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Best Low-Cost Brokerage in 2021

Author: Jim Mwangi

2021 is the Chinese year of the Ox, which many Chinese believe means that great rewards will be bestowed upon those who work hard. As a financial investor/trader, you most certainly work hard and, therefore, this auspicious year promises good returns. 

However, you need to work with the right broker. So, we'll be exploring some of the best low-cost brokerage firms that you should consider this year.

What Are the Advantages of Using a Low-Cost Brokerage

Online trading platforms offer many benefits to investors that traditional financial dealers and brokers don’t. Some of the advantages of opening a low-cost brokerage account include:

  • Straightforward dealings: You no longer have to arrange purchases or sales through a traditional broker.
  • Affordable trading: The cost of trading through a low-cost brokerage is low; hence you can benefit from higher incomes from your successful trades.
  • More control over your trade: Online brokerages offer you absolute control over your investments.
  • Round-the-clock trading: You can trade from anywhere via a PC or mobile device, 24 hours a day, Monday to Friday.
  • Faster trading: Online trading platforms are exceedingly fast. Opening up an account takes minutes, and the execution of trades is instantaneous.
  • Real-time trading: The prices shown on the trading platform are on a real-time basis as brokers endeavor to give their clients the most up-to-the-minute prices.
1
Min. Deposit
$50
Exclusive promotion
User Score
10
Trade/invest in stocks with just $50
Invest for dividends and get payout on stocks on Ex-Dividend day
Over 11 payment methods, including PayPal
Start Trading
Pros:
Trade/invest in stocks with just $50
Invest for dividends and get payout on stocks on Ex-Dividend day
Over 11 payment methods, including PayPal
Payment Methods
Bank Transfer, Wire Transfer
Full regulations list:
CySEC, FCA
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. Your capital is at risk.
2
Min. Deposit
$1
Exclusive promotion
User Score
9.3
0 Commissions and no deposit minimums
Registered with and regulated by SEC and FINRA
Loss of cash protection
Start Trading
Pros:
0 Commissions and no deposit minimums
Registered with and regulated by SEC and FINRA
Loss of cash protection
Payment Methods
Full regulations list:

What is a Broker?

When you jump onto the financial trading bandwagon, the very first entity you interact with will be the broker. Through the broker, you can open an online brokerage account to trade diverse financial instruments, including currencies, stocks, ETFs, mutual funds, bonds, commodities like gold and oil, and others.

Most low-cost brokers allow you to open a trading account with minimal funds. Some will even let you open a free account where no minimum balance is required.

3 Ways You Can Benefit from A Low-Cost Brokerage

Matching your trading and investment style with the right low-cost broker will benefit you in more ways than you might realise. 

Three major ways in which you stand to benefit include:

Lower transaction costs: Irrespective of your trading strategy, you will almost always be subject to transaction charges. For every trade you open, you can expect to pay for the service provided. Naturally, you should go for a broker with the most favorable rates. Low-cost brokerages are your best bet for affordable trading.

Easy transactions: When working with a good broker, it will be easy to deposit your capital or withdraw your earnings. Good brokers do not complicate things unnecessarily; their goal is to facilitate trading by making all processes easy, speedy, and smooth.

User-friendly trading platform: The best brokers have stable trading platforms whose user interface is easy to navigate and operate. The platform may also come with additional perks such as technical and charting tools and a free news feed.

Our Picks for The Best Low-Cost Brokerage

If you are struggling to sift through all the brokerage options out there, our shortlist might help you choose the best low-cost brokerage for you.

How Do Low-Cost Brokerages Work?

Some brokers give you the option of opening a margin account or a cash account. 

Margin accounts are like credit cards. They let you trade more assets than the money in your account would allow you to. The beauty of using a margin account is that it will magnify your gains. However, the downside is that your losses too will be magnified for each trade that goes wrong.

A cash account is akin to a debit card. It limits your trades to only the cash reserve in your account.  Unlike a margin account, your gains won't be amplified. Similarly, any losses you incur won't be amplified. Therefore, people with minimal trading and investing experience should stick to a cash account because it minimizes their losses.

3 Steps to Start Trading with a Low-Cost Brokerage?

1

Open a Free Trading Account

Your choice of broker should be based on their trading platforms, fees and commissions, technology and range of product offerings, account security, customer service, research, and education tools. Open an account online within minutes.

2

Make a Deposit

Pay close attention to the required account minimum and then deposit money based on how much you are willing to invest/risk in the financial markets.

3

Start Trading

Your broker is a conduit through which you execute your trades. Search the broker’s lists of stocks (or other tradable assets) for the ones you want, then specify an investment size or stake amount and press the “buy” button.

