Loyal3 is a discount broker like no other – they offer free trading! That’s right, any investing you do with Loyal3 is entirely free of any fees or commissions. In this Loyal3 review, we’ll cover how the online brokerage is another option in a growing space that’s aimed at democratizing investing for the masses. We will also cover just exactly how you can invest for free with Loyal3.
Many discount brokerage firms offer great service, access to investment research, and low-cost trades under $10 for buying and selling securities. Unfortunately, there are still brokerages out there that charge exorbitant fees which makes it that much more difficult for new investors to get started investing in the stock market. This is what makes Loyal3 a good option for select investors.
Loyal3 is a newer player in the discount brokerage space having started in 2008. Like online broker Zecco, Loyal3 has made a name for themselves by offering free trading to investors. While you normally pay a commission to buy a stock, then another one to sell, that’s not the vision behind Loyal3.
Loyal3 is able to offer this service as they receive payment from the companies they sell stock for on their platform. It essentially acts as part of the advertising budget of said companies. In exchange, Loyal3 offers a variety of services to these firms. These might seem a bit much to handle given the number of companies on a given exchange, however Loyal3 only offers investing in 65 different companies.
Another unique feature to Loyal3 is that they allow access to Initial Public Offerings (IPOs) to investors with account values of at least $350. You can invest in IPOs with Loyal3 for as little as $100. This is a great option for investors, although some IPOs can be risky, especially for those new to investing.
With a bit of background out of the way, it’s time to move on with a more in-depth review of Loyal3.
As has been stated, you pay nothing to trade or invest with Loyal3 – it’s entirely free. There are no maintenance fees, hidden fees or anything of that nature. You also pay nothing to move money in or out of Loyal3. Simply put, they’re a great option for those who want to start investing with little money as there are no fees, much like other services such as WiseBanyan or Robinhood.
With the fee structure out of the way, let’s move on to some of the features unique to Loyal3.
- Invest in 65 stocks. The Loyal3 website shows 65 stocks investors are currently able to purchase, including popular stocks like Google, Apple, Amazon and Yahoo.
- Access to IPOs. If you have account values of at least $350, you can participate in IPOs with as little as $100. Loyal3 also offers Follow-On offerings – which are essentially secondary offerings by already public firms.
- Fractional share availability. As Loyal3 allows you to buy any stock with as little as $10 you thereby get an opportunity to buy fractional shares. There are other services that offer this, so it’s not that unique but still not something found at most discount brokerages.
- Automatic investments. Loyal3 allows investors to schedule automatic investments for stocks you’d like to dollar-cost average into particular stocks each month.
- Set limit on automatic investments. While you can establish an automatic investment with Loyal3, they limit it to a maximum of $2500 per stock per month.
- Dividends are paid in cash. Loyal3 does not currently allow for dividend reinvestment, so dividends are paid in cash.
Pros to Loyal3
If the free trading aspect to Loyal3 isn’t enough, below are some other benefits to using their platform:
- Great way to get started. If you’re new to investing, a service like Loyal3 is a great way to get started investing in the stock market. If you’re a seasoned investor simply looking to dollar-cost average into a particular stock they might also be worth a look.
- No minimum balance requirement. Discount brokerages differ on this with Motif Investing being among the best at a $250 minimum requirement. Since you can open an account with whatever amount you want, you won’t encounter a minimum balance requirement with Loyal3.
- No fees. No, really. There are no fees to invest with Loyal3. You can’t argue with free.
- You can start buying with as little as $10. This gets back to the fractional share opportunity. If you can’t afford the $130 or so a share for a stock like Apple you can buy a fractional share.
- Easy to use site. Most discount brokerages claim this, but the Loyal3 platform stands behind the claim. The site is very clean, easy to navigate and a cinch to use.
- Easy to move funds. Loyal3 used to allow investing with credit cards, though they don’t any longer. That being said, you can link your bank account to your account with Loyal3 and have funds available in 1-2 business days or back in your bank account in 2-3 days.
Cons to Loyal3
While there are some great things to like about Loyal3, there are some things not to like either – such as:
- No retirement accounts. This may not be a big deal for some, but it’s a curious decision. You can’t rollover a 401(k) to them. The only account type they currently offer is an individual brokerage account.
- Trades are not real-time. Again, this may not be a big deal for some – especially the long-term buy and hold type investor but it will be a deal killer to some. Loyal3 batches their trades and places them all at or before 2:00 p.m. EST. This is likely a big part of how they’re able to offer free trading, but is key to know if timing is important to you.
- Limited diversification. Having only 65 stocks available to purchase, this can make it difficult to get any level of decent diversification using solely Loyal3 as an investment option.
Loyal3 – The Final Analysis
There are a lot of things to like about Loyal3. Anything that helps lower the barrier to entry to investing for those looking to get started is a good thing. As stated earlier, Loyal3 is part of a group of companies coming out that make investing simple by having no charges. Unfortunately with free there also comes a handful of drawbacks.
The no retirement account option and IPO availability are curious decisions. One would think that saving for retirement would be vital and IPO access is something newer investors should not consider, but it is what it is.
That being said, if you’re new to investing, simply getting started is the main key to consider. Loyal3 provides a solid way to do that if there is a handful of stocks you’d like to start investing with. This would allow you to get your feet wet with investing and give you time to find another discount broker to move to once you have a firmer grasp of the investment approach you’d like to take.
If you're looking for a no-cost option to start investing, Loyal3 offers free trades!