For decades, companies have been giving away free stuff to get you to try their service.
Brokers, like E*Trade, would offer hundreds of free trades within a fixed window whenever you signed up. Their latest advertised offer seems to be 60 days of commission-free trades. It's a nice offer, but what if I don't want to trade like a madman? What if I just want to try them out and perhaps get a few free shares of stock?
That's where the new crop of brokers comes in. Much like how online banks broke traditional banks, with high-interest rates and no fees, a new crop of brokers seeks to upend the traditional model.
Their first step? Free stock.
Here are some brokers who offer free shares of stock when you sign up:
Every company on this list is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). SIPC is the FDIC equivalent of deposit insurance with limits up to $500,000 ($250,000 for cash). Never use a broker that is not covered.
RobinhoodRobinhood is the most well-known startup on this list (don't feel bad if you've never heard of them, they're still relatively new). They were founded in 2013 by two veterans from the high-frequency stock trading world.
Robinhood is a broker that lets you buy and sell shares of stock and exchange-traded funds (ETFs) without paying a commission. Whereas other brokers charge you a fee, like Ally Invest charging $4.95 per trade, Robinhood does it for free. They do not charge a maintenance fee either.
They were the first to aggressively market themselves by giving away free stock and you can still get yours if you act quickly. Robinhood Financial LLC is based out of California with CRD# 165998 and SEC# 69188.
Summary of the deal: You get a free share of stock valued between $5 and $150, with the average being around $10. There's no other requirements, no minimum deposit amount, and trades are free.
Webull is another commission free broker and is accessible by app only. The app itself, which I've had for a couple months, is less user-friendly than Robinhood but the shares of stock they gift are just as real.
The stocks they give will almost always be in the $5 range, though from time to time you'll get something wild and crazy. For example, I received many shares of ABEV before randomly one day getting a share of AAPL.
Webull Financial LLC is based out of New York City with CRD# 289063 and SEC# 69978.
Summary of the deal: You get a free share of stock valued between $4 and $1,000 but chances are yours will be between $4and $6. There's no other requirements, no minimum deposit amount, and trades are free.
Spelled by someone who hates vowels, but pronounced “investor,” NVSTR gives free stock valued at $20 to $500. There are a few conditions with this offer, such as you cannot withdraw the funds for 1 year and you must place a trade within 1 year.
Unlike Webull and Robinhood, NVSTR is not a commission-free trading app. They charge $4.50 per trade, which is lower than most brokers and on par with Ally Invest. There is a simulated portfolio feature so you can use their collaboration and optimization tools without putting real money on the line.
It was founded in 2015 by Bernard George and Patrick Aber. George has a hedge fund and engineering background with a Physics degree from Harvard. Aber was designing investment strategies at Tower Research Capital and The Carlyle Group after studying Applied Math and Economics at Harvard.
Nvstr Financial LLC is based out of New York City with CRD# 269966 and SEC# 69642.
Summary of the deal: You actually get free cash between $20 and $500. There is no minimum deposit and you must hold the amount in your account for a year and make one trade within a year to keep the bonus. Trades are $4.50 each and there are no monthly fees, no membership fees, no account opening or closing fee, and no fund transfer fees.
Stash is a robo-advisor / investment app that helps you invest through “themes.” You choose the investments and they offer guidance, plus an app that helps you save money. If you want a closer look at the service, we take a brief look while comparing the best investing apps.
They don't give you free stock but they're an investment app that gives you $5 to start.
Summary of the deal: You get $5 free. There is no minimum deposit and no holding requirements, but there is a monthly fee that starts at $1 per month.
What About Taxes?
You will get a Form 1099 for the value of the stock that you receive from any of these brokers. You'll be responsible for including that on your tax return for next year and it'll likely be taxed like bank interest. The moment you get the shares, the value is recorded and the broker will record that as miscellaneous income.
When you sell the shares, you'll owe capital gains tax if you sold for a capital gain. You can deduct capital losses if you sell for a loss. The cost basis is the value of the share when you received it.
For example, you get a share of Wallet Hacks LLC valued at $100. The broker will issue you a Form 1099 at the end of the year for $100. If you sell the stock for $110 sometime during the year, you'll owe taxes on $10 of capital gain. You'll be taxed at ordinary income tax rates on the $100 and then capital gains tax rates on the extra $10.
If you sell the stock for $90 and take a loss of $10, then you'll still owe ordinary income tax rates on the $100 but you can deduct $10 of capital loss from any capital gains you have. If you don't, you can take that $10 off your ordinary income (up to the limit).
So, don't forget to set aside cash for taxes when you go on your free stock spree!