Best Investment Companies for Investors in 2023

It’s easy to find lists of the best investment companies. But the reality is that you’ll probably pick between one of three brokerage firms.

In this article, I'll explain the similarities and differences between Fidelity Investments, Charles Schwab Corporation and The Vanguard Group. My goal is to help you decide which brokerage you should use to manage your own portfolio — or maybe confirm that your money is already in the right place.

Table of Contents

I updated this article in December 2023 and I review it every six months.

3 Top Investment Companies for Most Investors

There are more places to invest your money than ever. It’s easy to get overwhelmed by the volume of options — and opinions. But money expert Clark Howard consistently recommends these firms as the best investment companies:

There are reasons why you may consider another investment firm. However, these three investment companies will meet the needs of almost everyone.

The American public has in the neighborhood of $20 trillion invested through these three brokerage firms as of December 2023. That’s no accident.

Fidelity, Schwab and Vanguard have specific qualities that appeal to investors, which I'll discuss shortly. But they're the best overall because they charge minimal fees, including $0 commissions on stocks, mutual funds, exchange-traded funds (ETFs) and options. They all offer a variety of low-cost index funds, strong research and educational tools and give you the ability to invest in many different asset classes.

You can do your banking, set up retirement accounts or even create a trust fund for your children with these three best investment companies. They provide everything a regular investor needs.

3 Best Investment Companies

1. Fidelity

Advantages:

Disadvantages:

#tablepress-327 from cache

The Details: When I ranked the best stock trading platforms, I labeled Fidelity as "best overall." Fidelity is among the best when it comes to fees, research, education and customer service.

If you’ve listened to advice from Clark before, you know how highly he prioritizes low fees, especially when it comes to investments. And if you look at surface-level marketing, you’ll find many investment firms that offer $0 commissions on trades in 2023. Don’t assume they’re all equal on price.

For instance, Fidelity doesn't profit by selling your trades to third-party companies, a controversial practice called Payment for Order Flow (PFOF). The company's decision not to use PFOF helps ensure that you'll get the best possible price on your trades.

Fidelity also allows customers to invest in more than 10,000 mutual funds with zero transaction fees. It even offers several mutual funds with zero expense ratios and no minimum deposit (Fidelity Zero funds). Higher-cost options do exist within Fidelity, so take care to check the fees before moving forward.

You might expect fewer features from a company that offers rock-bottom prices. That’s not the case with Fidelity. It offers customers insights from 20 different third-party research firms. Its in-house market analysis, Fidelity Viewpoints, consistently draws praise. Fidelity’s detailed but intuitive stock screener is worth pointing out as well.

If you’d like to learn more about investing and how to manage your own portfolio, you can take advantage of Fidelity’s educational opportunities. That includes free in-person help, investor seminars and a strong online learning center.

2. Schwab

Advantages:

Disadvantages:

#tablepress-328 from cache

The Details: Schwab started undercutting traditional brokers on pricing starting in the mid-1970s, making it the first "discount broker." But it's not some legacy company that's stuck in its ways.

Within the last three years, Schwab made a huge splash within the investment industry first by moving to $0 commission trades and then by acquiring major competitor TD Ameritrade as well as USAA's brokerage accounts.

Along with Fidelity, Schwab is probably one of the two best investment companies when it comes to research and investment tools.

Schwab also gets a gold star when it comes to low-cost ETFs, which are similar to mutual funds but trade during market hours like stocks. In addition to $0 trades on ETFs, Schwab offers more than 150 ways to analyze ETFs via its proprietary StreetSmart Edge software. It also allows customers to research and compare stocks, ETFs and mutual funds simultaneously, which is a feature unique to Schwab.

Like the other best investment companies, Schwab offers customers access to its proprietary index funds and offers more than 4,000 funds “with no loads and no transaction fees.”

The biggest knock on Schwab is that you'll make just 0.48% APY on your uninvested cash, which is low. Its robo-advisor, which did not make our list of the best, keeps an outsized portion of your portfolio in cash.

Schwab paid $187 million in 2022 after the Securities and Exchange Commission accused Schwab of misleading customers into keeping large amounts of money in cash. Due to the low-interest rate offered to those customers vs. what Schwab can earn on the money, Schwab has been able to make profits. But that's one reason Schwab was able to move to $0 commissions.

Clark likes Schwab Intelligent Portfolios Premium, which requires a $25,000 minimum investment. It charges a one-time $300 fee for financial planning and then $30 per month after that. This plan invests your money via a robo-advisor but gives you unlimited access to Certified Financial Planners.

However, Schwab makes it difficult to understand the true cost of Intelligent Portfolios Premium. Those who invest close to the minimum amount pay exorbitant annual fees.

3. Vanguard

Advantages:

Disadvantages:

#tablepress-329 from cache

Clark Calls Out Vanguard Customer Service

Clark has been a customer of all three of these companies for decades. But he has called out Vanguard on his podcast for lackluster customer service. He specifically noted the company's heavily criticized app as well as customers having difficulty getting representatives on the phone.

