Ally Invest Review: Great for Diverse Investing Needs, and Much More

Ally Invest is one of the purest examples of a discount brokerage. It offers some of the most competitive pricing on stocks, exchange-traded funds (ETFs), options, and mutual funds. Zero-dollar commission fees make this one of the best stock brokers we've seen. In this Ally Invest review, we'll cover everything you need to know to decide whether this brokerage is for you.

This stock broker is a good fit for: Investors seeking a versatile investing platform that cuts stock-trading commissions.

Top perks

Commission-free trades

Ally Invest is in line with much of the industry in offering $0 trades for stocks, options, mutual funds, and ETFs. However, stocks priced less than $2 per share are charged a commission of as much as $4.95 plus $0.01 per share. Bonds trade at $1 commission.

Reasonable margin rates

Ally Invest is in the middle of the pack for margin rates, offering rates lower than the larger players, but it charges more than one of the low-cost leaders, Interactive Brokers. It is most competitive for investors who use large amounts of margin as it is significantly less expensive than peers for those who have a margin balance of $500,000 or more.

No minimums

Ally Invest is a true no-minimum discount broker, as you can open an account with as little as $1 to start. We think that makes it a good online stock broker for beginners who plan to add to their account balance over time.

What could be improved

Commissions on low-priced stocks

While Ally has joined most of the industry in dropping commissions for online stock trades to $0, it still charges a commission on lower-priced stocks. For customers buying large blocks of sub-$2 stocks, this broker can get very expensive.

Trading tools

Ally Invest doesn't offer a sophisticated platform for active investors like many of its competitors. This means that, while Ally is well-suited for most long-term investors, those who like to do lots of research and make frequent trades could be better off with a more tech-heavy competitor.

There's a lot to like with Ally Invest, from the lack of a required minimum deposit to commission-free trading. However, this broker might not be the best choice for you.

If you want another option for no-transaction-fee mutual funds: Merrill Edge® offers many of the same features as Ally Invest, with fee-free access to over 1,000 mutual funds. The stock broker also shines with high ratings for customer support and its customer loyalty program for existing Bank of America clients that is the gold standard for banking relationship benefits.

If you want a high-quality active trading platform: TD Ameritrade packs in some of the most robust trading tools available in the market, along with $0 commissions for stocks and options. Combine that with its many research tools and high ratings for customer service, and it's one of the best stock brokers to consider for nearly every investor.

While the cost of making a trade isn't everything, it is an important consideration when deciding which broker to use. Ally Invest has some of the lowest commissions on stocks and mutual funds of any discount broker we've seen.

Although Ally Invest offers more than 17,000 mutual funds, some of them come with a load to buy them (a fee as a percentage of what you invest).

It's good practice to fully read any broker's fee disclosures before opening a brokerage account, but we did some of the homework for you. After reading through Ally Invest's list of fees, there were a couple of fees that stuck out as necessitating further discussion.

• Paper statements: Most brokers charge some kind of fee for paper statements, so be sure to opt-in for electronic statements when you can. Ally Invest charges a paper statement fee of $4, though like all brokerages, it encourages customers to opt in for electronic delivery.
• Penny stock fee: Ally Invest's commissions can be higher for low-priced stocks. For stocks priced under $2 per share, Ally Invest charges a commission of $0.01 per share ($4.95 minimum) with the commission not to exceed 5% of the trade value. Thus, to buy 5,000 shares of a $1 stock, the commission would be $50, rather than the standard cost of $4.95.

This brokerage doesn't have a complicated trading platform, which can be both a pro and a con, depending on how you use your brokerage account. The company's web-based trading platform is built using HTML 5, so it works well on large and small screens.

Mobile traders may prefer to download its mobile app (available on iPhone and Android) for an experience that is tailored for smaller devices. As long-term investors ourselves, we don't put much emphasis on trading platforms, given that virtually any broker makes placing a trade as easy as entering a ticker symbol and making a few clicks.

Brokerage firms allow you to borrow against the value of your investments. Some people use margin loans to leverage their portfolio (invest with borrowed money), which can increase the profits if your investments rise in value at a rate higher than the cost of borrowing money. That said, using margin also adds more risk to your portfolio, as it multiplies losses if your investments fall in value.

Other investors use margin differently, using it instead as a way to be able to immediately reinvest the proceeds from selling stock. Stock sales are "settled" in two days, which means that if you sell a stock in a cash account on Tuesday, you won't be able to use the money until Thursday. Investors who have a margin account can borrow the money for two days, so as to be able to immediately reinvest the proceeds from the sale of an investment.

Ally Invest charges interest based on a sliding scale, where the interest rate decreases as you borrow more. You can see Ally Invest margin rates in the above table.

Discount brokers may not offer the same assistance of full-service brokerage firms, but that doesn't mean they leave clients in the dark. Many offer research and screening tools that can help investors find suitable investments.

There are two notable research and news solutions available to Ally Invest customers:

• CFRA Research: Ally Invest clients get access to in-depth research from CFRA on individual stocks and themes.
• News: The web interface offers real-time updates from a variety of content providers, including MT Newswire and Zacks Investment Research.

RELATED: See The Ascent's complete Zack's Trade review to see how they combine trading and research.

If the following statements apply to you, you're likely a good fit for Ally Invest:

• You trade frequently or are particularly price sensitive. Ally has some of the lowest pricing among all brokers, particularly its stock and options fees.
• You use mutual funds as building blocks for your portfolio. You could open an account with every mutual fund company you want to invest with, or you could pay Ally just $9.95 per purchase to keep all of your mutual funds in one place.
• You don't need in-person customer service. Larger brokers have field offices in most major metropolitan areas, which may be an advantage for some investors. That said, we tend to think that 24/7 phone and online chat support will be sufficient for most people.
• You don't care for a complicated trading platform. Ally Invest customers can place trades through its web interface, without needing to download a platform just to make a trade.
• You don't trade penny stocks. Ally Invest's higher commission prices for stocks priced at less than $2 each makes it a more expensive brokerage for people who like buying low-priced stocks.

RELATED: Do you use Robinhood? See how The Ascent's Ally Invest vs Robinhood comparison.

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