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If you’re a young adult, you might feel that you’re barely keeping your head above water. Student debt looms large, which makes it hard to accept an entry-level job with a low salary. Combine these career headaches with pricy rent and sky-high health care costs, and you’ve got all the components of a cash-strapped existence.
How can there possibly be any cash left to invest at the end of each month? Investing while you’re young is always a good idea, even if you can only contribute meager amounts at first. Careful investing isn’t just about maxing out your 401(k), it’s about building good habits and letting the power of time work in your favor.
In this article, we’ll look at some of the best online brokerages for young adults.
Best Investment Accounts For Young Adults:
- Best Overall: Charles Schwab - Open an account
- Best for Minimizing Costs: Robinhood - Open an account
- Best for Day Trading: Interactive Brokers - Open an account
- Best for Retirement Planning: Vanguard
- Best For Mobile Trading: E-Trade - Open an account
- Best Education and Research: TD Ameritrade - Open an account
Why Should Young People Invest?
Time is a powerful weapon you’ll only have at your disposal while you’re young. If you begin investing in your early 20s, you’ll likely have 45+ years to learn the market, make mistakes, and yes, eventually build a nest egg.
Starting young also gives you the advantage of keeping it simple. A portfolio of low-cost index funds will give even the most uneducated investor a solid lifetime return if the holding period spans multiple decades.Building good habits in your 20s will also result in lots of smart investing decisions in your 30s, 40s, and 50s.
Even if you can only invest small amounts each week or month, you’ll get in the habit of paying yourself first and making consistent contributions to a brokerage account. Forming good, simple habits like these builds discipline and takes the emotion out of investing, or at least keeps it at bay.
What To Look for in an Investment Account
Compared to seniors or baby boomers, young adults aren’t looking for the same things in an investment account. Older investors might prefer human connection and trades placed over the phone and young adults prefer chat and email support and an immersive mobile experience.
Oh, and low fees. The secret’s out on costs and young people won’t (and can’t!) pay outrageous commissions.If you’re in your 20s and looking to open your first brokerage account, you'll want to consider the following: getting a lot of bang for your buck is a must. Look for a broker that can provide a great mobile experience with low trading costs and no minimum account balance.
Pore over a list of commission-free ETFs for some great ideas. You might also want some sort of live news feed and access to research materials, including interactive stock charts.
Common Characteristics of the Best Investment Accounts
Minimizing costs should be the most important goal of any investor, but that’s especially true for a young adult who might work with limited capital. Thankfully, there are plenty of discount brokerages with very minimal fees that welcome low-balance accounts with open arms.
Here are a few things the best brokerages have in common when it comes to meeting the needs of young investors.
- Low commissions: The days of charging $10 per trade are over. Many brokers today charge between $5 to $7 per trade and provide customers with a variety of commission-free investment options.
- No minimums: Starting small is always a good idea. Find a broker that doesn’t make you drop $1,000 in an account to get started.
- Easy-to-use mobile app: All brokers have a mobile app these days, but not all mobile apps are created equal. You want a smooth and streamlined experience when investing over a smartphone. Some of the best investment apps can be accessed by getting accounts at these brokerages.
- Access to investor research and education materials: Want to know the difference between traditional and Roth IRAs? Or maybe you’re interested in learning how to use stop-loss orders on your trades. Your broker should provide research and information to help you make better decisions.
- A wide variety of investment options: Investing in individual stocks can be risky, so make sure your brokerage account has access to low-cost index funds (and a list of commission-free ETFs).
- Excellent customer service through multiple forms of communication: No hour-long waits on hold! The best brokers have phone, chat and email options for reaching customer service.
Best Investment Accounts for Young Adults
Using the characteristics listed above as criteria, Benzinga has come up with a list of the best investment accounts that young adults can open today. Not every account will be a good fit; young adults will have to decide their investment goals before choosing an account to open.
Best Overall: Charles Schwab
Charles Schwab combines decades of investing experience with a modern approach, including a very simple (yet functional) mobile app, low trading commissions and access to great research tools and commentary.
Brokerage account holders at Charles Schwab enjoy some of the lowest investment costs in the industry. Trades are only tagged with a $4.95 commission and there’s a quality list of ETFs that trade commission-free. Many of those commission-free ETFs are Schwab’s own funds, which carry tiny expense ratios between 0.03% and 0.05%.
There aren’t any account minimums either, so finding a broker with a lower cost of doing business is a difficult task.Need to ask questions? Schwab offers 24/7 customer support through phone and chat services. Brokerage account holders also get access to news reports from leading market sources, along with commentary from Morningstar, Credit Suisse and Market Edge. But the biggest selling point (particularly if you’re a young adult) might be Schwab’s terrific mobile app.
With Schwab Mobile, you can place trades, deposit funds and research your investments from your smartphone. The app also syncs with Apple Watch to give on-the-go customers even more options.
Best for Minimizing Costs: Robinhood
Can’t get much lower than free, right? Robinhood probably won’t be the only online brokerage with zero commissions for much longer, but right now it’s the only place to trade completely free of charge.
