Brokers for Long-Term Investors: Comparing Fidelity and OptionsHouse

By Jordan Wathen Markets Fool.com

When you're ready to invest, your next step is to open a brokerage account to invest in everything from individual stocks to mutual funds. But there's more to a broker than its commissions or its name. Fidelity isn't just for mutual funds any more, and OptionsHouse isn't just for options traders.

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Let's walk through the similarities and differences between Fidelity and OptionsHouse, two well-known discount brokers.

Trading costs and commissions

Online discount brokers have made buying and selling stocks, options, ETFs, and mutual funds less expensive than ever before. The following table shows the differences in trading commissions at Fidelity and OptionsHouse.

Broker

Stocks/Options

ETFs

Mutual funds

Fidelity

$7.95 per trade + $0.75 per options contract

$7.95 per trade

$49.95 per purchase

OptionsHouse

$4.95 per trade + $0.50 per options contract

$4.95 per trade

$20.00 per purchase

Source: company websites.

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Importantly, the table shows each broker's standard trading commissions. Thanks to special offers for IRAs, no-commission fund trades, and other perks, your actual trading costs may be much lower than reflected in a broker's commission schedule. That said, this is a good guide for roughly comparing the differences in trading costs between both brokers. Depending on how much you trade, the difference in cost may be either more or less important.

Commission-free ETFs and NTF funds

Fund investors have it better than ever before. Some brokers put select ETFs and mutual funds on a no-transaction-fee (NTF) list, which enables you to buy and sell fee-free. Here's how Fidelity and OptionsHouse compare.

Broker

Commission-Free ETFs

NTF Mutual funds

Fidelity

91 ETFs (iShares and Fidelity)

3,632

OptionsHouse

None

None

Source: company websites.

Of course, there are some puts and takes when it comes to freebies. Fidelity has more NTF funds and commission-free ETFs, which may be an advantage if your favorite funds are available commission-free.

However, if you want to buy a fund that isn't available in a commission-free format, you'll pay a commission to do so. OptionsHouse's standard commissions are lower than Fidelity's. Depending on which ETFs or mutual funds you want to invest in, you could make the case that Fidelity or OptionsHouse is the better choice.

Account minimums

Fidelity requires that its investors deposit at least $2,500 to open a new account. OptionsHouse has no minimum account requirements.

For practical purposes, there isn't much you can do with just $1 in a brokerage account. Although it offers no-minimum accounts, OptionsHouse recommends on its website that investors start with at least $1,000. At the very minimum, you'll need enough money to buy at least one share of a stock or ETF, or meet the minimum investment requirement of a mutual fund.

Trading platform

Call us old school, but we don't spend too much time obsessing about the qualities of a trading platform. As long-term buy-and-hold investors, The Motley Fool thinks precious time is best spent finding and investing in great companies for the long haul, rather than trading in and out of stocks to earn a few pennies a trade. For this reason, as long as we can make a trade infrequently, we're happy with a trading platform.

In reality, both brokers' trading platforms will work well for any long-term investors' needs. Besides, it's really a personal preference, so we'll let you be the judge here.

Trading platforms can be a distraction. We're focused on the long haul. Image source: Getty Images.

International stocks and ADRs

Depending on your needs, access to international markets may steer you toward Fidelity or OptionsHouse.

Fidelity offers access to markets in 25 different markets, with the ability to settle your trades in 16 different currencies. In addition, investors can invest in foreign stocks domestically by investing in American depositary receipts (ADRs), which trade on U.S. stock exchanges.

By contrast, OptionsHouse doesn't offer trading on foreign markets, and thus its clients will find their trading limited to ADRs. Many large companies that are based in international markets have ADRs on American exchanges, but ADRs are less common for smaller companies.

Research quality and investment tools

It's generally advantageous to be able to view third-party research, check analyst estimates, and screen for good investments on your broker's website. Do-it-yourself investors will find that Fidelity and OptionsHouse have plenty to offer here.

Fidelity and OptionsHouse provide valuable screening tools to sort through investment opportunities based on fundamental and technical parameters. In addition, they offer tools to set alerts, see and subscribe to news and market commentary, and view consensus analyst estimates for individual stocks. You'll find that the research capabilities of either brokerage company can complement a long-term investment perspective.

Mobile app

Want to make trades on the go? Both brokers have apps that allow you to trade from a smartphone, tablet, or other mobile device. Here's how each brokers' users rated their mobile capabilities on iOS and Android, as of Dec. 2, 2016.

Broker

Apple App Store Rating

Google Play Rating

Fidelity

4.0 stars

4.5stars

OptionsHouse

2.0stars

3.0stars

Source: Relevant app stores.

The bottom line on discount brokers

Long-term Foolish investors will find that Fidelity and OptionsHouse both offer inexpensive commissions, access to research, and account minimums that won't break the bank. Thus, buy-and-hold investors could be very happy with either broker.

To be clear, The Motley Fool does not endorse any particular broker. That said, we can help you pick one that's right for you. Visit Fool.com's Broker Center to see a broad comparison of online discount brokers. If you're in the market for a broker for your IRA, see the IRA special offers page to compare cash bonuses, commission-free trades, and other great promotional offers for individuals who open an account.

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