Online stock investing gives you several ways to buy and manage investments without visiting a physical brokerage office. You can open an account, transfer money, research investments, place trades, and track your portfolio online. The harder decision often comes before your first deposit: choosing the type of platform that fits how involved you want to be.
Some platforms put investment selection in your hands. Others automate much of the portfolio management process. Before opening an account, compare costs, available investments, account requirements, research tools, and the level of control you receive.
Online Stock Investing: What Are Your Main Options?
Most investors will encounter two broad approaches: self-directed brokerage services and automated investment management.
An online brokerage account generally lets you select your own stocks, exchange-traded funds (ETFs), mutual funds, and other supported securities. Available investments vary by company.
A robo-advisor takes a different approach. These services typically ask questions about your goals, investing timeline, and tolerance for risk. Software then recommends or manages a portfolio based on your responses.
Neither structure automatically makes one platform suitable for everyone. Your preferred level of involvement can narrow the field quickly.
Self-directed investing may fit you if:
- You want to select your own investments.
- You enjoy researching companies or funds.
- You want greater control over individual trades.
- You are comfortable managing portfolio allocation yourself.
Automated investing may fit you if:
- You prefer having portfolio management handled for you.
- You want automatic rebalancing.
- You prefer diversified portfolios built around your stated goals.
- You don't want to select every investment individually.
How Much Does It Cost to Invest Online?
A $0 trading commission doesn't necessarily mean investing has no costs.
For example, Fidelity currently lists $0 commissions for online U.S. stock and ETF trades and no minimum to open a standard brokerage account. Charles Schwab similarly lists a $0 minimum deposit and $0 commissions for online trades of listed U.S. stocks and ETFs.
Costs can look different when automated portfolio management enters the equation. Wealthfront currently lists a 0.25% annual advisory fee for its Automated Investing Account.
Betterment uses two pricing structures for many investing customers. Eligible households with at least $24,000 invested, or at least $200 per month in qualifying recurring deposits, generally pay a 0.25% annual fee. Accounts below that threshold without the qualifying recurring deposits generally pay $5 per month.
That last example highlights why percentages alone don't tell the entire story. A flat monthly charge can represent a significant percentage of a small account.
Before choosing a platform, check these potential investment fees:
- Trading commissions
- Advisory or management charges
- ETF and mutual fund expense ratios
- Options contract charges
- Account transfer charges
- Wire fees
- Margin interest
- Charges associated with certain specialized investments
Fund expenses deserve particular attention. ETFs and mutual funds can have their own operating expenses even when the brokerage charges nothing for the trade.
What Should You Look for in a Stock Trading Platform?
Start with the investments you actually plan to buy.
A stock trading platform aimed at self-directed investors may provide individual stocks, ETFs, mutual funds, options, bonds, and other securities. Access varies, so checking the platform's investment menu before funding an account can save you from having to transfer later.
Then examine how you plan to use the account.
Someone who wants to buy diversified ETFs periodically has different needs from someone who expects to research individual companies frequently. Advanced charts and trading tools might matter greatly to the second investor and very little to the first.
Useful areas to compare include:
- Supported securities
- Account minimums
- Research and screening tools
- Automatic investing
- Recurring deposits
- Mobile and desktop functionality
- Customer support
- Portfolio analysis tools
- Transfer policies
- Cash management features
Don't assume a long feature list equals better value. Features have value when you actually use them.
Do You Need a Large Amount of Money to Start?
Not necessarily.
Several large U.S. brokerage firms currently have no minimum deposit requirement for standard brokerage accounts. The amount needed to purchase a particular investment can still vary.
That's where fractional shares can become useful. Instead of purchasing one whole share, participating brokers can let you purchase part of a share based on a dollar amount.
For someone investing a relatively small amount, this feature can make it easier to divide money among selected investments rather than putting most of the account into a single high-priced share.
Fractional-share policies aren't identical across firms. Eligible securities, minimum purchase amounts, dividend treatment, and transfer rules can differ.
Brokerage Account or Automated Portfolio?
The answer depends largely on how much portfolio management you want to handle.
A self-directed brokerage gives you control over investment selection. That freedom comes with responsibility. You decide what to purchase, how much to invest, and when your portfolio needs adjustment.
Automated services typically handle much of that work. Betterment, for example, describes portfolio management and trading as services included with its managed investing fee. Wealthfront's Automated Investing Account similarly uses automated portfolio management and rebalancing.
Automation has a price, though. Compare the advisory charge against what you're receiving and how much work it saves you.
A self-directed account with commission-free stock and ETF trading may have lower platform-level costs, yet you remain responsible for investment selection and portfolio maintenance.
How Should You Compare Investing Apps?
Searching for the best investing apps can produce plenty of rankings, yet the highest-rated service on someone else's list may not fit your needs.
A cleaner comparison starts with a personal checklist.
1. Decide what you want to buy
Check stocks, ETFs, mutual funds, bonds, options, or other securities based on your intended strategy.
