Charles Schwab and Fidelity might be better known as an advisory firm or asset manager, but it also offers discount brokerage services to investors who want to take control of their own destiny. When you're ready to open an IRA, these two popular brokers could be a good choice. Let's see how they compare on the things that matter most -- commission prices, fees, account minimums, and more.
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The truth is that trading costs are a fraction of what they once were, and prices keep getting lower. Pricing rarely varies much. As the following table shows, Fidelity charges just $1 more per trade than Charles Schwab in most cases.
Data source: company websites.
Where differences are sizable (mutual funds), they are most likely to be irrelevant. Both brokers have funds and ETFs you can trade without paying a fee, which can reduce your average commission paid per trade.
Smart shoppers can take advantage of a particularly competitive brokerage environment. Thanks to lucrative special offers for IRAs, investors routinely qualify for cash bonuses, commission-free trades, and other perks that can be worth $1,000 or more just for opening an account.
Mutual fund selection and commission-free choices
Make no mistake: While stock investors enjoy low commissions, fund investors may have it better. Both Fidelity and Schwab offer thousands of funds and ETFs that you can buy or sell for free -- no commissions, no loads, and no transaction fees.
Data source: company websites and representatives.
Although their standard transaction fees for mutual funds may be high ($49.95 or $76.00), so many funds are free that you may never pay a transaction fee to assemble a diversified portfolio. These brokers' commission-free ETFs may be particularly exciting for the frugal investor, as many also have very low expense ratios of less than 0.10% per year.
Minimum deposit requirement for IRAs
Fidelity is a no-minimum brokerage, so you can get started with whatever you'd like. Charles Schwab requires a $1,000 minimum deposit to open an IRA, which can be waived for customers who agree to make automatic deposits of $100 per month. In either case, minimums shouldn't turn away too many investors from getting started.
Many brokers have much higher IRA minimums than Charles Schwab or Fidelity. Image source: Getty Images.
International stocks and ADR investments
If you like shopping for great stocks all around the world, Charles Schwab and Fidelity may be the right pick for you. These two are part of a small group of brokersthat enable their clients to trade on international exchanges, not just tickers in the United States.
Data source: company websites and representatives.
Keep in mind that both brokers have additional fees and commissions for sending trades overseas, with prices that can vary based on the stock exchange and local currency.
Fund investors can shop from a laundry list of mutual funds and ETFs with foreign stock exposure that can be purchased at the standard commission price, or in some cases, at no cost at all.
The ability to trade from anywhere isn't just a perk, it's a standard feature. You can now trade from anywhere thanks to mobile apps that bring Wall Street to your phone or tablet. Here's how each brokers' users and customers rated their capabilities, as of Jan. 26, 2017:
Data source: relevant app stores.
IRA fees: Maintenance and inactivity fees
You don't need to sweat annual fees or inactivity charges, as neither Fidelity nor Charles Schwab charges a fee just for having an account, or for trading infrequently. That said, keep these fees in mind as you comparison shop for a broker for your IRA; they're more common than you might think.
Research and retirement planning tools
We tend to think that more information can be a good perk of having a brokerage account. Most brokers offer a wealth of research and retirement planning tools to their investors, regardless of how much they trade or how much they deposit.
Fidelity's third-party research includes S&P, analyst upgrades and downgrades from hundreds of research companies, plus proprietary screening tools. When it comes to retirement planning, its Retirement Planning & Guidance Center can help you evaluate your current retirement plan, and see whether you're on track to reach your most important goals.
Charles Schwab provides its own ratings and research, in addition to research from third parties like Reuters, Morningstar, and Credit Suisse. For retirement planning, it has a library of worksheets and calculators on its website, plus quarterly reports to score your asset allocation compared to its model portfolios.
A better broker for IRAs: Charles Schwab or Fidelity
Truthfully, which broker is best for your IRA depends entirely on how you manage your account.Fidelity may win for having no-minimum deposit requirements, and access to Fidelity and iShares ETFs. Charles Schwab may win over other investors for offering access to more international markets, and lower prices on domestic stock and option trades. 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. Check out Fool.com's IRA Center to compare several leading discount brokers all on one page.
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