Investing For Beginners

Investing For Beginners is a series of articles, resources, and other information about basic investments, value investing, quantitative research and other ideas.

Free Stock Trading

Most brokerages charge a fee, but offer free trades as an enticement to open an investment account. Other than promotions, is there any way to do free stock trading on a permanent basis?  This may come as a surprise to you, but yes there are options.


Free Stock Trading at Robinhood

If you are willing to forego your neighborhood brick-and-mortar office, manual account management and you are willing to try something new (in beta), then you might want to check out Robinhood.  Robinhood is the new kid on the block, and is funded by notable investors such as Index Ventures, Google Ventures & Andreessen Horowitz, meaning the company will be around for awhile. 

Free stock trading at Robinhood is as simple as three pokes on your smartphone.  There is even an iTunes App.  Most finance apps only let you monitor stocks, or charge you to trade them like those from the big retail brokerages. But the Robinhood App allows you check your stocks whenever you have a free moment and make stock trades for free when the need occurs.

You can set stock price alerts, and place limit orders. When you are ready to enter a trade, just specify the stock and number of shares to buy or sell. RobinHood previews how much that will cost or earn you, and you swipe to confirm the trade. And because security is always of concern, it even lets you set up a special pin code that’s required to open the app.

With over $3 million in funding, Robinhood hopes to avoid the fate of Zecco.com, an online investing company that started with zero commission trades, but eventually started charging commissions as the company grew.

 

Zero Commissions at Folio Investing

Folio Investing, a subsidiary of FOLIOfn, offers a flat-fee pricing model. So technically, this may not constitute "free stock trading".  But for $29 a month, an investor can make as many trades as he or she desires for free.  For investors who like to turn over their holdings frequently, this pricing model will save a lot of money. The only catchis that trades are only executed during specific time windows.

 

Other Free Stock Trading Options

There are more recent entrants into the field of online "portfolio-based" investments, including companies like Motif Investing, founded in 2010, and Betterment, founded in 2008.

Motif has established portfolios for a variety of investment strategies, including the classic target date and asset allocation strategies. They also offer funds grouped by common themes (aka motifs, hence the name). Motif operates on a $9.95 commission per “Motif” (or portfolio), with no additional fees. Betterment charges a quarterly fee between 0.15% to 0.35%, depending on your balance.

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