Discount Brokers: Comparing TD Ameritrade and Charles Schwab

By Jordan Wathen Markets Fool.com

When you're ready to start investing, you can't just walk onto a Wall Street trading floor. But you can bring Wall Street to your home computer or mobile device by opening a brokerage account with an online discount broker that will give you access to invest in everything from individual stocks to five-star funds.

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Millions of people use TD Ameritrade and Charles Schwab to place trades and make investments. Here's how they compare for long-term investors.

Trading costs and commissions

TD Ameritrade and Charles Schwab both allow investors to buy and sell stocks, options, ETFs and mutual funds inexpensively. The brokers' standard commission rates are shown in the following table.

Broker

Stocks/Options

ETFs

Mutual Funds

TD Ameritrade

$9.99 per trade + $0.75 per options contract

$9.99 per trade

$49.95 per purchase

Charles Schwab

$8.95 per trade + $0.75 per options contract

$8.95 per trade

$76 per purchase

Data source: company websites.

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Always remember that standard prices are just that -- standard prices. TD Ameritrade and Charles Schwab customers might actually pay less, depending on how frequently they trade and what they trade. In fact, brokers frequently run promotional offers and discounts, as well as commission-free trades on some ETFs and mutual funds that reduce the total cost of trading for their clients.

Commission-free funds and trades

Like funds? We have good news! TD Ameritrade and Charles Schwab have long lists of no-transaction-fee (NTF) mutual funds and ETFs, which make it possible for their customers to buy and sell popular funds without paying a fee to do so.

Broker

Commission-Free ETFs

NTF Mutual Funds

TD Ameritrade

101 ETFs (iShares, Vanguard, VanEck)

3,984

Charles Schwab

200+ (Schwab, SPDR, PowerShares, WisdomTree, Guggenheim, etc.)

3,390

Data source: company websites.

If you invest in funds -- ETFs or mutual funds -- NTF funds may be very important to you. Though transaction fees are just one expense, they can add up quickly, especially for investors who make routine contributions to their portfolio. TD Ameritrade and Charles Schwab have some of the most comprehensive lists of NTF ETFs and mutual funds alike.

Account minimums

TD Ameritrade and Charles Schwab have no minimum account sizes, which means investors can open accounts with as little as $1.

We'll caution that it would be advantageous to start with a larger initial deposit, as you'll need enough money to buy at least one share of a stock, ETF, or mutual fund to actually make an investment. As far as opening an account goes, though, a single dollar bill will do.

No minimum account requirements allow you to start planting the seeds of wealth with as little as a dollar. Image source: Getty Images.

Trading platform

While a good-looking trading platform is undoubtedly cool, we don't spend too much time worrying about a broker's bells and whistles. The Motley Fool takes the long view, buying and holding companies to benefit from their prosperity over years or decades, if not forever.

Given that the quality of a trading platform is probably more important for traders than it is for investors, and because it's mostly a matter of personal preference, we'll let you be the judge here.

International stocks and ADRs

Neither TD Ameritrade nor Charles Schwab offers trading on foreign stock markets. However, both brokerages will allow you to trade American depositary receipts (ADRs), enabling you to buy many of the largest companies listed overseas.

Research quality, screeners, and other tools

Both brokers offer research tools that help investors stay informed about their investments and find new stocks or funds to invest in.

TD Ameritrade and Charles Schwab offer access to Morningstar research for stocks and funds, in addition to portfolio-level analysis tools to give you a better look at how your portfolio holistically. With research and recommendations from a number of sources, long-term investors will find they can supplement their own analysis with the help of research provided by either broker.

Mobile app reviews

You can trade on the go with mobile apps for Android and iOS devices. Here's how TD Ameritrade and Charles Schwab's users rated their mobile apps on iOS and Android, as of Dec. 1, 2016.

Broker

Apple App Store

Google Play

TD Ameritrade

4.5 stars

3.5stars

Charles Schwab

3.5stars

4.0stars

Data source: Relevant app stores.

Making a decision

TD Ameritrade and Charles Schwab have plenty to offer the individual investor. Both have low commissions, no minimum accounts, and thousands of commission-free ETFs and funds that make it possible to build a diversified portfolio quickly and inexpensively.

To be clear, The Motley Fool doesn't endorse any particular broker, but we want our readers to make an informed decision about which brokers best suit their needs. To that end, Fool.com's Broker Center compares all the key features of online brokers. In addition, IRA investors should visit the IRA special offers page to see if they qualify for bonuses, free trades, and other perks, just for opening an account.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TD Ameritrade. The Motley Fool recommends WisdomTree Investments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.