What makes a good online broker for long-term investing? First, they need to offer fair fees for stock and ETF trading, while mutual fund and bond fees are also relevant. Second, the inactivity fee shouldn't be high. Finally, we rated it as a positive if the broker provides a wide range of products to trade.
Some of the brokers offer CFD products. These are complex and very risky, thus not suitable for everyone. You can easily lose all of your invested money. For buy-and-hold investors, it is probably a better option to buy stocks directly rather than via CFDs.
If you have no idea what a CFD is, start with the following concepts first:
What is share trading?
Share trading is the buying and selling of company stock with the aim of making a profit. It allows you to obtain legal ownership in a specific company. Once you have shares in a company you own part of the underlying asset. This means you can receive company dividends and are able to vote in company meetings.
What’s the difference between CFD and share trading?
The main difference between CFD trading and share trading is when you trade a CFD you don't own the underlying share. With a CFD you never actually own the asset or instrument you have chosen to trade, but you can still benefit if the market moves in your favour, or make a loss should the market move against you. With share trading however you enter a contract to exchange the legal ownership of the shares for money and you own this equity.
Is CFD trading like gambling?
Gambling is a broad term, but CFDs are indeed like sports betting. If you bet on football it’s essentially a contract for difference — the difference between the number of touchdowns if American football, goals if British. However, if you follow a strict trading strategy and analyze each trade, than it’s not gambling but trading.
Well if you analyze each sports team, how their defense has been improving, how healthy the star players are, what the chance of rain is and how that might affect the more speed-driven team, etc. then you are using your knowledge to reduce the risk and better pinpoint the future “difference” in touchdowns or goals. Throw in the leverage factor which brings the needle sensitivity of CFD trading in line with sports betting mechanically, plus the short-term factor which does the same, and then the question is simply “Do you consider sports betting gambling?”. If you do then you should also consider CFD trading gambling, it’s hard to argue otherwise.
Which is better, buy real stock or trade CFDs?
There is a lot to be said for both, but they are completely different ways of investing or trading, each with advantages and disadvantages.
What are some best online stock brokers (non-CFD) for share trading?
As with most financial products and services, there's no such thing as the best online stock broker for everyone, so we're sharing several of our favorites:
Best international brokers for stock trading
Interactive Brokers: Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform, a large selection of tradable securities — including foreign stocks — and ridiculously low margin rates. Its new offering, IBKR Lite, offers commission-free trades of stocks and ETFs.
Etoro: At eToro, you can trade CFDs and forex, as well as real stocks, ETFs, and many cryptos. You can be invested in both with and without leverage, giving almost anyone access to short-, mid- and long-term investment options. eToro offers a user-friendly and well-designed web trading platform. Innovative services like social trading and Smart Portfolios are also available.
Saxo Bank: Saxo Bank is a global service provider and its subsidiaries are present in the form of separate legal entities in different regions of the world. The services offered by the various entities may differ slightly, especially with respect to fees and product portfolios. Saxo Bank is considered safe because it has a long track record, a banking background and is regulated by top-tier financial authorities. It offers a user-friendly and well-designed trading platform, backed by great research. The product portfolio covers all asset types and many international markets.
Swissquote: Swissquote is a Switzerland-based broker established in 1996, serving clients from all over the globe and is regulated by top-tier financial authorities. Swissquote offers access to many markets all around the world, with almost everything available, from stocks, mutual funds, and a lot of different other types of products, from bonds to cryptos. However, Swissquote's trading fees are relatively high. As you can trade many products and no inactivity fee is charged, feel free to give it a try.
Best online brokers in the US
Robinhood: Robinhood is best suited for newcomers to investing who want to trade small quantities, including fractional shares and cryptocurrencies, and require little in terms of research beyond seeing what others are trading. Robinhood's overall simplicity makes the app and website very easy to use and charging zero commissions appeals to extremely cost-conscious investors who trade small quantities.
E*Trade: E*TRADE has long been one of the most popular online brokers. The company's $0 commissions and strong trading platforms appeal to active traders, while beginner investors benefit from a large library of educational resources.
Webull: Webull will appeal to the mobile-first generation of casual investors with its slick interface for desktop and mobile apps, but the brokerage also delivers an impressive array of tools for active traders. However, its relatively weak educational content may leave true beginners in the lurch, and it lacks access to a few common asset classes.
TD Ameritrade: TD Ameritrade meets the needs of both active traders and beginner investors with quality trading platforms, $0 commissions on online stock, options and ETF trades and a large selection of mutual funds.
TradeStation: TradeStation is the gold standard for advanced, active traders, but its new offering of $0 trades is an attempt to appeal to casual investors. The web and mobile platforms are very user-friendly with many functions. It also offers low stock and ETF trading fees. On top of that, TradeStation's education materials are well-structured and high quality. It is recommended for traders focusing on US markets and buy-and-hold investing.
Fidelity: Fidelity offers $0 trading commissions, a selection of more than 3,400 no-transaction-fee mutual funds and top-notch research tools and trading platform. Its zero-fee index funds and strong customer service reputation are just icing on the cake.
Best online brokers in Europe
Capital.com Invest: Capital.com, the high-growth trading and investing platform, has launched a dedicated stock dealing account for clients in the UK and Europe. Capital.com Invest enables customers to easily and securely invest in global stocks without paying any commission. With no hidden costs or mark-ups and with no fees to pay on deposits or withdrawals, you can confidently invest directly in an underlying stock without incurring any additional costs or expenses. As there is no inactivity fee and the account opening is fast, feel free to try Capital.com.
XTB: XTB provides real stocks and ETFs only for EU customers onboarded under XTB's Polish entity, except in Cyprus and Hungary. There is no commission for stocks and ETFs if you trade less than €100,000 in a month. While favorable, this is still not the best offer on the market, as some competitors such as eToro or Trading 212 offer commission-free trading without any limitations.
Best online brokers in Australia
CMC Markets: CMC Markets offers an excellent fit for all types of traders, with a broad product offering and an accessible, feature-rich platform (Next Generation). CMC Markets emphasizes customer service, research amenities, and educational resources.
ANZ Share Investing: ANZ Share Investing is owned by ANZ, which is one of Australia's Big Four Banks and a highly trusted financial institution globally. You can access a range of markets with an ANZ Share Investing account including Australian and international shares, exchange traded funds (ETFs), managed funds, options, warrants and more. You can apply online for an ANZ Share Investing account if you’re an Australian or New Zealand resident.
CommSec: CommSec is one of the largest online brokers in Australia, providing trading access to 25 exchanges throughout the world. While its shares trading fees are expensive, CommSEC offers traders a variety of trading tools and market research.
SelfWealth: SelfWealth is a trading platform for Australian shares (and recently US shares) that offers trading at a flat fee or $9.50, no matter how big the trade is. All shares are CHESS sponsored on your own individual HIN so you are the full legal and beneficial owner of the shares.
Nabtrade: nabtrade is the online share trading platform of National Australia Bank (NAB). You can apply and manage your account online and keep track of market activity with NAB's complimentary mobile trading platform, IRESS. NAB also gives you access to comprehensive market research reports and information as well as notifying you of changes to help you stay on track.
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