Best Brokerages: Comparing TradeStation and Vanguard

By Jordan Wathen Markets Fool.com

Before you make your first stock trade, you'll need to open a brokerage account from which you can place your orders. Vanguard and TradeStation are two popular choices for long-term investors who want low commissions, mobile trading capabilities, and the ability to get started without having a billion dollars to invest. Here's how these two brokers compare on costs, research, and other important criteria for long-term investors.

Continue Reading Below

Trading costs and commissions

As trading costs decline over time, the differences between brokers frequently come down to just a few dollars per trade. That's the case with Vanguard and TradeStation, which offer competitive prices on stocks, options, ETFs, and mutual funds.

Broker

Stocks/Options

ETFs

Mutual Funds

Vanguard

Stocks: $7.00 per trade

Options: $20 + $1 per contract

$7.00 per trade

$35.00 per purchase

TradeStation

$8.99 per trade + $0.70 per contract

$8.99 per trade

$14.95 per purchase

Data sources: Company websites.

The table reflects each broker's published commission rates, but there may be some discounts you qualify for. Vanguard cuts prices for people who keep at least $50,000 in its ETFs and mutual funds. TradeStation customers qualify for volume discounts when they make more trades in a monthly period. If your primary goal is to invest for retirement, make sure you take into considerationbonus offers for IRA accounts when thinking about your total trading costs.

Continue Reading Below

Commission-free ETFs and NTF Funds

Brokers are increasingly competing to be your broker by offering commission-free ETFs and no-transaction-fee (NTF) mutual funds that you can invest in without paying a fee to do so. Here's how these two brokers stack up on fee-free investment options.

Broker

Commission-Free ETFs

NTF Mutual Funds

Vanguard

55 ETFs (All Vanguard ETFs)

Thousands (including Vanguard mutual funds)

TradeStation

None

None

Data sources: Company websites.

To be completely fair, the number of fee-free funds isn't as important as which funds are fee-free. Consider that Vanguard charges a higher standard commission on mutual funds than TradeStation, so mutual funds that don't fall on its list of freebies would be more expensive to buy through its services.

Account minimums

Both brokers will allow you to get started without making a life-changing commitment. Vanguard's no-minimum account policy means you can open an account with just $1. TradeStation has a $5,000 minimum initial deposit for standard brokerage accounts, and $5,500 for IRAs.

Minimum account requirements aren't necessarily the practical minimum account requirements, however. TradeStation clients who do not trade at least 5,000 shares of stock, 50 options contracts, or 10 round-turn futures or futures options contracts per month are charged a $99.95 monthly fee.

Trading platform

The Motley Fool is all about investing with a long-term focus in mind. We tend to prefer a buy-and-hold strategy, and thus we don't spend that much time monitoring our portfolios, nor do we log in to our accounts to make a trade every day.We think the quality of a trading platform is pretty binary -- a "good" platform can process our trades and a "bad" platform can't.

Realistically, long-term investors who don't trade that often will find that Vanguard or TradeStation platforms make it easy to buy or sell an investment. If day trading is your aim, we'll encourage you to seek a second opinion on trading platforms; our experience probably isn't relevant to you.

When you trade less often, you don't need much out of a trading platform. Image source: Getty Images.

International stocks and ADRs

Going global? The differences between brokers can be substantial.

Investors who want to invest in foreign stocks can do so by buying American depositary receipts (ADRs) through Vanguard and TradeStation's brokerage services. However, of these brokers, only Vanguard offers the ability to trade foreign stocks on foreign markets. Vanguard charges a $50 fee on top of a commission to place trades on international exchanges, which may make some trades cost-prohibitive for some investors.

Research quality and tools

We generally view access to research and investment tools as a good thing, and both Vanguard and TradeStation give their customers plenty of information about their investments.

Vanguard clients have access to a number of stock, ETF, and mutual fund screeners, in addition to profiles for individual stocks with data compiled from Standard & Poor's, Thomson Reuters, and First Call, among other sources. TradeStation publishes Morning Market Briefings, gives investors access to news from the wire services, and releases weekly reports for stocks and ETFs. Truly, investors will find a collection of research tools at their disposal as customers of either brokerage firm.

Mobile app

Want to trade from a phone or tablet? Here's how each brokers' users and clients rated their mobile capabilities on iOS and Android (as of Dec. 6, 2016).

Broker

Apple App Store

Google Play

Vanguard

2.0 stars

4.0 stars

TradeStation

4.0 stars

4.5 stars

Data sources: Relevant app stores.

The better brokerage: Vanguard vs. TradeStation

Depending on your needs, you can find plenty to like about Vanguard or TradeStation. Fund investors might like Vanguard's wide selection of fee-free funds, whereas higher-activity investors might prefer TradeStation's volume discounts on commissions.

It really comes down to how you invest, and what you need in a brokerage service to build your portfolio. To be clear: The Motley Fool does not endorse any particular broker. Check out a complete comparison of major brokerages services on our Broker Center. Retirement investors should visit the IRA Center to see if you qualify for some great special offers that include cash incentives and commission-free trades.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

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.