Charles Schwab vs. TradeStation: Comparing Popular Online Brokers

By Jordan Wathen Markets Fool.com

When it's time to open a brokerage account, you'll find plenty to choose from. You'll also find that the hunt can be overwhelming. With so many features to compare between brokers -- commissions, fees, funds, research, and mobile apps, just to name a few -- it's easy to lose track of your end goal.

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Shopping for a broker can be easier, but only if you know the right questions to ask. Today we'll compare two popular brokers,Charles Schwab and TradeStation, to see how they stack up on the qualities that individual investors want in a brokerage account.

Trading costs and commissions

It's only good news here: With each passing day, it's becoming less expensive to buy and sell stocks, options, ETFs, and mutual funds thanks to discount brokerage services. Charles Schwab and TradeStation both play a role here. See how their commission prices compare in the table below.

Broker

Stocks/Options

ETFs

Mutual Funds

Charles Schwab

$8.95 per trade + $0.75 per options contract

$8.95 per trade

$76.00 per purchase

TradeStation

$8.99 per trade + $0.70 per options contract

$8.99 per trade

$14.95 per purchase

Data sources: Company websites.

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The discount brokerage industry seems to be one of the few corners of finance where actual prices tend to be lower than the published price. Thanks to commission-free investment menus, volume-based discounts for active traders, and special offers that can be worth thousands of dollars just for opening a brokerage account, you'll find that your average trading cost can ultimately be much lower than the stated price.

Commission-free ETFs and NTF funds

Fund investors should be particularly attentive when shopping for a brokerage account. Many brokers now offer commission-free ETFs and no-transaction-fee (NTF) mutual funds that you can buy and sell without paying a commission or transaction fee on every trade.

Broker

Commission-Free ETFs

NTF Mutual Funds

Charles Schwab

200+ (Schwab, Guggenheim, State Street, and more)

3,900+

TradeStation

None

None

Data sources: Company websites.

The real benefit is to the person who wants to invest over time with small contributions. Rather than pay...say $10 per trade to make a bi-weekly investment in a fund, investors can save the transaction fee and put $260 per year back in their own pocket.

Of course, the number of funds a broker offers isn't everything. Although Schwab has thousands of fee-free fund choices, keep in mind that its standard mutual fund commissions are much higher than TradeStation's. Unless it's a mutual fund is on Schwab's fee-free list, it's likely much cheaper to buy at another brokerage.

Account minimums

Some brokers have minimum account requirements to open an account. Charles Schwab does not, though some investments (like mutual funds) may have their own minimums. TradeStation requires that investors deposit at least $5,000 to get started with a traditional brokerage account, and $5,500 to open an IRA account.

Some brokers' minimum initial deposit requirements may be too high for investors who are just starting out. Image source: Getty Images.

Trading platform

We prefer to invest for the long haul at The Motley Fool, so we tend to buy and hold rather than actively trade in and out of stocks. As infrequent traders, we don't really have strong opinions on trading platforms. To us, it's just a means to an end: a piece of software through which we can tell our brokers to make a trade.

Active traders tend to see the world of investing differently, and some have strong preferences for trading platforms. Ultimately, personal preference is usually what matters most, so it's worth forming your own opinion about the quality of a platform if you plan to trade actively.

International stocks and ADRs

One area where many broker services diverge is in their ability to process trades in foreign companies listed on U.S. markets, and on international stock exchanges. Here's how Schwab and TradeStation compare on international stocks.

Investments

Charles Schwab

TradeStation

American depositary receipts (ADRs)

Yes

Yes

International stock markets

Yes

No

ETFs/Mutual funds of foreign stocks

ETFs and mutual funds

ETFs and mutual funds

Data sources: Company websites.

Both brokers allow you to invest in ADRs and funds of foreign stocks. However, when it comes to trading stocks on international stock exchanges, only Charles Schwab offers that capability.

Schwab clients can access up to 12 foreign markets electronically, and up to 30 foreign markets through its Global Services desk. Notably, though, trades on non-U.S. exchanges typically incur additional fees and commissions.

If trading on foreign stock exchanges is important to you, you should know that the list of brokers that offer international trading is pretty short. Many brokers limit their investors to ADRs and other securities that are listed on U.S. markets.

Research quality and tools

We tend to think that individual investors can benefit from getting access to screening tools and investment research through their brokerage. Luckily, even discount brokers are getting into the research game, and many give their clients free access to powerful tools and up-to-date research notes.

Charles Schwab offers research from its own in-house analysts, in addition to stock and fund screens, news from the wire services, and daily market reports from leading publishers and bank groups. TradeStation provides a wealth of screening tools, plus proprietary Morning Market Briefing presentations before each trading day, weekly stock and ETF reports, and other reports on everything from foreign currencies to futures markets.

Realistically, there's only so much we can say about either broker's research offerings. Truly, depending on your particular needs, online discount brokers have a lot to offer in investment research.

Mobile app

Virtually every broker makes it possible to trade from anywhere through a mobile trading app. Here's how users and clients of each broker rated their iOS and Android apps (as of Dec. 29, 2016).

Broker

Apple App Store

Google Play

Charles Schwab

3.0 stars

4.0 stars

TradeStation

3.0 stars

4.5 stars

Data sources: Relevant app stores.

Picking an online brokerage: Charles Schwab or TradeStation?

Both brokers have a lot to offer different types of investors. Charles Schwab has thousands of fee-free funds, in addition to international market access. However, mutual funds that aren't on its list of freebies will incur a high transaction fee for each purchase. TradeStation offers reasonably low commissions and a pricing structure that favors higher-volume investors, but it doesn't offer as much international access and requires a larger initial deposit.

Ultimately, it all comes down to how you manage your personal portfolio. To be clear: The Motley Fool doesn't endorse any particular broker, but we can help you discover the best brokerage for you. Visit Fool.com's Broker Center for a comparison of features and special offers for traditional brokerage accounts. See Fool.com's IRA Center to see special offers, perks, and features that are specific to retirement investors.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.