Capital One vs. TD Ameritrade: Best IRA Accounts

By Jordan Wathen Markets Fool.com

You've balanced your budget, you've maxed out your employer's match on your 401(k), and now you want to open an IRA to save even more for retirement. Good for you -- you're well on your way to building a bountiful nest egg.

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Picking one to house your new IRA can be a challenge, given the number of brokerages out there. Let's look at just two popular choices, Capital One and TD Ameritrade, to see how they compare on the features that are important to retirement investors.

Commission prices by investment

Trading costs have come a long way since 1975, when fixed commissions died and discount brokers began their rise. Today, you can trade most stocks, ETFs, and options for $10 a trade or less, making investing more accessible for individual investors.

Brokerage

Stocks and ETFs

Stock Options

Mutual Funds

TD Ameritrade

$9.99 per trade

$9.99 + $0.75 per contract

$49.99 per purchase

Capital One

$6.95 per trade

$6.95 + $0.75 per contract

$19.95 per purchase

Data source: company websites.

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The table shows commission prices by brokerage and investment, but not all prices are as they appear. Thanks to special offers for opening an IRA, commission-free trades on funds, and alternative commission schedules, it's likely you'll pay less than the stated rate to place the average trade.

Capital One allows investors to make scheduled trades in stocks and ETFs for just $3.95 through its ShareBuilder service. Alternatively, investors can purchase up to eight ETFs at one time with its PortfolioBuilder option, which charges just $18.95. TD Ameritrade has a large list of funds that are simply free to buy and sell, making it much less expensive for fund investors than it may appear.

Mutual fund selection and commission-free choices

Not all mutual funds are available through every broker, and brokers maintain different fee-free funds lists. TD Ameritrade and Capital One both offer plenty of mutual funds to choose from, with thousands of funds that are commission-free or no-transaction-fee (NTF).

Brokerage

Total Mutual Funds

No-Load, No-Transaction-Fee Funds (NTF)

Commission-Free ETFs

TD Ameritrade

11,800+

3,800+

101 (iShares, Vanguard, VanEck, etc.)

Capital One

1,100+

400+

Not available

Data source: the companies.

Depending on how you invest, fee-free funds may be particularly important when shopping for a brokerage. In this case, the cost savings can be significant, as Capital One and TD Ameritrade charge roughly $20 and $50, respectively, to buy mutual funds that aren't on their freebie lists.

Minimum deposit requirement for IRAs

You can open an IRA with TD Ameritrade or Capital One with just the change in your pocket. As no-minimum IRA brokers, they don't have a minimum deposit requirement to open a new account. Of course, you'll want to deposit enough to buy a share of stock or an ETF, or to meet the minimum investment on a mutual fund to get started.

Start small with a no-minimum IRA account from Capital One or TD Ameritrade. Image source: Getty Images.

International stocks and ADR investments

Like most discount brokers, TD Ameritrade and Capital One allow you to invest in foreign companies but don't offer trading on international exchanges. This table summarizes what investments are available to each brokers' customers:

Type of Investment

TD Ameritrade

Capital One

American depositary receipts (ADRs)

Yes

Yes

Stocks traded on international stock markets

No

No

Mutual funds and ETFs of foreign stocks

Yes

Yes

Data source: companies.

Explained simply, as long as a foreign company has a ticker that trades on an American exchange, you can trade it with either brokerage. However, if a company only trades on an international stock exchange -- in, say, Germany or Malaysia -- you'll have to use a different brokerage. In fairness, only a handful of brokers offer the ability to trade overseas.

Mobile app reviews

Whether you're at home or on the road, you can check up on your account and make trades thanks to mobile trading apps for mobile phones and tablets. Here's how users recently rated TD Ameritrade's and Vanguard's apps, as of Jan. 19, 2017:

Brokerage

Apple App Store

Google Play

TD Ameritrade

5.0 stars

3.5 stars

Capital One

1.5 stars

3.0 stars

Data source: relevant app stores.

IRA fees: maintenance and inactivity fees

Not all brokerages are created equal in the fee department. If possible, it may be advantageous to avoid paying a fee just for having an account (maintenance fees), or for trading infrequently (inactivity fees). TD Ameritrade and Capital One don't charge annual account fees or inactivity fees on their accounts, IRAs included. Regardless of which broker you choose, you won't have to worry about seeing your IRA balance get drained by recurring charges.

Research tools for retirement investments

Discount brokers are leveling the playing field with full-service brokerages, adding research, tools, and retirement calculators to help their clients make better investment decisions. TD Ameritrade provides research from S&P, FirstCall, and Credit Suisse, just to name a few perks. Capital One powers its research library with Morningstar data, making it easy to quickly evaluate and compare funds and individual stocks.

Both provide some features that are useful for retirement planning. TD Ameritrade's Portfolio Planner tool can help you set goals and score your progress toward your retirement plan. Capital One makes it easy to see your portfolio holistically, viewing investments by sector, geography, or market cap size. Both brokers have a feature to help you find lower-cost funds to reduce your annual expenses, which can help you save thousands of dollars over the life of your IRA.

Best for IRAs: Capital One or TD Ameritrade?

There are a few differences between brokers that really stick out. Capital One has universally lower commissions, and its ShareBuilder program makes investing in individual stocks less expensive, but it offers a comparatively smaller list of mutual funds and no commission-free ETFs. TD Ameritrade offers more to fund investors with thousands of fee-free mutual funds, plus an assortment of commission-free ETFs, but if it isn't free, it'll generally cost more to buy or sell at TD Ameritrade than Capital One.

To be clear, The Motley Fool does not endorse any particular brokerage, but we can help you find one that is a good fit for you. Visit Fool.com's IRA Center to see how several leading brokerages compare on key features all on one page!

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TD Ameritrade. The Motley Fool has a disclosure policy.