Best of the Online Brokers

Fidelity edges out Merrill Edge and Schwab for first place in our rankings of top discount brokerages.

- Daren Fonda

INVESTORS CAN POCKET A FEW HUNDRED BUCKS JUST BY OPENING an account with an online broker these days. But don’t let a signing bonus sway you. Low commissions to trade stocks or exchange-traded funds can save you more money in the long run. Whether you’re a stock jockey, a saver or a retiree, finding a firm that suits your needs is far more valuable than even a $600 bonus (Merrill Edge’s current inducement if you open an account with at least $200,000). So what makes for a first-rate broker? It depends on what you value. Low fees may be critical for active traders, but buy-and-hold types may want an array of no-transaction-fee mutual funds. Brokers with unbeatable prices may lack the retirement-planning tools or advisory services you need.

To help you choose, we rounded up data from seven of the biggest brokers in the business: E*Trade, Fidelity, Merrill Edge, Schwab, Scottrade, TD Ameritrade and Vanguard. Why these seven? A firm had to offer online trading of stocks, ETFs, funds and individual bonds to be included in the rankings. Discount brokers affiliated with Citigroup and Wells Fargo don’t provide online bond trading. Capital One, T. Rowe Price and USAA all declined to participate. We also excluded some brokers that focus primarily on active traders and lack a full suite of investment choices and services.

Although the results are close in most categories, Fidelity slips past Merrill Edge and Schwab for first place in our survey, featuring the best overall mix of investment products, retirement-planning tools and services. Fidelity’s commissions aren’t the lowest, especially if you want a mutual fund for which you must pay a transaction fee. But its prices are close enough in other areas to be competitive with lower-cost brokers. Furthermore, Fidelity wins points for its full range of retirement and advisory services, along with topnotch investing tools and customer service.