Robinhood is geared towards the younger generation with its mobile-only strategy and minimal overhead. Robinhood has no physical branches, doesn’t pay for affiliate research and limits the number of securities you can trade. If futures are your thing, you’ll need to look elsewhere.
But commission-free trading of stocks, ETFs, mutual funds, options, and cryptocurrencies is only possible because of its fewer bells and whistles.As far as education goes, you’ll get charts, access to news reports, analyst rankings and conference call recordings with a Robinhood account, but that’s about it.
You can change chart patterns from lines to candlesticks, but can’t use technical indicators or signals, nor will you get any buy or sell recommendations from industry insiders. Remember, you get what you pay for.
Still, paying $0 in commission on stock and options trades will be too enticing for some young investors to pass up. There are better brokers out there, but none which currently offer free trading.
Best for Day Trading: Interactive Brokers
Any young adult interested in learning to day trade would be wise to get a brokerage account with Interactive Brokers.
At Interactive Brokers, you’ll be able to leverage sophisticated trading software if you day trade, all the while paying $1 commission on most low-volume transactions. Interactive Brokers doesn’t use a set commission per trade; it charges 0.005 per share on trades with a $1 minimum. If you were to buy 300 shares of Boeing at $411 (total price of $123,000), you’d only be charged $1.50 commission.
However, large trades or penny stock transactions can quickly become more expensive than big-name brokers. Interactive Brokers has access to markets in over 100 countries and its Workstation trading platform makes it easy to analyze stocks and test theories.
The mobile app offers real-time news updates and quotes, but the Workstation platform is also extremely mobile friendly. One drawback: Interactive Brokers charges an inactivity fee if your account balance is under $100,000 and you don’t rack up $30 in commissions each month. If you’re a buy-and-hold investor, Interactive Brokers might not be the best fit.
Best for Retirement Planning: Vanguard
The investment world recently mourned the passing of Jack Bogle, architect of the Vanguard Group and creator of the index fund.
Few people have done more to enhance the lives of mom-and-pop investors than Bogle, and Vanguard remains one of the ideal places to open an IRA for retirement saving.Vanguard index ETFs have some of the lowest expense ratios on the market and IRA holders can buy and sell with commission, loads or sales fees.
Vanguard offers over 200 different commission-free mutual funds and ETFs, many of which are their own tiny expense funds. Plus, set-it-and-forget retirement savers can choose one of Vanguard’s Target Date Retirement funds and leave money in safe hands for decades.Vanguard isn’t for active traders; you can’t even make a trade on the mobile app.
This certainly won’t appeal to you if you want to remain in complete control of your accounts, but you could be better served to trust Vanguard’s Target Date funds over your own stock-picking prowess.
Best for Mobile Trading: E-Trade
E-Trade reasserted its dominance in the mobile category with the release of Power E-Trade, a powerful trading platform designed for a flawless smartphone experience. Power E-Trade combines real-time data with over 100 technical indicators and analysis tools.
You’ll be able to trade stocks, bonds, mutual funds, futures and options all right from your smartphone. There’s even a feature to create chains of options and futures. The LiveAction tool of Power E-Trade is a powerful market searching tool, allowing investors to spot disruptions or unusual volatility.
E-Trade has a second mobile app as well, which allows basic trading functions but allows users to combine their brokerage and bank accounts into a one-stop access point. This traditional app will be less imposing for novice investors than the complex Power E-Trade, but still gives users access to chart analysis tools and real-time news updates.
Commissions are a little higher at E-Trade than other brokers on this list; trades cost as much as $6.95. Frequent traders get the more standard $4.95 commission rate. An account minimum of $500 exists for brokerage accounts too, so make sure you have some cash saved up before choosing
E-Trade as your broker. The trading platforms provide a lot of bang for your buck.
Best Education and Research: TD Ameritrade
TD Ameritrade’s thinkorswim platform might be the best trading software available to the public today, but its backbone is the research and data provided by Ameritrade’s many affiliates.
As a TD Ameritrade brokerage account holder, you’ll get access to seven different market research agencies, including Morningstar and The Street. The thinkorswim platform lets users track everything from stocks and bonds to commodities and currencies. TD Ameritrade claims thinkorswim users can view over 400,000 different economic data points that span the globe.
Not only can users view market signals, but they can view social ones as well. Using Market Edge tools, traders can check out the sentiment of different securities on social media platforms like Twitter. No brokerage currently offers a comparable number of research and analysis tools.
TD Ameritrade is expensive, at $6.95 commission per trade, but like E-Trade and Schwab, there’s a long list of commission-free ETFs available for account holders. There’s no account minimum either, so you can buy a single share of a penny stock and still get access to all the research tools.
As a young adult, you’ve got no shortage of options if you’re looking to open an investment account. Many of the old guard firms like Schwab and TD Ameritrade have been challenged by Robinhood and Vanguard to lower costs and make investing more accessible to everyone.
If you’re new to the workforce and want to get a head start on investing and planning for retirement, you’ll find what you’re looking for at one of these firms.
Frequently Asked Questions
Young people must consider the fees, tools, educational resources and long-term growth.
Benzinga recommends Interactive Brokers, Charles Schwab and Vanguard.