Best online brokers 2018

Looking for a good online stock broker? That can be tricky.

It's not that online stock brokers are hard to find. It's just that to compare online brokers requires sifting through a lot of information in a crowded field -- an endeavor that can be quite time-consuming. Making the right choice is important: It can impact the results you achieve as an investor.

Investment goals determine best online broker

Maximizing your return may depend on how well-suited your broker is to your goals. For example, a newcomer looking to wade slowly into investing might be dismayed to find that some online brokers bleed your account with inactivity fees -- in other words, you could pay for doing nothing.

By contrast, higher-volume traders might be more interested to know where they can find commission rates that are less than half the industry average.

For technology lovers, the bells and whistles on a broker's mobile app may be the basis for a decision, while investors driven by fundamentals might seek a brokerage firm that provides the best access to research resources.

To suit your needs and preferences, MoneyRates.com made online broker comparisons based on the following criteria:

1. Best for cheap commissions
2. Best for new investors
3. Best for margin investors
4. Best mobile app
5. Best desktop interface
6. Best research capabilities

Note: Any of the figures mentioned in this study are subject to change at any time at the sole discretion of the brokerage firm. Also, two brokerage firms in this study, Scottrade and TD Ameritrade, will be joining forces in the coming year, so you may want to reevaluate them after the transition is complete.

Below are the top-ranked online brokers in each category. Listed first are the overall winners based on average rankings in those six categories.

Best online brokers overall

Out of 18 online brokers evaluated, four came out on top based on the six categories combined:

1. Merrill Edge

The online brokerage branch of Merrill Lynch was the overall winner because it did better than most of the brokers studied in every category except margin rates, and that consistency earned it the best ranking on average. Of all the things online brokers advertise about their offerings, commission rates are probably the attribute they most often use to appeal to investors. In that light, it is interesting that Merrill Edge ranked first because its commission rate is far from the lowest.

2. Charles Schwab

Like Merrill Edge, Charles Schwab outperformed most of the brokers studied in every category but one to earn the second overall ranking.

3. Ally Invest (tie)

Ally acquired TradeKing in 2016 to add brokerage to its well-known online-banking capabilities. Based on Ally Invest's high overall ranking in this study, the acquisition appears to have been a good choice.

3. TD Ameritrade (tie)

While not the cheapest option, customers might find that the quality of TD Ameritrade's research resources and online tools helps them make more effective investment decisions.

Best online brokers for cheap commissions

By and large, online brokers these days offer flat-rate, per-trade commissions rather than charging based on the size of the trade. That works especially well for people who make larger trades. But smaller investors need to watch trade commissions carefully because they can eat up a significant amount of funds, especially since you will pay that commission both when you buy and sell a stock.

Here are the online brokers with the lowest flat-rate commissions in the MoneyRates study:

1. Just2Trade

At $2.50, Just2Trade's flat-rate commission is a significant savings over the category average of $6.61.

2. Firstrade

The flat-rate commission charged by FirstTrade is $2.95, so not much more expensive than the cheapest rate.

After those two brokers, there was a significant jump to a group of firms that have set their per-trade pricing at $5 or slightly under.

* N/A 1: Interactive Brokers charges $0.005 per share, with a minimum of a $1 commission. This means they would be cheaper than a fixed rate for small trades but not for large trades.

** N/A 2: Lightspeed Trading charges $0.0045 per share, with a minimum commission of $1, which would make them cheaper for small trades but potentially more expensive for large trades.

Best online brokers for new investors

Getting started can be one of the most difficult parts of investing. Online brokers try to make it easy by offering user-friendly interfaces, but there are also dollars-and-cents barriers to consider. Assuming most new investors start with relatively small amounts of money to invest, MoneyRates.com looked at which pricing schedules are likely to take the smallest bite out of the modest resources newer investors may have.

1. Firstrade

As mentioned previously, Firstrade had the second-lowest commission rate in the study. When you combine that with no monthly maintenance or inactivity fees and no account minimum, the economics work well for new investors.

