Years ago, brokers used “free stock trades” was a sexy promotional offer for new accounts.
Open a new account at E*Trade, deposit at least $10,000, and you would get 500 commission-free trades for sixty days. Deposit some more and get cash. It was a pretty standard new brokerage account promotional offer.
Today, led by companies like Robinhood, free trades are almost the norm.
In early October 2019, Charles Schwab announced they would let you buy and sell U.S. stocks, ETFs, and options for free. Then TD Ameritrade countered with the same offer just a day later. Their stock prices were hammered (brokers make a lot of money off trading commissions) but this only helps investors. One day later, E*Trade joined the party.
Funny enough, this was all prompted by Interactive Brokers! Interactive Brokers announced IBKR Lite and how it would be commission-free trading on US exchanged listed stocks and ETFs. It's not available yet but this is what kicked off the most recent run to free commission trades!
So, which stockbrokers now offer free trades?
Robinhood was the earliest of the brokers to offer free trades. They will also not charge you an account maintenance fee or any fund transfer fees. It's truly fee-free.
The only fee that is charged is a fee levied by the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) on the sale of stock. This is a fee charged to all brokers and Robinhood passes them on:
- The SEC regulatory transaction fee is $20.70 per $1,000,000 of principal, rounded up to the nearest penny.
- The FINRA Trading Activity Fee (TAF) is $.000119 per share rounded up to the nearest penny with a cap of $5.95.
Robinhood also gives you a free share of stock, worth up to $500, when you open a new account.
Much like Robinhood, Webull is a broker that got its start with a mobile app first. They have a fully functional app with no minimums and no maintenance fees. They charge $0.00 per trade and even offer full extended-hours trading.
If you open a new Webull account and complete the process within 24 hours, you can get a free stock worth up to $500. Make your first deposit of $100 or more and you get another free stock, this one valued between $12 and $1400. Can't beat that! (more details about the Webull promotional offer)
SoFi is most well known for being a student loan refinance company but they also have other products such as SoFi Money (banking) and SoFi Invest (investing).
SoFi Invest has an Auto Investing product (similar to a robo-advisor) and an Active Investing product, which lets you manage your portfolio. SoFi Invest lets you invest in a stock, crypto, and ETFs – all without any trade commissions.
Plus, you can get $50 in stock from SoFi Invest if you sign up with a referral link and deposit at least $25.
IBKR Lite is not available yet but it's the lightweight trading platform run by Interactive Brokers. It plans to “offer unlimited, commission-free trading on US exchange-listed stocks and ETFs,2 as well as low-cost access to global markets without required account minimums or inactivity fees.
If that is not reason enough, we pay competitive interest on your idle cash balances, let you earn extra income in our Stock Yield Enhancement Program and offer low financing rates for borrowing against your account.”
We will add more details as they become available.
As of October 7th, 2019, Charles Schwab no longer charges a commission on the buying and selling of U.S. stocks, exchange-traded funds, and options. Options will still have a 65 cent option contract fee.
As of October 3rd, 2019, TD Ameritrade no longer charges a commission on the buying and selling of U.S. stocks, exchange-traded funds, and options. Options will still have a 65 cent option contract fee (no exercise or assignment fees).
E*Trade has also removed it's $6.95 per trade commission to match Charles Schwab and TD Ameritrade in offering commission-free trades on U.S. stock, ETFs, and options.
I'm the least familiar with Firstrade (they're legitimate though, FINRA regulated and all that) but they were named the $1 Best for ETF Investors and Bond Investors by Kiplingers in 2018. They charge $0 on all trades – stocks, ETFs, mutual funds, and options. They also offer up to $200 in transfer fee rebates if you move your account to them.
As of October 9th, 2019, Ally Invest was commission-free on all U.S. exchange-listed stock, ETF, and options trades!
As for October 10th, 2019, Fidelity went commission-free to trade online U.S. stocks, ETFs, and options.
Vanguard has several tiers of investors and the commission you pay depends on which tier you are in. The tiers are determined by the assets you have invested with Vanguard.
At the Vanguard Flagship tier, if you have more than $1,000,000 and less than $5,000,000, you get free trades. There are a variety of perks associated with this tier, such as access to a Personal Advisory, but every year you get 25 transactions commission-free. You already get commission-free transactions on Vanguard mutual funds and ETFs, so the twenty-five count towards stocks, options, and non-Vanguard ETFs.
The Rest (Who Charge a Commission)
We looked at a lot of brokers but many still charge a fee.
Here is the base fee schedule for the brokers we looked at (as of October 7th, 2019):
- Interactive Brokers – $0.005 per share, $1 minimum, 1% of trade value maximum
- Lightspeed – $0.0045 per share, $1 minimum
- Merrill Edge – $6.95
- TradeStation – $5.00
What's funny about getting free stock trades is that it's a red herring for most investors.
It also runs counter to the idea of buy-and-hold for the long term.
While it has never been an enticement for me, I can see why it's appealing. Even if you don't trade much, getting it for free is still better than paying!