Trading commissions and account minimums are largely a thing of the past — especially for any online stock broker. Almost no online broker or investing app charges commission fees on basic trading, and most let you open an account with $0 deposited, or just a few dollars.
However, most still require a minimum amount of money to use more complex features, such as margin investing. And $0 commission typically applies to stock and ETF trades; some brokers charge commissions for trading options and mutual funds, among other products. Take a look at a broker’s full fee schedule before you open an account to make sure it makes sense for how you intend to invest.
Why commission fees matter
Here’s why trading commissions are so important: Say your broker charges a $6.99 commission for online stock trades and you have $1,000 to invest. You want to spread your money across a portfolio of five stocks.
To make your initial investments, you’ll pay nearly $35 in trading commissions. On a $1,000 investment, you’re effectively starting with a 3.5% loss in your portfolio.
Plus, you’ll pay another $6.99 each time you add to one of your stock positions. If you’re planning to build up your portfolio over time, it’s not hard to see how this can cost you thousands of dollars over the years.
Keep in mind the account minimum
Most major online brokers — including all of the brokers in our list — have no account minimum. This historically hasn’t been the case. When I opened my first brokerage account nearly 20 years ago , I needed to deposit $2,000 just to get started.
A low- or no-minimum-deposit requirement lets investors who don’t have a ton of spare capital get started investing early, so you can gradually build your first investment portfolio and take advantage of long-term gains.
View more information: https://www.fool.com/the-ascent/buying-stocks/best-online-stock-brokers-beginners/