Compare the 5 Best Online Brokers Comments9 Comments

Hey everyone, thanks for joining us for this weeks review. Today, we’re going to try something a little different. Throughout the past several months, we’ve been reviewing all kinds of investment platforms and brokers. So, today, we’re going to pick out what we believe to be your 5 best online brokers, and compare them against each other.

What Are The 5 Best Online Broker Options?

As you know, we’ve done tons of these reviews. After going through all of the broker and investment platform reviews that we’ve done, we’ve finally dialed the list down to the top 5. They include everything from peer to peer investment platforms to online brokers and more. So, what are they? Below is our list. Keep in mind that this list is in no particular order. They are our favorites, but choosing just one is going to be up to you. Hopefully this comparison will help.

  1. Prosper – Prosper is a peer to peer lending service. They are arguably one of the largest, and oldest options for peer to peer lending out there. To read our full review of Prosper, click here!
  2. Betterment – Betterment is a stock market investment broker. However, they take a very unique approach. Instead of choosing stocks one by one, all you need to do is set the allocation of stocks and bonds. This is why they promote their services as “Perfect for busy investors”. To read our full review of Betterment, click here!
  3. OptionsXpress – OptionsXpress is another stock market investment broker. Like most online brokers, they allow you to choose your own trades. One of our favorite aspects of OptionsXpress is their virtual trading options. Learn more about OptionsXpress in our full review here!
  4. eTrade – eTrade is another online investment broker. They are one of the top in terms of technology which is why we love them so much. Their research and education tools seem to be some of the best in the market. Read our full review of eTrade here!
  5. Scottrade – Scottrade is another giant in the online brokerage industry. One of our favorite things about Scottrade is that they don’t charge for small things like streaming quotes, keeping prices down for investors. To learn more about Scottrade, read our full review here!

A Comparison Of Online Broker Costs

Below, we’re going to give you a chart that tells you a bit about the differences in cost with these different platforms. When it comes to cost, most online investment platforms will reduce the price with high volume. That being said, please keep in mind that this chart is for their lowest volume, highest cost. If you’re a high volume investor, these numbers will most likely be much lower with all platforms.

 ProsperBettermentOptionsXpresseTradeScottrade
StockN/AN/A$8.95$9.99$7
OptionsN/AN/A$14.95$9.99$7
Options Contract FeeN/AN/A$1.50$0.75$1.25
Broker Assisted TradesN/AN/AStandard fees, no addition$45.00$32
Annual Membership Fee1% of principal
balance.
.35% of total
balance.
N/AN/AN/A

Now, Lets Compare the Best Online Brokers

All of our top 5 investment options offer various services. Some may overlap services, while others offer something completely different. That being said, putting the services into chart form like I did above would be not only a pain to do, but it’d also be a pain for you to read. So, instead, below you’ll see the names of each of these options followed by the services they offer.

Prosper Services – Prosper is a peer to peer lending company that offers services to both investors and borrowers. In their platform, investors are able to search through borrowers that need loans, and choose the loans that they’d like to fund. In turn, the borrower repays the investor with added interest.

Aside from their standard peer to peer lending services, Prosper offers a secondary market to help liquidate investments when needed. So, if you need to liquidate, you have the option of selling your lending contract to another investor. However, be prepared to take a loss if you need to liquidate before the investment matures.

Betterment Services – Betterment offers services that they say are designed for “busy investors”. However, busy investors aren’t the only investors that can benefit from their services. I’ve found that they are great for the new investors as well. When it comes to services, they offer only one. It’s a pooled investment system. This means that you give Betterment the money you would like to invest. They in turn invest that money into their pool of stocks and bonds. All you need to do is adjust the allocation of your money in stocks and bonds, they will do the rest.

OptionsXpress Services – OptionsXpress offers a wide range of services, most of which you would expect to see at an online brokerage like this. In a nutshell, they offer stocks, bonds, options, mutual funds, EFT’s, options on futures, and penny options.

Aside from the types of investments that you can make, OptionsXpress offers a wide range of research and education services. They offer just about any training that a new investor would need. One of our favorite services in this realm is their virtual trading platform. If you’re not interested in trading your own money until you see what your strategy will do for you, this is a great way to go!

eTrade Services – eTrade is one of the most recognizable names in the online brokerage industry. They offer just about any form of investment that you can think of. Their investment options range from stocks to options, mutual fund, EFTs, bonds, IPOs, features, forex, margin trading, global trading, even extended hours trading.

Aside from the types of trades that you can take part in with eTrade, they are another great option for research and training tools. eTrade is known for it’s intuitive online platform that provides the tools needed for beginners to trade like pros.

Scottrade Services – Scottrade is another giant that offers a wide range of investment products. Their investment products include stocks, bonds, options, retirement investments, IRAs, margin trading, EFTs, mutual funds, CDs, treasuries, Coverdell ESAs, and global trading.

Aside from the different types of trading that you can take part in, like eTrade, Scottrade is a great option for research and training tools. On of our favorite tools that they offer is streaming quotes.

Drawbacks Of Each Investment Broker

As you probably already know by now, there is no investment service that is a one size fits all option. That being said, they are all going to have their own, unique disadvantages, just like they all have their own unique advantages. That being said, below is a list of the things that we don’t like about each different option in our list of the 5 best online investment platforms!

Prosper Cons – Prosper is a peer to peer investment platform. That being said, there is no guarantee that your peers are going to pay you back. Although, this isn’t a huge drawback, it’s definitely something to think about. The reason I say it’s not huge is because there’s no guarantee that any of your investments will pan out. Even in the stock market, a company could go out of business and you could lose it all. As with any other form of investment, to protect your investments with Prosper, it’s important to diversify.

