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What is a Discount Broker and How Can They Save You Money?

A discount broker can help you save money on your investments by offering lower fees and commissions
what-is-discount-broker
what-is-discount-broker

The first discount brokerage firm, Charles Schwab, was founded in 1971, but it wasn’t until the 1980s that discount brokers began to gain significant market share.

The introduction of online trading platforms in the 1990s further fueled the growth of discount brokers, making it easier and more convenient for investors to trade stocks and other securities on their own.

Today, discount brokers are a popular choice among individual investors, who appreciate the lower cost and flexibility of these services.

What Is A Discount Broker

A discount broker is a type of brokerage firm that offers lower fees and commissions than traditional brokers. They typically offer a more streamlined and automated approach to investing, with fewer bells and whistles than full-service brokers.

Discount brokers may also offer a range of investment products, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs).

While they may not offer the same level of personalized advice and support as full-service brokers, they can be a great option for investors who are comfortable making their own investment decisions and want to save money on fees and commissions.

Discount Broker Pros

  • The primary advantage of using a discount broker is the lower cost. Discount brokers typically charge lower fees or commissions for trades.
  • Investors who make frequent trades or have a large portfolio can save a significant amount of money over time.
  • Discount brokers often offer online tools and resources to help investors make informed decisions about their investments. This can be especially helpful for those who are comfortable making their own investment decisions and don’t require personalized advice from a full-service broker.

Discount Broker Cons

  • The lower cost discount brokers offer comes at the expense of personalized investment advice. Investors may need to do more research and make more investment decisions on their own.
  • Discount brokers may not provide customized investment advice or in-depth financial planning services, which may not be suitable for investors who need more guidance.
  • Some discount brokers may have limited access to certain investment products or markets.

How can you choose the right discount broker for your needs?

When choosing a discount broker it’s important to consider factors:

  • Fees, investment options, customer service, and user experience.
  • Look for a broker with low fees and commissions, a wide range of investment options, and good customer service.
  • Consider the broker’s user interface and mobile app, as well as any educational resources or tools they offer.

Top Discount Brokers That Offer Investment Guidance

1. SoFi Invest

Sofi Invest offers online trading services at a lower cost than traditional, full-service brokerage firms. Investors can buy and sell stocks, exchange-traded funds (ETFs), and cryptocurrency all without paying commissions. The platform also offers automated investing and robo-advisory services, which can help investors build and manage a diversified investment portfolio at a lower cost than working with a traditional financial advisor.

Features:


  • Investors get access to educational resources, investment research, and tools to help make informed decisions.
  • Personalized investment advice through its robo-advisory services.
  • Investors can build a portfolio based on their individual goals and risk tolerance.

2. Fidelity Investments

Fidelity Investments offers a range of investment services, including self-directed investing and advisory services. While Fidelity does offer low-cost trading commissions and access to a wide range of investment products, it is not strictly a discount broker or a self-directed investing platform.

Features:

  • Access to a broad range of investment products, including stocks, bonds, mutual funds, ETFs, and more.
  • A range of investment research, tools, and educational resources to help investors make informed investment decisions.
  • Managed accounts and robo-advisory services, which can provide personalized investment advice and guidance to investors who require additional support.

3. E-Trade

E-Trade is a discount broker that offers self-directed investing services. It provides investors with access to a range of investment products, including stocks, bonds, mutual funds, ETFs, options, and more, at competitive trading commissions.

Features:

  • Wide range of tools and resources to help investors make informed decisions.
  • Real-time market data, investment research, and trading tools.
  • Educational resources to help investors learn more about investing and develop their investment strategies.
  • Optional advisory services, such as managed portfolios and robo-advisory services.

4. Charles Schwab

Charles Schwab offers low-cost trading commissions and access to a wide range of investment products, but it’s not considered a pure discount broker. Charles Schwab is a full-service brokerage firm that offers a range of investment services, including self-directed investing and advisory services.

Features:

  • Access to a broad range of investment products, including stocks, bonds, mutual funds, ETFs, and more.
  • Range of investment research, tools, and educational resources to help investors make informed investment decisions.
  • Advisory services, such as managed accounts and robo-advisory services, which can provide personalized investment advice and guidance.

5. Ally Invest

Ally Invest is considered a discount broker that offers self-directed investing services. It provides investors with access to a range of investment products, including stocks, bonds, mutual funds, ETFs, options, and more, at competitive trading commissions.

Features:

  • Wide range of tools and resources to help investors make informed decisions.
  • Real-time market data, investment research, and trading tools. T
  • Educational resources to help investors learn and develop investment strategies.
  • Optional managed portfolios and robo-advisory services.

Conclusion

Finally, discount brokers are a popular choice among individual investors who appreciate the lower cost and are comfortable making their own investment decisions. However, full-service brokers still play an important role in providing personalized investment advice and other value-added services to clients who require more guidance and support.

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