The Details: Vanguard has earned a reputation as the low-cost index fund superstar, and it's easy to understand why.

For starters, Vanguard founder Jack Bogle invented index funds. The company also offers more than 3,100 mutual funds with zero transaction fees and a large number of proprietary low-cost index funds.

According to Morningstar, Vanguard's average expense ratio for mutual funds and ETFs is .08% as of August 2023. This is the lowest of any brokerage firm and well below the industry average of a 0.47% expense ratio. The company got rid of commissions, announcing free trades on equities like stocks, in early 2020.

Vanguard is an ideal place to follow Clark's two primary investment recommendations: Put every retirement dollar into a target date fund or buy three index funds (total stock market, international and bond).

Self-directed investors who use a low-cost, well-diversified buy-and-hold strategy have loved Vanguard for decades, as evidenced by its $8.1 trillion assets under management in the most recent update I can find from the company.

The downsides of Vanguard: Its no-frills style won’t cater to active investors, and its minimum investment requirements can be a barrier for some. Vanguard’s tools, data, app and options trading are much more limited than some of its competitors. But if you’re looking to buy and hold index funds, you don’t really need those things.

Most of Vanguard's funds require minimum investments of $1,000 to $3,000. Clark recommends Vanguard's Personal Advisor Select, which uses a robo-advisor to invest your capital but also offers you unlimited access to a Certified Financial Planner (CFP) for an annual fee as low as 0.35%. However, you must invest a minimum of $50,000 to participate.

7 Reasons To Choose a Different Investment Company Option

There aren’t a lot of reasons to choose a firm other than Fidelity, Schwab or Vanguard.

But you might consider investing through another brokerage if you’re interested in any of these seven things:

Other Investment Companies in 2023

Best Investment Company for Fractional Shares & Cryptocurrency, Best Mobile App: Robinhood

Advantages:

Disadvantages:

The Details: If the goal is to generate as many headlines and opinions as possible, Robinhood is a clear winner.

The company sent shockwaves through the industry in 2013 when it became the first brokerage to offer free trades. It also has faced a litany of controversies, including aggressive PFOF, extended platform downtime during peak trading days and few guardrails for the millions of new investors attracted to its ease of use and the way its app gamifies the stock market.

However, Robinhood has taken simple elegance to the extreme with its app. That’s only one reason it appeals to investors who are just getting started and don’t have a lot of capital. The others: no minimum deposit, free trades, the most robust fractional shares program that I’ve seen and the ability to trade up to $1,000 instantly before your deposit has even cleared.

Clark is not a fan of cryptocurrency such as Bitcoin: He compares it to betting in a Vegas casino rather than investing. But if you've built a strong core portfolio that follows his advice and you'd like to dabble in cryptocurrencies such as Bitcoin with some money you aren't worried about losing, Robinhood probably is your best option.

You can buy as little as $1 in Bitcoin on Robinhood's platform. And unlike other crypto exchanges, you don't have to fuss with "wallets" that require passwords and sometimes lead to disaster.

Best Investment Company for Options Trading: tastytrade

Advantages:

Disadvantages:

The Details: As a reminder, Clark doesn't recommend options trades. They're risky and complex. Much like betting, it's possible to win, but it's also possible to lose big. And if you're not an expert, you could lose big often.

However, tastytrade is renowned among options traders. The people behind tastytrade also created thinkorswim®, an excellent trading platform for advanced investors that was attached to TD Ameritrade (and now Schwab as a result of the acquisition).

In addition to good software, educational resources and research materials that are all geared toward options trades, tastytrade offers an inexpensive fee schedule.

Options trades are much more complicated and risky compared to investing in a target date fund. But among platforms that cater to options traders, tastytrade is simple and easy to use.

Best Investment Company for Day Trading: TradeStation

Advantages:

Disadvantages:

The Details: Clark also doesn't recommend day trading because of its high-risk level.

Like most brokerage platforms that cater to day traders, TradeStation lacks strong fundamental company research and educational materials.

Day traders need their own complex systems that include software and data, and TradeStation is consistently lauded as one of, if not the, best in the industry on that front. Charting (technical analysis) is critical for some day traders. Without getting into great detail, as Clark thinks day trading is a bad idea, TradeStation is loaded with the types of features that can satisfy even the most demanding day traders.

Best Investment Company for International Stocks: Interactive Brokers

Advantages:

Disadvantages:

The Details: Do you want to trade around the world and around the clock? It's unnecessary, but Interactive Brokers makes it possible. The investment firm gives customers access to stocks, options, futures, bonds and currencies from 150 international markets. You can invest in more than 48,000 mutual funds, many of which include zero transaction fees.

Again, it’s much simpler to get exposure to international stocks through a target date fund or an international index fund. But if you know what you’re doing, it’s not necessarily risky to diversify through a set of individual international investments. If you want to go that route, Interactive Brokers is probably your best option.

