Discount Brokers for Buy-and-Hold Investors: TD Ameritrade vs. OptionsHouse

By Jordan Wathen Markets Fool.com

You've diligently managed your budget, you've built up your savings, and now you're ready to invest. The next step is to open a brokerage account to buy stocks, funds, and other investments. Picking a broker is no small matter, as each broker fits a different type of investor. Here's how TD Ameritrade and OptionsHouse, two well-known discount brokers, compare for buy-and-hold investors.

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Trading costs and commissions

Deciding which brokerage is best for you isn't just about commissions or trading costs, but it is an important consideration for people who trade more frequently. The following table shows commission schedules for TD Ameritrade and OptionsHouse.

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

OptionsHouse

$4.95 per trade + $0.50 per options contract

$4.95 per trade

$20.00 per purchase

Source: company websites.

Your actual commissions may be much lower than reflected in the table, as volume discounts may apply. In addition, commission-free trades on ETFs and mutual funds and special offers for individual retirement accounts effectively reduce the price you pay for every trade.

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Commission-free ETFs and NTF Funds

If you prefer funds to individual stocks, you'll be happy to find that some brokers offer commission-free trades on select ETFs and mutual funds. So-called no-transaction-fee (NTF) mutual funds can be purchased for free at TD Ameritrade.

Broker

Commission-Free ETFs

NTF Mutual Funds

TD Ameritrade

101 ETFs (iShares, Vanguard, VanEck)

3,984

OptionsHouse

None

None

Source: company websites.

The availability of fee-free ETFs and mutual fund transactions may be more or less important to you, depending on your preference. Do keep in mind that the standard trading commissions apply to ETFs and mutual funds that aren't available as no-transaction-fee funds; thus, the numberof free funds is less important than which funds are fee-free.

Account minimums

You don't need to be rich to open a TD Ameritrade or OptionsHouse account. In fact, both brokers have a no-minimum account policy, meaning that you can get started with as little as $1. However, you'll want to have enough money to purchase at least one share of a stock or ETF, or to meet the minimum investment of a mutual fund, to actually make an investment.

Buy-and-hold investors don't require much of a trading platform. Image source: Getty Images.

Trading platform

The Motley Fool focuses on making long-term investments in companies that we believe will make good investments over a horizon of years, if not forever. We certainly aren't day traders, and therefore we don't really care all that much about a trading platform's look or its charting capabilities. We just want to be able to buy and sell stocks infrequently, and virtually all brokers will allow you to do just that without any problem.

Investors who take the long view with their investments will find TD Ameritrade and OptionsHouse plenty suitable for their needs. After all, both platforms make it easy to buy and sell stocks with a few clicks, which is really all that most long-term investors need in a trading platform. Beyond that, it's really just a personal preference.

International stocks and ADRs

If you want to trade on international markets, you should know that TD Ameritrade and OptionsHouse are limited to American depositary receipts (ADRs), which allow you to invest in foreign companies through a ticker on a U.S. exchange. What that means is you can invest in foreign stocks so long as they have an ADR, as many foreign large-cap companies do. Neither broker offers direct access to foreign stock markets, however.

Research quality and tools

We generally believe that investors make better decisions when they have access to research tools and second opinions. TD Ameritrade offers access to third-party research from S&P Capital IQ and Morningstar, in addition to proprietary tools to screen investments and discover consensus analyst expectations for stocks and funds alike. OptionsHouse offers streaming news, earnings track record analysis, and a consensus analyst outlook for individual stocks. Investors will find plenty to like with either choice.

Mobile app ratings

Here's how each brokers' users and clients rated their mobile capabilities on iOS and Android, as of Dec. 2, 2016.

Broker

Apple App Store

Google Play

TD Ameritrade

4.5 stars

3.5stars

OptionsHouse

2.0stars

3.0stars

Source: Relevant app stores.

Choosing a broker that's right for you

Long-term investors will find that TD Ameritrade and OptionsHouse have compelling commission costs, accessible no-minimum account sizes, and a wealth of research and tools to help their clients stay informed about their investment portfolios. To be clear, The Motley Fool does not endorse any particular broker. See Fool.com's Broker Center to quickly compare many online brokers on one page. If you plan to open or transfer an IRA, see if you qualify for promotional IRA offers that include commission-free trades, cash bonuses, and other perks.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TD Ameritrade. 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.