In this article we are going to list thhe top 5 online brokers in 2021.
It has always been more important to save money and invest them appropriately than it is now. Corona pandemic has destroyed the global economy at many levels not seen ever before , and with the on going lockdowns to limit the spread of the virus, this has led to millions of jobs being lost across the globe. This means that many people do not know about where their income is going to come from . This income has to do more with the survival than fulfilling wants.
While this is the story of most people, the few individuals that do have surplus for savings and investments have done somewhat better as they know that they don’t have to worry about the immediate future even if their job is at risk. one of the most popular ways of investing money right now is investing in the stock market, which has traditionally been the area of the rich.
Ever since companies bonds and shares started to be traded in the stock exchange, capitalists, hedge funds and high net worth individuals have made it as their playfield. plaThis has made rich even more richer using the share trade and many complex terms and coming up with complex methodologies that made the market unattractive for even the average finance professional,
And while the rich are easily able to make huge trades and engage in complex financial arrangements, tthe average earning guys arekept out due to high commissions, high margin. Forget about high complex traders where retailers are not even allowed to try their hands.
This is where online brokers makes a statement .
A broker is a person or an institute which is as an intermediary between the buyer and seller of a financial instrument, in this case shares of a company. The broker executes the deal on behalf of the purchases and facilitates the purchase while charging a small fee / commission. With the ever growing advancements in technology, in recent years online brokers have emerged and gained high popularity especially in the United States, inviting people who are now known as retail investors.
An indivdiual don’t need high minimum amounts, and most online brokers actually don’t require any minimum amounts at all. Many of these brokers also don’t charge commissions on any transaction, and some of them provide leverages with margin purchases. Margin purchases refer to purchases made by borrowing money from a broker, allowing individuals to invest more money than they actually have. This is of course a risky propostion which could backfire if you lose the money
So this becomes double whammy for people without money as they lose not only the money which they had and they lost the borrowed money as well from the broker. This is why I personally have always avoided making this type of investment, or any investment other than that amde from money which I actually have. And this development has led to one of the most controversial and major incidents in recent stock history.
you all must have heard about the GameStop (NYSE:GME) price rise over the past couple of weeks. This was done to make a pont to the hedge funds which had shorted 140% of the stock. The typical method of investing and making money from stocks is investing in a company which you think has potential to do better, or which you think is undervalued, wait for the share price to go up and then sell it and pocket the gain.
A short takes this entire system and turns it on its head. When you short a stock, you are actually expecting on the company to fail. So for example, you find a company which you think is going to fail and whose stock will fall in the future. When you short the stock, that means you actually sell it at the price it is right now (in this example for $ 80), even though you don’t actually have the stock. Then, you enter a contract to buy it at a later date, by which time you think that the stock will have gone down to say $50 and you’ll have made a $30 gain. This is what major hedge funds had done with GameStop, a struggling company which was struggling even more during the pandemic.
Then, Reddit was involved and the sub-reddit WallStreetBets started buying up shares of GameStop and as the message gained popularity, more and more people started buying the stock, raising its price massively. This has not just been happenign to GameStop though, with other companies such as BlackBerry (NYSE:BB) and (NYSE:AMC) also being impacted, though not as severely. And this is the biggest risk when you short a stock, cause the losses are theoretically infinite.
According to S3 Partners, that the hedge funds shorting the position, have actually lost around $20 billion in this incredible story where the retail investors have actually gained approval of both the Democrats as well as the Republicans in addition to many famous personalities across the world such as Mark Cuban among many others. So why exactly did Reddit do this?
To punish Wall Street and punish the hedge funds which had shorted more stock than that in existence, and to dissuade the policy of shorting stocks, which as per me is betting on the company to fail.
for now, the person who started this entire thing making an investment of over $50,000 in 2019, has now unrealized gains of more than $43 million, which is simply astonishing, while also making several other people multi millionaires as well. This also reminds us of another failure in shorting a stock, when investors who had shorted Tesla in 2020 ended up losing billions as Tesla shares shot up massively, even briefly making Elon Musk the richest person in the world ahead of Jeff Bezos. These investors ended up losing more than $38 billion in just 2020as shares rose more than 700%.
Another important aspect is how Redditors and retail investors were able to make such a serious and significant impact on the stock. This was possible due to the online broker apps available which have extremely low / non-existent customer fees or commissions, as well as the easy to use interface.
These apps had already started to grow with retail investors and demand when the pandemic hit and people were forced to stay home. Many people, who had time on their hands and were lucky enough to have savings which they could invest, started using these apps to make investments . one of the apps has been the main one Robinhood used in this entire saga, which went from being beloved to being incredibly hated and now has class action suits filed against it when it refused to allow its users to purchase GameStop stocks, and only allowed them to close out their positions.
After strong backlash, the company restarted allowing buy of these stocks but greatly limiting such purchases, with users claiming they were unable to purchase more than a single share. This app is Robinhood, and has come under fire by not just normal users, but by Democrats and Republicans as well, including Alexandria Ocasio-Cortez and Tred Cruz agreeing on something after a long, long time. While Robinhood is still among the biggest online brokers in 2021, whether it will stay on the list a year from now is a big question, considering the controversy the app is currently embroiled in. The company has also been planning an IPO, which will be quite interesting to see as well.
Of course, there are a lot more online brokers these days , and with the rise in demand, there is a possibility that even more will emerge and create more competition in what is a relatively new industry. Actually, the fact that there were substitutes available has allowed people to continue buying GameStop stock even as Robinhood keeps on applying restrictions and seemingly digging itself into an even bigger hole. And that is what we’re going to focus on today. Since most online brokers are private, there is little data available regarding their finances, earnings and profits . This is why instead of using those metrics, we have ranked the top 5 online brokers in the world by how little commission they charge. So without further ado, let’s take a look at the online brokers making it easier for us to invest and earn, or lose, even more money, starting with number 10:
- Zacks Trade
Zacks Trade executes stock trades, options and ETFs charging just $1 per order, or 1 cent per share. It requires an account minimum, which is $2,500.
If you want to try hands in options, then Tastyworks is among the best online brokers in 2021, with no commissions or minimum account requirements.
- Charles Schwab (NYSE:SCHW)
This financial services company is perhaps one of the biggest banking institution in the United States and it also provides a greaat online trading platform, with awesome customer service
- TD Ameritrade
The parent company of this platform is 50 years old, and has revenues of over $5 billion annually. The online broker also offers helpful tips and education to its many users, which is why many websites including Forbes have declared it as the best online broker for beginners.
TradeStation is an international company with offices in Australia and the United Kingdom in addition to multiple offices in the US. The online app operated by the company provides a cash credit of up to $5,000 if there’s a qualifying deposit.