What Are the Disadvantages of Using a Low-Cost Brokerage

  • Trading is not entirely free: Even brokers who claim to charge zero commissions still charge for some services. For example, you might be charged a withdrawal fee when you come to take your winnings.
  • The risk in your hands: Online brokers give you total control over your investments. This means that it's upon you to properly manage your risk. 
  • It's easy to get carried away: Since trading happens with a mere push of a button, it is so easy to make poor investment choices. This is especially true when a trader begins to get emotional about movements in the market.
  • Online trading is entirely internet-dependent: Without good internet connectivity, you cannot trade effectively.

Expert Tip on Selecting the Best Low-Cost Brokerage

Even though you are looking for value through low-cost brokerage, a good broker should optimize your ability to execute trades. And in addition to offering you cutting-edge tools and indicators, a good broker also provides quality data, educational tools, and research materials. Finally, don’t forget the customer support that could be important if something goes wrong.
- Jim Mwangi

How to Choose the Best Low-Cost Brokerage?

Competition among online brokerages is fierce. This means that there never has been a better time to open a low-cost brokerage account. 

Of course, account minimums, commissions, and fees are some of the criteria upon which your decisions for an online broker should be based. However, below are some additional factors worth considering when evaluating investment brokers.

Is the Broker Regulated?

One essential characteristic that your broker must demonstrate is a high level of security. You shouldn't hand over your hard-earned money to somebody without verifying their legitimacy claims. 

It isn't that hard to check the credibility of a financial broker. Most countries have regulatory agencies which list all authorized brokers. For example, a UK investor should choose an FCA-regulated financial broker. 

What Fees and Charges Apply? 

To maximize your returns, you should endeavor to keep the cost of trading to a minimum. Besides the bid-ask spread that means you lose a little bit of money as soon as you open a trade, some brokers find sneaky ways to take some of your money; for example, by charging you to withdraw money from their platform.

Also, note that (usually small) fees or commissions can be charged when you buy certain assets. You will likely pay a commission when you open a contract-for-difference (CFD) trade, and you’ll have to pay stamp duty reserve tax (SDRT) in the UK as well as a dealer commission for any ordinary share purchases you make.

What Payment Methods Are Accepted?

Most brokers make it possible for investors to deposit and withdraw funds through bank transfers. Many also accept debit or even credit card payments (and withdrawal refunds to the same sources). Some brokers support additional payment methods such as PayPal.

What Are the Available Assets to Trade?

A broker’s primary goal is to facilitate the analysis and trading of diverse financial products like stocks, forex, cryptos, ETFs, bonds, commodities, and more. Therefore, you ought to pick a broker who provides access to the financial markets you wish to invest in.

Is There A Demo Account?

A demo account helps traders learn such basic things as placing orders and configuring technical indicators as well as advanced things such as strategy development and execution. Go for a broker who offers an easy-to-access demo account.

What Is the Account Minimum?

Some brokers let you open an account with no minimum deposit, as a low-cost route to entry. However, some brokers require you to deposit and maintain a minimal sum of money to keep your account open.

What Educational Resources Are Available?

The success of your trading will depend greatly on how well you understand the securities you wish to trade. This can only be accomplished through good research and education. Your broker should therefore provide a way for you to conduct fundamental analysis on various assets.

A full-service broker might be what you need if you have no time to study the markets. Nevertheless, no matter what brokerage option you choose, be sure to pick one that has tons of educational and research tools.

Is There Help and Support Available? 

Investors need reliable access to technical and administrative support for their trades. Your brokers' platforms should make it easy for you to contact support directly via chat, email, or phone.

Is There a Mobile Platform or App?

Good brokers make it easy for their clients to access their portfolios via mobile trading applications. But they’re not all easy to use and optimised for small screens, so see if there is a mobile demo or at least some screenshots of the mobile app on the broker’s website. 

Frequently Asked Questions

  1. The best low-cost brokerages do not charge commissions, and they have no account minimums either.

  2. Transparency is a key thing that a beginner should look for in a low-cost broker. You shouldn't have to keep guessing what the broker does with your investment and whether it is in your best interests. Therefore, pick a broker who is reliable, honest, and has a good reputation.

  3. In addition to the order execution tools that allow you to buy and sell assets, a low-cost brokerage should also provide a news feed, fundamental research tools, charts, and technical analysis tools, as well as customer support.

  4. Opening an account is easier than most people would presume. All you do is provide some information about yourself and have money to make an initial deposit. Your account will be up and ready to start trading in a matter of minutes.

  5. Low-cost trading brokers run a business, and so they still need to make money. Revenue sources are many and too diverse to list here. However, clients should expect to pay some trading fees and a variety of other service charges.

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