It's fun to invest, but it isn't so fun to shop for a brokerage account. The sheer number of online discount brokers and the differences in their fees and features can be simply overwhelming. We tend to think the process should be simpler. Today, we'll compare two brokers -- Capital One and TradeKing -- on key criteria that we believe are the most important for long-term investors.
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Trading costs and commissions
We'll admit that costs aren't everything, but they do matter, particularly for investors who trade more frequently. The table below shows how each broker's standard commissions vary by the type of investment.
Data sources: Company websites.
Commission prices frequently come with asterisks, and we'll add one of our own: This table shows standard commission prices. Many investors will find they actually pay a lower price than the published rate.
Capital One has two programs designed to reduce trading costs. Its Sharebuilder and PortfolioBuilder services enable you to place trades to buy individual stocks or a whole portfolio, for just $3.95 and $18.95 per trade, respectively. In addition, many brokers offer select lists of investments that you can buy or sell for free.
Last but certainly not least, special offers can really add up. You'll be pleased to find that special offers for IRA accounts and traditional brokerage accounts frequently feature hundreds of commission-free trades or cash bonuses worth thousands of dollars. Shopping around can be very lucrative.
Commission-free ETFs and NTF funds
Some brokerages offer commission-free ETF trades and no-transaction-fee (NTF) investments in mutual funds as a perk to their clients. Here's how these two brokers compare on fee-free investment choices.
Data sources: Company websites.
Importantly, what really matters more than the number of fee-free funds is which funds are fee-free. If you have a preference for a particular fund, you'll want to do some exploring here. Notably, Capital One has more fee-free mutual funds, but funds that aren't on its list will incur a higher commission cost. Capital One charges a standard price of $19.95 per mutual fund investment vs. TradeKing's price of $9.95.
Both Capital One and TradeKing are no-minimum brokers, so you can start with whatever you deem most appropriate. Note, though, that to actually make an investment, you'll need to deposit enough to be able to afford one share of a stock, ETF, or mutual fund, and pay the commission.
For as long as we can remember, traders have always talked up the advantages or disadvantages of each broker's trading platform.Years later, no one has ever come to a consensus, probably because the quality of a platform usually depends on personal preference.
As long-term investors, we at The Motley Fool don't consider ourselves traders. We don't care about what candlestick charts look like, or how many technical indicators we can throw on a stock chart. We simply like to buy shares of great businesses and let the power of time and compounding work in our favor. For this reason, we don't have a particularly strong view on trading platforms. The truth is that they matter most to people who are most active in the markets, and frankly, that's just not us.
Luckily, though, most brokers will allow you to try out their platform with a demo account, which we'd recommend if a trading platform is of particular importance to you.
Image source: Getty Images.
International stocks and ADRs
Most online brokerages allow you to invest in foreign stocks with some limitations. The table below shows how these two brokers compare.
Data sources: Company websites.
Notably, both allow you to invest in American depositary receipts (ADRs), which trade on U.S. markets and represent ownership in a foreign company. Many foreign large caps have ADRs (think household names), but they're less common with foreign small caps.
That said, neither brokerage currently offers the ability to trade stocks on international stock markets. You won't be able to trade on the Frankfurt stock exchange, for example. To be fair, only a handful of online brokers offer international trading abilities anyway.
Research quality and tools
We think that getting access to research through your brokerage account can be a good thing for do-it-yourself investors. Both Capital One and TradeKing provide a wide range of quantitative screening tools for stocks and funds. Capital One also offers a research portal powered by Morningstar data, where you can compare companies on key metrics. TradeKing offers a pre-market Breakfast Bell report, in addition to S&P stock reports for individual publicly traded companies.
We've really only scratched the surface of research capabilities offered by either broker. Depending on your personal needs, you can find plenty of tools and research to better understand your portfolio at either brokerage.
You can now trade from just about anywhere thanks to mobile apps. Here's how each broker's users and clients rated their iOS and Android apps (as of Dec. 19, 2016).
Data sources: Relevant app stores.
The best broker for you: Capital One or TradeKing?
The truth is that there is no one-size-fits-all brokerage, as each broker generally caters to a different type of investor. Capital One has lower prices on trades that aren't time-sensitive, whereas TradeKing has lower standard prices on time-sensitive trades. Fund investors could go either way -- Capital One has more fee-free funds, while TradeKing has lower commissions on every other fund.
It's all about your specific needs, and how you plan to invest. To be clear: The Motley Fool does not endorse any particular broker, but we can help you compare brokers to find one that fits your style. Compare online discount brokers by features and special offers by visting Fool.com's Broker Center. If you're in the market for a retirement account, Fool.com's IRA Center is a great place to compare brokers on features that are specific to retirement investors.
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