Online Discount Brokers: Robinhood vs. TradeStation

By Jordan Wathen Markets Fool.com

The truth is that online brokerages exist for just about every kind of investing style. The hard part is finding the brokerage that works perfectly for your needs. We tend to think that focusing on the main criteria -- commissions, fund selection, research capabilities, etc. -- is the best way to find the best brokerage account without all the headaches.

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Below, we'll take a look at Robinhood and TradeStation, two popular discount brokerages with vastly different offerings for investors.

Trading costs and commissions

Trading costs are where Robinhood and TradeStation (or any broker, for that matter) diverge strongly. Robinhood doesn't charge a commission on trades. TradeStation does. But there's more to it than price, which we'll explore from the table below.

Broker

Stocks/Options

ETFs

Mutual Funds

Robinhood

Stocks: Free

Options: Not available

Free

Not available

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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Extremely price sensitive investors will find that Robinhood has a clear advantage on costs, but not necessarily on investment availability. Robinhood only allows you to trade stocks and ETFs. TradeStation provides access to stocks, options, ETFs, and mutual funds.

Furthermore, we should note that TradeStation's prices also include breakpoints at which active traders receive volume-based discounts. Other factors play into an honest discussion about costs, too. For instance, special offers for traditional brokerage accounts as well as IRA accounts can not only reduce your trading costs, but they can also result in a scenario in which your broker actually pays you to open an account.

Commission-free ETFs and NTF funds

Many brokers offer commission-free ETFs and no-transaction-fee (NTF) mutual funds that you can invest in without paying your broker. Neither Robinhood or TradeStation are such brokers, however, as neither maintain a specific list of fee-free funds.

Broker

Commission-Free ETFs

NTF Mutual Funds

Robinhood

All ETFs

Not available

TradeStation

None

None

Data sources: Company websites.

Of course, all stock and ETF trades on Robinhood are commission-free, so I suppose it's safe to say that every ETF is a commission-free ETF if you're a Robinhood customer.

Account minimums

Before spending too much time comparing brokers, it's probably prudent to talk about account minimums. Robinhood doesn't have a minimum account size, so you can open an account with less than $1.00, if you'd like. TradeStation requires a $5,000 initial deposit to open a brokerage account, and $5,500 to open an IRA.

Realistically, account minimums are different than practical minimums. If you want to buy a share of a $100 stock, you'll need to deposit at least $100 (plus the commission cost) to buy one share.

Trading platform

Which broker has the best trading platform is an argument that's been going on ever since online discount brokers were popularized in the late 1990s. Frankly, as long-term investors, we at The Motley Fool don't have particularly strong opinions. We rarely open our trading platforms, and don't really care what they look like when we do.

In general, we tend to think personal preference is the primary factor in deciding on a trading platform. But there is an objective difference between Robinhood and TradeStation: Robinhood is a mobile-only platform, whereas TradeStation offers mobile and desktop trading platforms.

Ultimately, if a trading platform is of particular importance to you, then it is worth trying out for yourself.

Image source: Getty Images.

International stocks and ADRs

As a general rule, most brokers offer the ability to invest in foreign companies subject to some limitations. Robinhood and TradeStation generally in fit with many of the brokerage companies in this category.

Investment

Robinhood

TradeStation

American depositary receipts (ADRs)

Some

Yes

International stock markets

No

No

ETFs/Mutual funds of foreign stocks

ETFs

ETFs and mutual funds

Data sources: Company websites.

First and foremost, if you invest in foreign companies through ETFs, you won't have much of a problem at either broker. If you prefer mutual funds, only TradeStation offers those.

If individual companies are your thing, then listen up, because there are some differences here. TradeStation allows you to trade ADRs, which are something similar to shares of foreign stocks listed on U.S. markets. Robinhood allows for trading in some ADRs, but generally restricts trading to companies that are domiciled in Israel or Canada, and trade for more than $5 per share.

If you want to go trade directly on international stock markets, you may want to look elsewhere. Only a few online brokers offer the ability to buy foreign stocks listed on foreign stock markets.

Research quality and tools

We tend to think that research access can be a good perk that comes with opening a brokerage account. Besides, in the worst case, you won't have to feel bad if you don't make full use of free research since...well, it's usually free.

TradeStation prominently features its screeners and scanners, which have a number of preset criteria that can make it easy for beginners to find what they're looking for. It also offers some proprietary content in the form of a Morning Market Briefing, as well as weekly stock and ETF reports.

Robinhood doesn't currently offer research capabilities, which is a trade-off for its commission-free pricing structure. Depending on how much you value free research services, the differences here may be more or less important.

Mobile app

You can now trade anywhere you have internet access or mobile signal through trading apps offered by Robinhood and TradeStation. Here's how each broker's users and clients rated their iOS and Android apps (as of Dec. 19, 2016).

Broker

Apple App Store

Google Play

Robinhood

4.5 stars

4.5 stars

TradeStation

4.0 stars

4.5 stars

Data sources: Relevant app stores.

Picking a broker: Robinhood or TradeStation?

Depending on your needs, you could make the case that either broker is a winner. You won't pay a commission to make a stock or ETF trade at Robinhood, but you'll be limited mostly to just domestic stocks and ETFs. TradeStation offers access to more markets -- stocks, ETFs, options, and mutual funds, just to name a few -- in addition to more international options. However, you'll pay a commission on every trade.

The point is that there are pluses and minuses with every broker, and there isn't a brokerage that is universally the "best" broker for every type of investor. It's all about how a brokerage's offerings fit into your portfolio. To be clear: The Motley Fool does not endorse any particular broker, but we can help you find one that works for you. To compare brokerages and their current special offers, see Fool.com's Broker Center. If you're looking to open an account to save for retirement, the IRA Center makes it easy to compare different choices on important criteria for long-term savers.

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