2. Ally Invest

Ally's $4.95 commission rate is below the category average, and with no maintenance fees, inactivity fees or account minimum, it is welcoming to newer investors. In particular, customers of Ally's banking services might find the transition to their brokerage service to be especially seamless.

3. Capital One (tie)

At $6.95 per trade, Capital One's commission rate was about $0.30 more than the category average. However, with no maintenance or inactivity fees and no account minimum, it is a fairly cost-effective place to get started, especially for lower-volume traders. It is currently offering cash bonuses for new accounts.

3. TD Ameritrade (tie)

This broker was an exact match for Capital One with respect to commissions, monthly fees, and minimum funding policy. They, too, offer an incentive for new investors -- in this case, it is 60 days of free trading plus cash bonuses for certain account sizes.

A note about online broker fees

A monthly maintenance fee is a set dollar amount charged in addition to usage-based charges like commissions and, since it is typically a dollar-based rather than percentage-based fee, it is proportionally more burdensome on small investors.

Inactivity fees are charged by some brokers to investors who don't meet a certain volume of trading activity. Like monthly maintenance fees, these are set dollar amounts that disproportionately affect small investors. Also, newer investors who want to wade into the market gradually are more likely to fall below the required trading volume.

Finally, while many online brokers allow you to start an account with any amount of money, some impose a minimum account size which could be a barrier to getting started.

So, in considering the best online brokers for new investors, MoneyRates looked for those with reasonable commissions, no monthly maintenance or inactivity fees, and no minimum funding requirement. MoneyRates also found that a few online brokers are offering special incentives for new investors. Since these incentives are temporary, they were not considered dominant factors, but they are noted above where applicable.

Best online brokers for margin investors

For investors who use margin, the margin interest rate is a key hurdle to overcome in order to earn a positive rate of return. Here are the brokers that had the cheapest margin rates:

1. Interactive Brokers

With a margin rate of just 2.92 percent on a $25,000 loan balance, Interactive Brokers offered a much cheaper alternative than the category average rate of 8.14 percent.

2. Just2Trade

At 6.75 percent, Just2Trade's margin rate couldn't come close to that of Interactive Brokers, but it still represented a significant savings over the average.

Best online brokerage mobile apps

Online brokerage mobile apps are heavy on price and volume charts but typically a little thin on facilitating access to fundamental research. MoneyRates.com looked at how robust the overall range of features was; but since many mobile brokerage apps offer much the same features, a key factor is how reliably these apps perform. So, MoneyRates.com also considered ratings from both iOS and Android users in its ranking of online brokerage mobile apps. Overall, two apps rose to the top:

1. (tie) E*Trade

No earth-shattering features, but overall one of the more robust line-ups including portfolio status, watch-list information and alerts, and current market data.

1. (tie) Motif

Motif is geared toward helping customers build portfolios around broad thematic themes, and their mobile app does an efficient job of allowing users to construct model portfolios on the fly and then implement them instantly.

Best online brokerage desktop interface

Since the desktop interfaces of online brokers offer largely the same capabilities, MoneyRates put an emphasis on transparency, looking at which desktop interface made it easiest for users to locate key information for decision making. The winners were:

1. Scottrade

Unlike some sites that make you scroll endlessly or hunt and peck through different pages to find basic information, Scottrade offers a clear, user-friendly layout.

2. (tie)Just2Trade

Just2Trade's site offers clear, menu-driven access to information.

2. (tie) Merrill Edge

While their broader range of services prevents Merrill's website from being as concise as the other two on this list, they do a good job of laying out their capabilities in a straightforward manner.

Best online brokerage research capabilities

The quality of research capabilities is a very subjective thing, so MoneyRates combined ratings from multiple reviewers to come up with a consensus ranking.

1. Charles Schwab

Ideally, research capabilities should include everything from quantitative tools to fundamental research reports, and Charles Schwab scores well for the full range of resources it offers.

2. TD Ameritrade

After their research score came close to matching Schwab's this time around, it will be interesting to see if joining forces with Scottrade brings them any extra capabilities to put them over the top next year.

Online brokerage is an emerging field, so the dynamics change quickly. Choose carefully to begin with, and then stay up to date to make sure your initial choice is still the best option.