2. Check the full cost
Look beyond advertised trading commissions. Read the company's current fee schedule and applicable fund prospectuses.
3. Review account requirements
Some services have no opening minimum. Certain products, premium services, or managed portfolios may carry separate eligibility requirements.
4. Decide how much control you want
Self-directed accounts leave investment decisions with you. Automated services can select and maintain portfolios based on information you provide.
5. Check the tools you'll actually use
Research reports, screeners, recurring investments, automatic rebalancing, mobile trading, and customer service can affect your experience.
6. Read transfer and closure policies
Moving an account later can carry fees at some firms. Checking these policies early can prevent an unpleasant surprise.
Why Expense Ratios Still Matter With Commission-Free Trading
Commission-free trading addresses one possible cost: the broker's commission for executing an eligible transaction.
It doesn't remove expenses charged by the investment itself.
ETFs and mutual funds typically have operating expenses expressed as an expense ratio. These costs reduce fund returns rather than appearing as a traditional trading commission.
The SEC warns that even relatively small ongoing fees can have a meaningful effect on portfolio value over long periods.
When comparing funds, check the prospectus for operating expenses and other relevant charges. Comparing two similar investments without examining their expenses leaves out part of their actual cost.
Should Beginners Choose Individual Stocks or Funds?
Individual stocks give you direct exposure to specific companies. They also concentrate your results around the companies you select.
Funds can spread money across many securities. ETFs and mutual funds are commonly used to achieve diversification without selecting every underlying company individually.
Diversification doesn't prevent losses. It can reduce the risk associated with putting too much of your portfolio into one investment or category.
Your asset allocation also matters. Stocks, bonds, cash, and other assets behave differently, and an appropriate allocation can depend on your time horizon and tolerance for losses.
Money intended for a distant retirement date may be invested differently from money you expect to need relatively soon.
What Type of Account Should You Open?
The platform is only one decision. You also need the appropriate account type.
A standard taxable brokerage account generally doesn't receive the same tax advantages associated with certain retirement accounts. IRAs and employer-sponsored retirement accounts operate under separate tax rules and contribution or withdrawal requirements.
Brokerage applications may also ask you to choose between a cash account and a margin account.
In a cash account, you pay the full purchase price of your investments. A margin account lets you borrow from the brokerage using securities as collateral and charges interest on the borrowed money.
Margin increases purchasing power and can increase potential losses. The SEC specifically advises investors to confirm which account type they're opening because some applications may default to margin.
How Do You Start Investing Online?
Once you've selected a provider, the basic process is usually straightforward.
- Choose your account type. Decide between a taxable brokerage account, eligible retirement account, or another available structure based on your purpose.
- Complete the application. Brokerage firms generally request identifying, financial, employment, and tax information.
- Review the account settings. Confirm details such as cash versus margin and how uninvested cash will be handled.
- Fund the account. Connect an eligible bank account or use another supported funding method.
- Select investments or an automated strategy. Self-directed investors make their own selections. Managed services generally recommend or construct a portfolio.
- Review costs before buying. Check applicable trading charges, fund expenses, advisory costs, and other fees.
- Monitor your account. Review your holdings, allocation, fees, and progress periodically.
Don't rush through account-opening screens. Read the firm's disclosures, relationship summary, and current fee schedule before depositing money.
Common Questions About Investing Online
Can you start online stock investing with a small amount?
Yes, depending on the provider. Fidelity and Charles Schwab currently list no minimum deposit for standard brokerage accounts. The minimum needed for a specific investment can still vary.
Are commission-free trades completely free?
Not necessarily. You may encounter fund expense ratios, options contract charges, advisory fees, transfer charges, regulatory charges, margin interest, or other costs depending on the account and investments.
Is automated investing better for beginners?
It can be convenient for someone who prefers portfolio management and automatic rebalancing. A self-directed account can suit someone who wants direct control. Costs, available investments, and the services included should be compared before deciding.
Can you lose money investing online?
Yes. Stocks, ETFs, mutual funds, and other market investments can decline in value. Using an online platform doesn't eliminate investment risk.
How can you check an investment firm's background?
Investor.gov provides tools and guidance for researching investment professionals and firms. Reviewing a firm's Form CRS and regulatory history can add another layer of due diligence before opening an account.
Choosing an Online Investing Platform
The strongest comparison starts with your intended use rather than a platform's longest feature list.
Decide how involved you want to be, what investments you plan to purchase, and what type of account you need. Then compare the providers that meet those requirements based on their current pricing, minimums, investment selection, tools, automation, and transfer policies.
Pay particular attention to recurring charges. The SEC notes that ongoing expenses reduce the amount of your portfolio left to generate returns over time.
Finally, verify pricing directly with the provider before opening an account. Brokerage commissions, advisory pricing, account minimums, and platform features can change. A platform that fits your needs today should be evaluated on its current terms rather than an old comparison or advertisement.
