Discount Brokers for Investors: TD Ameritrade vs. TradeStation
Once you've made a budget and built up some savings, it may be time to start thinking about how to help your money grow with investments. To do that, you'll need to open a brokerage account to start placing orders online. Two well-known brokerage services, TD Ameritrade and TradeStation, can help investors get started. Here's how these brokers compare on key features and criteria.
Trading costs and commissions
Trading commissions are universally much lower today than in the past, so trading cost differences now amount to mere dollars and cents at most discount brokerages. In the following table, we've compared the standard commission schedules of TD Ameritrade and TradeStation.
Data source: company websites.
Standard commission rates may be higher than the actual rate you pay. For instance, TradeStation offers a number of volume discounts for active traders, with reduced commissions based on how many trades you make each month. Both brokers also offer no-transaction-fee (NTF) funds and waive commissions on these orders.
Commission-free ETFs and NTF Funds
TD Ameritrade and TradeStation both offer the ability to trade some funds and ETFs without paying a transaction fee or commission on every purchase. The following table shows the number and type of mutual funds and ETFs available on their respective NTF lists.
Data source: company websites.
Investors who plan to buy and hold individual stocks may not care all that much about the availability of no-commission ETFs and NTF mutual funds at any given broker. For fund investors, however, avoiding transaction fees can potentially save you thousands of dollars in the long run.
Importantly, the number of commission-free ETFs or NTF mutual funds isn't as important as whether your preferred fund is available in a fee-free variety.
Account minimums
Before online brokers came to dominate the industry, brokerages were mostly limited to the wealthy. Luckily, account minimums at TD Ameritrade and TradeStation are accessible for new and experienced investors alike. TD Ameritrade offers no-minimum accounts, meaning you can open an account for as little as $1. TradeStation requires a minimum account size of $5,000 for taxable accounts, and $5,500 for IRAs.
Note that TradeStation charges a minimum activity fee of $99.95 per month for investors who do not trade a minimum number of futures (10 round-turn contracts), options (50 contracts), or stocks (5,000 shares), or who don't maintain a minimum balance of $100,000. If you don't trade frequently, you'll need to maintain a $100,000 balance to avoid the minimum activity fee.
Start small with an online discount broker and watch your investments pile up. Image source: Getty Images.
Trading platform
A flashy trading platform may look nice, but The Motley Fool doesn't do much trading. We like to buy and hold for the long haul, so we don't really care too much about the bells and whistles of a trading platform.
For long-term investors, TD Ameritrade and TradeStation offer trading platforms that make buying and selling stocks, ETFs, and funds a breeze. Long-term investors will find that either broker has plenty of functionality to suit their needs. Admittedly, the quality of a trading platform largely comes down to personal preference.
International stocks and ADRs
Neither TD Ameritrade nor TradeStation offers direct trading on foreign stock exchanges. However, investors can invest in foreign companies that have American-listed American depositary receipts (ADRs). If international stocks are your thing, be sure to see if the stocks you'd like to own have an American-listed ADR.
Research quality and tools
Online discount brokers became tremendously successful because they cut out the extras of full-service brokerage firms and thus found it possible to reduce trading commissions for their clients. However, online discount brokers are building out impressive research tools that give their clients the ability to find great investments and better understand their portfolios.
TD Ameritrade and TradeStation both offer access to third-party and proprietary research tools. Clients of either brokerage will enjoy access to Thomson Reuters data, for example, in addition to screening tools for individual stocks and funds. Third-party research tools are numerous at both brokerages, as each broker gives their clients access to research and expert opinions from a variety of sources.
Mobile app reviews
Want to trade from your phone or tablet? TD Ameritrade and TradeStation have an app for that! Here's how their users and clients rated their mobile capabilities on iOS and Android, as of Dec. 1, 2016).
Data source: relevant app stores.
The broker that fits your needs
Long-term investors will find a lot to like as customers of TD Ameritrade or TradeStation. After all, both brokerages offer inexpensive trades, no-transaction-fee mutual funds, and research to help you better understand your investments and get a second opinion when you'd like to. While The Motley Fool does not endorse any particular broker, we are interested in helping our readers select a broker that is right for them. See Fool.com's Broker Center for a comparison of online discount brokers. Investors who are opening a brokerage account for retirement should check out our frequently updated special-offers page for IRA accounts.
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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.