Ally Invest Review

In many ways, Ally Invest exemplifies what it means to be a discount brokerage. The company offers one of the most competitive pricing structures at just $4.95 per trade, plus a mutual fund transaction fee that is one of the lowest at just $9.95 per purchase. That's one of the main reasons it landed a spot on our best online stock brokers for 2019 list.

Active traders and investors with large account sizes score even lower commissions on stock, option, and ETF trades, making it a compelling bargain for investors who consider price a particularly important factor in picking a brokerage firm.

Brokerages tailor their pricing and features to compete for a certain type of client. We think Ally Invest’s value proposition is really centered on four key features that separate it from other discount brokers.

1. Discounted trades -- Ally Invest is already a price leader at its base rate of $4.95 per trade, but those who quality for select pricing by making more than 30 trades per quarter, or having an equity balance of $100,000 or more, enjoy a discounted price for stocks, ETFs, and options ($3.95 plus $0.50 per options contract).
   
2. Excellent promotions -- All new accounts receive 90 days of commission-free trades, up to $500 in value. This means you effectively get 100 free trades for your first 90 days, which means you can essentially build out your initial portfolio for free. Additionally, Ally offers cash bonuses of $50 - $3,500 with a minimum qualifying deposit of $10,000.
   
3. Fund transaction fees -- Though it doesn’t have any truly free funds to choose from, Ally Invest still ranks well for fund investors because of its low $9.95 fee to buy a mutual fund through its service.
   
4. Reasonable margin rates -- Ally Invest is in the middle of the pack for margin rates, offering rates lower than the larger players (E*TRADE and TD Ameritrade), but it charges more than the low-cost leader, 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.
   
5. 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 fit for beginning investors who plan to add to their account balance over time.

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 on the market today.

Ally Invest offers significantly reduced commissions for investors who place more than 30 trades per quarter or keep an average daily equity balance of $100,000 or more. Thus, its pricing is even better for active traders and those who have larger account balances.

Great news for investors: Ally Invest now offers more than 100 ETFs commission-free, including all of the popular WisdomTree ETFs. This is an important step in Ally's evolution into a true do-it-all brokerage, as the popularity of ETFs have exploded in recent years as investors seek out low-fee options that give them turnkey diversification. Though Ally Invest offers more than 8,000 different mutual funds, all of them come with either a load to buy them (a fee as a percentage of what you invest), or carry a transaction fee of $9.95 to invest in them.

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

• Debit card fees -- Ally Invest may not be the best broker if you want to have a debit card linked to your account. The Apex Select™Annual Debit Card fee of $35 plus $1 per ATM withdrawal makes it a relatively expensive option for people who want to be able to access their balance at ATMs.
  
• 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, they encourage 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 $2.00 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.

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. Of course, using margin also adds more risk to your portfolio, as it multiplies losses if your investments fall in value.

Other investors use margin differently, instead using it 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.

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 (iPhone and Android) for an experience that is custom-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.

Access to a live agent doesn’t matter much…until you really need it. Ally Invest has dedicated, 24/7 support over the phone and through an online chat service.

That said, one downside of a purely online bank and brokerage is that Ally doesn’t have the branch networks that many other services do. For example, Schwab, TD Ameritrade, and E*TRADE have offices all around the country where clients can get information and help with their account and speak to customer service representatives in person. If in-person support is a necessary feature for you, then Ally Invest may not be the best fit.

Discount brokers are able to offer lower prices because they cut out many of the expenses 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 Benzinga, Briefing.com, and Seeking Alpha.

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

1. You trade frequently, or are particularly price sensitive. Ally’s “select” pricing makes it one of the least expensive brokers for high volume traders, though even its standard price of $4.95 per trade is hard to beat.
   
2. 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. On a $5,000 investment, the $9.95 fee works out to less than 0.20% of the amount invested, which is relatively trivial for buy-and-hold investors.
   
3. 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.
   
4. 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.
   
5. 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.

Here at The Ascent, our passion is providing expert reviews that highlight the things that actually matter when making decisions that affect your personal finances. We've published thousands of articles that have appeared on sites like CNN, MSN, and Yahoo Finance, and sometimes we even get talked into putting on a tie to appear on TV networks like CNBC and Fox. But don't worry: you'll find that our reviews are all jargon-free and written in plain english. As investors who manage our own portfolios through online brokerage firms, we have personal experience with many of the most popular online brokers which informs our view on brokers, how they compare, and pitfalls to look out for.