Merrill Edge vs. Capital One: Finding the Best Online Brokerage

By Jordan Wathen Markets Fool.com

Popular online brokerage companies like Merrill Edge and Capital One allow investors to make trades in stocks, ETFs, and mutual funds without having millions of dollars just to buy a seat at an exchange. But while you don't need to be rich to make a trade, you will need to open a brokerage account. Below, we'll examine how Merrill Edge and Capital One contrast on the details that are important to individual investors.

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Trading costs and commissions

Discount brokers got their name for a reason -- they are much cheaper than full-service stockbrokers. Merrill Edge and Capital One both come in on the inexpensive side when it comes to making a trade, featuring standard trading prices that are exactly the same for popular investments.

Broker

Stocks/Options

ETFs

Mutual Funds

Merrill Edge

$6.95 per trade + $0.75 per options contract

$6.95 per trade

$19.95 per purchase

Capital One

$6.95 per trade + $0.75 per options contract

$6.95 per trade

$19.95 per purchase

Data sources: Company websites.

What you see above isn't necessarily what you'll pay. It's actually likely that you'll end up paying less. Merrill Edge rewards customers with free trades for meeting certain minimum account balance requirements.

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Capital One customers can score discounts on trades that aren't time-sensitive by using its Sharebuilder service, which allows for trading costs as low as $3.95 per trade. Its PortfolioBuilder option allows you to buy a whole portfolio of stocks, ETFs, and mutual funds and pay just $18.95 for the entire order.

But that's just the start. In this case, both brokers also offer a number of investments that you can trade for free in addition to special offers.

Commission-free ETFs and NTF funds

Investors who like to use mutual funds and ETFs in their portfolio should take a glance at a broker's commission-free ETF and no-transaction-fee (NTF) mutual fund assortment. By definition, ETFs and mutual funds that are designated as commission-free or NTF can be bought and sold without paying the typical fee or commission.

Broker

Commission-Free ETFs

NTF Mutual Funds

Merrill Edge

None

5,800+

Capital One

None

400+

Data sources: Company websites.

Depending on which funds you want to invest in, you could make the case that either brokerage gets the edge here, but it's pretty clear that Merrill Edge offers more choices.

Account minimums

If you can come up with a dollar, you can open a brokerage account. Both Capital One and Merrill Edge have no minimum initial deposit requirements, so you can open an account with whatever you'd like.

Practically speaking, it'd be a good idea to start with more than $1, so that you can afford to buy shares of a stock, ETF, or mutual fund and cover the commission. But as far as opening an account goes, you won't find deposit requirements to be a limitation.

Trading platform

To tell you the truth, The Motley Fool doesn't do much trading. As long-term buy-and-hold investors, we think we do better by buying companies we believe in and letting the power of compounding do the rest. For us, the trading platform is just a means to an end.

Realistically, Merrill Edge and Capital One both provide a trading platform that makes placing a simple trade just a matter of a few keystrokes and mouse clicks. The differences between their platforms may be more important to active traders, but we don't have much expertise here.

International stocks and ADRs

If you'd like to invest in foreign companies, you can buy American depositary receipts (ADRs) on American markets as a customer of Capital One or Merrill Edge. Many household-name companies that trade on international stock exchanges have an ADR in the United States. That said, ADR availability can be spottier for smaller international companies. At the time of this writing, neither Capital One nor Merrill Edge provide for trading on international exchanges.

Though neither broker can send trades overseas, investors can get foreign stock exposure by purchasing ADRs. Image source: Getty Images.

Research quality and tools

There's more to a brokerage than its minimum account sizes or fund selection. We tend to think that investors can benefit from access to investment research, too.

Merrill Edge clients are rewarded with third-party research from S&P Capital IQ and Morningstar, in addition to proprietary research from analysts who work for Bank of America Merrill Lynch. Capital One pulls data from Morningstar to power its research pages, which gives its clients the ability to compare companies on fundamental factors and learn more about funds and ETFs. Research services are numerous at virtually all online discount brokerages, and investors could find plenty to enjoy about Capital One or Merrill Edge.

Mobile app

If trading from a phone or tablet is important to you, you'll be pleased that both brokers offer this capability. Here's how each brokers' users and clients rated their iOS and Android apps (as of Dec. 12, 2016).

Broker

Apple App Store

Google Play

Merrill Edge

4.0 stars

4.0 stars

Capital One

3.5 stars

3.0 stars

Data sources: Relevant app stores.

Better broker for online trading: Merrill Edge or Capital One?

These brokers are in many ways so similar that it's a tough comparison. Both offer the same standard commission prices, access to free or reduced commissions, and the same level of access to international markets.

Where they differ is in the availability of funds, research, and mobile app ratings, all of which have varying importance depending on your personal investing style and preference. To be clear: The Motley Fool does not endorse any particular broker, but we are here to help. Take a peek at Fool.com's Broker Center to see if you qualify for any special offers that may tip the balance in favor of one of the brokers discussed above. If an IRA is what you're looking for, this page on special offers for IRA accounts could lead you to thousands of dollars in savings and bonuses.

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