It offers free trades on domestic stocks. But its “Pro” plan is set up for professionals who want to trade internationally. Its pricing structure is complex, but basically, customers pay up to $0.005 per share on international trades with a minimum of $1 per trade. That can be great value for high-volume orders on equities that can otherwise be unreachable for U.S.-based investors.

Best Robo-Advisor, Part I: Betterment

Advantages:

Disadvantages:

The Details: Betterment, a pioneer in the rob-advisor space, is ideal for most retail investors, starting with its fees and minimums. The company charges customers an annual fee of 0.25%, which is below average for a robo-advisor. There's no minimum deposit. Its weighted average expense ratio is 0.09%.

You can also create multiple portfolios within Betterment, each dedicated to a separate financial goal.

You can get access to one-time consultations with Certified Financial Planners (starting at $299) through Betterment’s standard robo-advisor. If you’d rather do your own financial planning, you don’t have to resort to back-of-the-envelope calculations.

Betterment offers easy-to-use financial planning calculators and tools. If you get a raise and plan to increase your monthly investment amount, or if you’re curious how a large one-time deposit can impact reaching your goal, Betterment’s tools can tell you.

The company also offers a sliding scale tool that customers can manipulate to understand the relationship between risk, volatility and the probability of reaching a financial goal.

A Betterment cash management account also pays 4.75% APY on your uninvested cash as of December 2023, making it one of the best online savings accounts.

Best Robo-Advisor, Part II: Wealthfront

Advantages:

Disadvantages:

The Details: Wealthfront's hard numbers are similar to Betterment: a 0.25% annual advisory fee, a weighted average expense ratio of 0.09%, a $500 minimum deposit and a cash management account that offers 5.00% APY as of December 2023.

Those are good, but you need to look past the numbers to fully appreciate Wealthfront's value. Wealthfront's portfolios offer relatively low risk even compared to other good robo-advisors. Its tax-loss harvesting strategy is among the most advanced. You can use its free, customizable, user-friendly financial tools whether or not you invest a single dollar with Wealthfront.

Wealthfront offers investment models for five different goals: funding retirement, paying for college, buying a house, making a large one-time purchase and taking extended time off work to travel. It also offers a separate model for windfalls such as a lump-sum inheritance.

The robo-advisor has experimented with a “Self-Driving Money” feature, but it seems promising. It intends to take your paycheck and automatically allocate it to paying your bills, saving, investing and optimizing the amounts based on your goals.

How To Choose the Best Investment Company for You

There are numerous factors to consider when picking the investment firm you’ll use to manage your portfolio. Rather than suffering from “paralysis by analysis,” do what Clark does: prioritize the fees. Here’s an idea of the fees you’ll pay depending on how you choose to invest.

Self-Directed: Look for a target date fund or a mix of index funds (total stock market, international and bond) with an expense ratio of 0.10% or less. There's also no need to pay a commission to trade stocks or ETFs in 2023.

Robo-Advisor: There are plenty of good robo-advisors that charge annual fees of 0.25% or less. If you're going to use a robo-advisor that charges more, make sure you're getting additional features. For example, Vanguard's Personal Select charges as little as 0.35% but gives you unlimited access to a Certified Financial Planner (CFP).

Financial Advisor: Most reputable sources cite an industry benchmark of 1% annually. It can be hard to pinpoint a "good" fee level for a financial advisor. First, make sure that the person you're considering is a CFP and therefore has a fiduciary duty to act in your best interests.

Beyond fees, here are some other things you may want to consider:

Clark Howard’s Investing Advice

Clark often describes his investment style as “dull.” The truth is that smart, successful people have been investing in “boring” ways for decades.

True investing isn’t like putting all your money on red at the roulette table in Vegas. Yes, there’s risk involved. And yes, you could theoretically lose some or all of your money in any investment. But the proven way to invest well for retirement is to achieve modest, relatively stable gains over a long period.

Clark's favorite retirement investment recommendations are target date funds. Every major brokerage offers them including Fidelity, Schwab and Vanguard. Pick the year closest to when you expect to retire: That's your target date. The fund manager will change the allocation of the fund as you get closer to retirement, reducing your risk by holding less of your portfolio in stocks.

Back to the casino metaphor: Trying to time the market is much like gambling. It can be fun, especially if you win. But more than likely, your result will be based on nothing more than luck. Clark suggests "dollar-cost averaging," which is a fancy way of saying you should contribute new money to your investment portfolio at regular intervals rather than putting in a one-time lump sum.

Final Thoughts

Formulating a good investment strategy is just as important as picking the best investment company.

Just remember that it’s OK to be boring with your investments, as Clark has advised many times.

It’s easy to get FOMO (fear of missing out) when you see a certain cryptocurrency or stock such as Tesla spike in the last few years (even if it was less common for investors for most of 2023). But saving for retirement is about steady returns and consistent contributions.

Interested in investing? Check out the conversation in our Clark.com Community!

The post Best Investment Companies for Investors in 2023 appeared first on Clark Howard.