Betterment Cons – The cost is the biggest drawback with this option. Their prices are relatively straightforward. You’ll pay a percentage of your total balance as an annual fee. However, if you really delve into the numbers, it’s easy to see that the cost of investing with Betterment is a little higher than the cost of choosing your own stocks and bonds through another platform. Essentially, you’re paying this added cost to reduce the headache associated with choosing and tracking your own investments. Although the price is a bit higher than average, for many busy people, it’s worth paying to avoid spending so much time in another platform.

OptionsXpress Cons – As you can see from the cost chart above, the prices you pay with OptionsXpress are going to be higher than the average leading investment broker. It’s not much, but we all know that pennies add up. Another thing that we noticed about OptionsXpress is when it comes to novice investors, their tools can be a bit overwhelming. That being said, this is probably not the best option for you if you’re a newbie.

eTrade Cons – Our biggest beef with eTrade is their pricing. Although they are incredibly competitive for the big time investors, their pricing is not at all competitive for the smaller guys. So, if you’re looking into eTrade, it’s important to remember that they’re best if you make 150 trades per quarter or more. If that’s not the case, you’re probably better off looking into another option.

Scottrade Cons – Some investors like to take part in advanced trades like straddle or spread trades. For these investors, Scottrade may not be best for easily accessing and managing your investments. If you’re interested in advanced trades, you’ll have to apply for a different platform. Once you’re approved, you may find yourself managing your investments in 2 different areas, which can add a bit of confusion to the management process.

Who Should Consider Which Online Broker?

Before I get into this, I’ve gotta bring up a cheesy disclaimer. The truth is, everyone has a very unique financial portfolio. Without looking directly into your portfolio, I can’t tell you exactly what you need. That being said, below, I’m going to go over who I think each broker is best for. However, the ultimate decision to choose one broker over another is your decision to make. That being said, let’s jump right into who I think each option is best for…

Prosper – Prosper is one of those options that can be good or bad for anyone depending on what you’re looking for. If you want to find an alternative to investing in the stock market, this is a great way to go for you.

Betterment – Betterment boasts that their platform is best for busy investors. That, I’ve got to agree with. It’s just very simple to go in and manage your investments in a very short period of time. However, I think they’re missing another market entirely. When it comes down to it, in my humble opinion, Betterment is great for new investors too!

OptionsXpress – When building their platform I think that OptionsXpress kept larger investors in mind while completely forgetting about the smaller guys. Between their pricing, research tools, and education tools, I can definitively say that if I didn’t know what I was doing before I signed up, I would be lost. However, for expert investors, this is a great option! It’s low cost, they’ve got great research tools that experts will be able to understand, and they offer a wide range of investment types.

eTrade – This is another option where their pricing makes it clear that the platform is best for the larger investors. Choosing to go with eTrade really boils down to one question. Are you planning on making 150 trades or more per quarter. If the answer is yes, eTrade is great for you! If the answer is no, they will be a more pricy option, and you can probably find another one that’s more appealing by way of cost.

Scottrade – Scottrade, like Betterment is great for beginning investors. They provide the tools you need to learn and get started, and they do it at a relatively low cost. However, expert investors that need more advanced trade abilities would be better off looking into something like OptionsXpress or eTrade. The simple fact is, Scottrade limits your ability to go with advanced trades and easily manage all of your investments at the same time.

Final Thoughts

Wow, I had a great time coming up with this post! I hope that this comparison offered everything that you need to get a good idea of who to work with.

Reader Question
Do you invest with any of these options? If so, who, and how are your experiences with them? If not, after reading this, which do you think will be the best online broker for you and why?

Author Bio: Check out Josh Rodriguez at his blog CNAFinance where he writes about a wide variety of finance topics. Also to learn where he writes or to hire him for writing, check out his site JRod Writes.

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By : Josh Rodriguez | 20 Dec 2013
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9 thoughts on “Compare the 5 Best Online Brokers

  1. mark williams

    It is hard to beat purchasing one of the many low-cost mutual funds direct from Vanguard.

    I’m not a fan of Prosper in any way, shape or form. I invested with them a few years back and money went missing from my account. Prosper could not account for where this money went. Eventually, their support folks stopped returning my messages. It was a small amount, but indicative of a much larger issue with any financial services company; you better be able to provide an accounting for every penny under your stewardship.

    While P2P Lending is an intriguing secondary income stream if your portfolio of notes is diverse enough, I wouldn’t ever consider relying on it in any capacity that is more than supplementary.

    Reply
  2. Steve Burgess

    An eye opener post, truly innovation has reached a commendable position that is why comparing broker cost can be done so easily & rather better option to get into further details with ease.

    Reply
  3. Kim@Eyesonthedollar

    I have been using Betterment for about 6 months for taxable investments now with no complaints. I still think for my personal situation, my money is better spent by being put in tax deferred accounts, but it’s nice to have a bit of a mix.

    Reply
  4. Ryan @ Impersonal Finance

    I use Sharebuilder for my Roth IRAs and so far, I have been pretty pleased. I don’t do much with them, so there isn’t a lot I require out of my brokers. But, everything I’ve seen so far, I like. I’ve also had TD Ameritrade, and was neither impressed nor unimpressed. There are definitely a lot of options nowadays.

    Reply
  5. Jack @ Enwealthen

    People are typically drawn to online brokers due to the low cost – ScottTrade, eTrade, et al.

    So if you’re concerned about transaction costs, you can’t go lower cost than investing in a DRiP. Obtaining the first share can be a hassle, but once you’re in, you can’t get lower costs or easier reinvestments. Perfect for the budget-minded, buy and hold investor.

    Reply

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