With U.S. bank rates now down to pitiful lows, are you thinking about trying out US stock investing?
Your first step in buying and selling stocks is to choose a reliable brokerage as your trading intermediary (unless you plan to sell your shares on the street). There are so many well-known brokers; how do you pick one?
Today we compare the major brokers to help you make your own choice.
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Overview of U.S. Brokers
Although the U.S. securities market is highly developed, the share of individuals directly participating in stock investing is not very high. Maybe this is a sign of market maturity, or it may reflect general money-management habits among Americans. Either way, the result is that broker fees are not cheap. In China, people are already used to paying by basis points, but in the U.S., most brokers still charge fees per trade. Some brokers even charge oddball fees.
In China, broker differences are usually very small; firms are highly homogeneous, with only brand names changing while many services overlap. Here, business differences are significant. Some brokers offer options trading, some provide access to foreign exchanges, and some market themselves as commission-free. So we don't just compare price tags—we also care about differences in broker services.
Comparison of Major Brokers
| Broker | Minimum Account Balance | Stock/ETF Fees | Options Trading Fees | Sign-up Bonus | Other Fees | Highlights |
|---|---|---|---|---|---|---|
| Robinhood | $0 | $0 | Not supported | None | None | Mobile-only platform, zero commission, no minimum account balance, options and margin not supported (yet) |
| Interactive Brokers (IB Fixed Plan) | $10,000 (or $3,000 if age is 25 or under) | $0.005/share (minimum $1.00) | $0.70/contract (minimum $1.00) | None | Minimum activity fee: $10 per month | Very low commissions, high account minimum to open, low margin rates, access to international markets |
| OptionsHouse | $0 | $4.95 | $4.95 + $0.50/contract | Deposit $5,000 on opening, then 100 free trades within 60 days | None | Optimized for options trading, low fees for options and stocks |
| TradeKing | $0 | $4.95 | $4.95 + $0.65/contract | Use promo code FREE1000, deposit $5,000 at opening and receive $1,000 in fee reimbursement | None | Low commissions |
| Charles Schwab | $1,000 | $8.95 | $8.95 + $0.75/contract | Deposit $50,000 at opening for 500 free trades | None | Well-known brand, higher fees, free trading for many ETFs and mutual funds, access to foreign markets |
| Fidelity | $2,500 | $7.95 | $7.95 + $0.75/contract | Deposit $50,000 at opening for 300 free trades | None | Well-known brand, assets above $25,000/50,000/100,000 can repeatedly earn airline miles. Many house funds have no transaction fee. Access to foreign markets |
| OptionsXpress | $0 | $8.95 | $1.25/contract | Transfer $5,000 from another broker and get 50 free trades | None | Optimized for options trading, free trading of Charles Schwab ETFs |
| Firstrade | $0 | $6.95 | $6.95 + $0.75/contract | Deposit $5,000 for 100 free trades; deposit $100,000 for $100 | None | Mid-range pricing, platform features are not very rich |
| Scottrade | $2,500 | $7.00 | $7.00 + $1.25/contract | Deposit $10,000 at opening for 50 free trades, additional rewards with higher deposits. | None | Mid-range pricing, decent platform |
| E*Trade | $500 | $9.99 | $9.99 + $0.75/contract | Deposit $10,000 at opening and get 500 free trades within 60 days. Additional rewards with higher deposits. | None | Strong mobile support, very high trading fees, access to foreign markets |
| Wells Fargo | $1,000 | $8.95 | $9.95 + $1.00/contract | None | Very high trading fees | |
| TD Ameritrade | $0 | $9.99 | $9.99 + $0.75/contract | Deposit $3,000 at opening, then 60 days of free trading, with more rewards for larger deposits ($100-$600) | None | Very high trading fees |
Note: The trading fees above include only the broker charges. Exchanges and regulators usually have additional fees, which are not included.
Recommendation for Beginners
For beginners (especially students), buying stocks is often just for practice or fun, and amounts are usually not high. In that case, Robinhood is worth considering. Its zero commission trades are a blessing for smaller-ticket beginners.
Imagine this: with only $5,000 in principal, if you buy and sell 10 times each, a $5 fee per trade would consume $100 immediately—2%. That is a significant amount. Using Robinhood can save those costs, but more importantly it reduces the psychological pressure around trading, making it a good platform for learning.
The downside is obvious: it does not support margin trading, though it is reportedly coming soon. In addition, the functionality is relatively basic, and it can't be used to trade forex or invest in overseas markets.
Recommendation for Advanced Traders
If you're already experienced, Interactive Brokers (IBKR) may be your best choice. The commission per trade is very low, and they support multiple overseas markets. If you need leverage, their interest rates are also very competitive (benchmark +1.5% under $100,000; benchmark +1% above $100,000).
Overall, it is a strong balance of trading cost and functionality.
Will My Money Be Safe?
Brokerage investment accounts are not covered by FDIC deposit insurance, but these brokers are all members of SIPC (Securities Investor Protection Corporation). Like FDIC, SIPC protects up to $500,000 for each securities investor at each broker (including up to $250,000 in cash), so there is not much reason to worry about a broker disappearing and your stock investment evaporating.
Opening Requirements
Like a bank account, opening an online securities account requires submitting a W-9 (Robinhood does not support W-8BEN). F-1 students who are not yet Resident Aliens should be cautious about opening Robinhood.
Many large brokers support W-8BEN, but identity verification usually has to be done in person at a branch.
Tax Issues
For Non-Resident Aliens, the net profit each year after subtracting losses is subject to 30% federal tax, while state tax rates vary by state.
For Resident Aliens or U.S. citizens, long-term gains (defined as holding a stock for more than one year) are taxed at 15% federally. Short-term gains (held less than one year) are treated as ordinary income and taxed together with wages.
Final Thoughts
As the saying goes: there is risk in the stock market; invest carefully. Even if things look calm, the stock market is not that much of a game.
Beginners are better off taking it slow, first practicing with a small amount of spare cash, and keeping a healthy mindset. Using funds you need for essential expenses (like tuition due soon) to trade stocks is a big mistake.
Of course, we hope all readers can get rich.
Feel free to share your own stock account-opening experiences.