space for a couple reasons:

  • Best in class tax loss harvesting software
  • Simple, easy to use platforms
  • Low management fees compared to the competition (0.25%)

You’ll notice the similarities between the two offerings below.

Betterment:

Online Investment Brokers: Betterment
  • Fees:
    • 0.25% management fee (plus the expense ratio of investments)
  • ETFs/Index Funds:
    • Variety of Vanguard, Schwab and other index funds and ETFs
  • Other Notes:
    • Provides tax loss harvesting

Get our full guide on how to start investing with Betterment here and our full review of Betterment here.

Wealthfront:

Online Brokerage Accounts: Wealthfront
  • Fees:
    • 0.25% management fee (plus expense ratio of investments)
  • ETFs/Index Funds:
    • Variety of Vanguard, Schwab and other index funds and ETFs
  • Other Notes:
    • Provides tax loss harvesting

Additional Robo-Advisors Include:

  • Blooom – a robo-advisor for your 401(k)!
  • SoFi
  • Charles Schwab Intelligent Advisory (yes, they have a robo-advisor platform as well)
  • M1 Finance
Online Brokerage Accounts - Pinterest

Ready to start investing today now that you know about online brokerage accounts? Start now and do it yourself.

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