How to Choose a No-Trading-Fee Stock Trading App

Updated on August 30, 2018

This article will not make any recommendations about what kind of stocks or other instruments people should invest in. Instead I will describe how the different no-trading-fee apps currently operate and thus which one is best for any given type of investor. I base my comments upon the terms of service and my experiences using each app. I continue to currently use RobinHood, M1 Finance, and Alfa Invest -- and have previously used Stash and Webull.

Why No-Trading-Fee Apps?

Until a few years ago the only way to buy a stock or fund was to pay a trading fee for each purchase or sale. This fee is typically between five and ten dollars and not effected by the number or value of stocks being bought or sold. These fees are a substantial cost for less wealthy investors who may want to acquire stocks in small amounts as they put aside the necessary funds.

A number of companies have attempted to attract these customers by using different methods of monetization and eliminating trading fees entirely. These companies typically support trading through a simple app and provide a simplified service with limited options and customer support. However each of these app works rather differently and so is better suited to a different kind of customer.

M1 Finance

https://www.m1finance.com/

M1 is an app that will allow a disciplined investor, interested in high value and expensive stocks, maximize their profit. Ask yourself:

  • Am I interested in stocks that I cannot easily afford such as Apple at around $2000 a share
  • Do I already have a clear idea of how much of my income I plan to invest and no trouble putting this money aside?

If so then M1 will be your best choice. It allows you to buy fractions of shares at a time, and automatically divide each deposit you make between your chosen stocks according to a set percentage. You will need $100 to start and $10 or more per deposit.

RobinHood

https://robinhood.com/

The real leader in this area is RobinHood. Their app is popular and generally less buggy than the others. Ask yourself:

  • Does buying and tracking one stock at a time motivate you to invest more?
  • Do you want to be able to automate buying and selling when stocks hit a target price?
  • Do you have intermediate or better knowledge of stock trading?

If so, RobinHood might be the app for you. As a better established app it is also well-supported with peer-to-peer forums and Facebook groups. Qualifying accounts also have access to trading cryptocurrencies and options. However not being able to buy fractions of stock will tend to limit the diversity of your portfolio, make volatile penny stocks more attractive, and lead to lower profits for less experienced traders.

Alfa

https://alfa-investing.com/

  • Do you want to follow the investment patterns of famous and successful investors?

Alfa's trading app is not especially easy to use and fully-functional, but the information they offer about the portfolios of famous investors like Warren Buffet is hugely beneficial to investors starting out. If you don't have the time, skill or interest in becoming a stock expert it makes sense to copy those who are. The Alfa app brings this information direct to users in an easy-to-understand format.

Stash

https://www.stashinvest.com/

  • Do you just want your money invested with little or no effort?

Stash is easy to use but has limitations that will annoy most people with an actual interest in companies and stocks. With Stash you can easily invest in diversified funds with various themes. The funds have some variation in risk and rewards but are all fairly safe for the novice investor. There is a monthly $1 fee that may be excessive for very small time investors.

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