It wasn't all that long ago that orders had to be placed by phone, and each buy and sell carried a very steep commission. Today, online trading accounts from modern brokerages offer more bells and whistles -- research, international stocks, and more -- at a fraction of the cost.
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Two well-known and widely used brokers, Merrill Edge and Charles Schwab, offer individuals access to the markets through their computers or phones. Here's how they stack up for investors.
Trading costs and commissions
As trading costs drop toward zero, the differences in trading commissions is becoming smaller and smaller. Note that Merrill Edge and Charles Schwab are generally priced just a couple of dollars apart for each trade, based on their standard commission prices.
Data source: company websites.
If there's one thing you should know, though, it's that many people actually pay much less than a broker's standard rate. Merrill Edge gives investors 30 commission-free trades for keeping a certain minimum balance. Charles Schwab routinely offers bonuses just for opening a new account. When commission-free funds are combined with special offers for new accounts, investors pay a much lower effective price to make trades.
Commission-free ETFs and NTF Funds
Does your portfolio include a lot of ETFs and mutual funds? If so, you'll want to check out the availability of commission-free ETFs and no-transaction-fee (NTF) mutual funds. These are funds that their clients can buy and sell without paying a fee to do so.
Data source: company websites.
Depending on your needs, you could make the case for either brokerage. Charles Schwab has one of the longest lists of commission-free ETFs, while Merrill Edge promises a massive list of no-transaction-free mutual funds that can save you hundreds or thousands of dollars in transaction fees over time.
Ultimately, though, it depends on the funds you want to invest in. Remember that you'll pay the standard commission to trade funds that aren't designated as commission-free or no-transaction-fee.
Neither Charles Schwab nor Merrill Edge has a minimum initial deposit, thus enabling you to open an account with whatever you deem appropriate. As some brokers have minimums that can rise as high as $10,000, no-minimum account requirements can be a boon for investors who are just getting started.
A lot can be said about the qualities of any given trading platform, and we'll let others provide the commentary. As long-term investors, we at The Motley Fool don't really care about fancy charting or technical analysis tools. We simply aren't traders.
In general, we tend to think this comes down to personal preference for a trading platform's look or feel. (One perk of no-minimum accounts is that it doesn't hurt to try out both to see if you have a strong preference one way or another.)
Long before online trading and fancy monitors, stock prices were printed on tape in real time. Image source: Getty Images.
International stocks and ADRs
The internet makes it easier to invest in foreign companies than ever before. Both Merrill Edge and Charles Schwab enable investors to buy American depositary receipts (ADRs), which trade domestically, but represent ownership of foreign companies.
If you'd like to get direct to the source, Charles Schwab offers ways to trade on foreign markets. A Schwab Global Account offers access to electronic trading in 12 markets, while its Global Services desk makes more than 30 markets available to its clients. Additional commissions may apply, however, with prices varying by the security and exchange. Merrill Edge does not currently offer trading directly on international markets.
Research quality and tools
Although discount brokerages are generally defined as providing fewer services than full-service brokers, the industry has bridged the gap over time. In fact, Merrill Edge customers get access to research and investment tips from Morningstar, S&P Capital IQ, and its own BofA Merrill Lynch stock analysts, just to name a handful of things clients can expect.
Meanwhile, Charles Schwab provides research and updates from Credit Suisse, Schwab proprietary ratings and research, and news and reports from S&P, Reuters, and more. Depending on your personal needs, you'll find a plethora of research material to digest on everything from stocks to funds at either brokerage.
Mobile app reviews
Brokerage apps bring Wall Street everywhere you are, enabling you to place trades on a phone, tablet, or other mobile device. Here's how each brokers' users and clients rated their iOS and Android apps, as of Dec. 12, 2016.
Data source: relevant app stores.
The best online trading account: Merrill Edge or Charles Schwab?
Each brokerage has its own advantages and disadvantages relative to one another. Merrill Edge has lower commissions but less access to international investments. Charles Schwab has more commission-free ETFs, but its standard mutual fund commissions are significantly higher. And you should also consider your existing accounts. Current Bank of America or Charles Schwab banking customers might prefer to keep it simple and keep their brokerage and bank accounts with one company.
To be clear, The Motley Fool doesn't endorse any particular broker over one another, but we do want you to make an informed decision. To that end, check out Fool.com's Broker Center for comparisons on everything from account minimums to commissions at many of the most popular brokerage companies. If you're investing for retirement, check out this list of offers for IRA accounts, which can be especially lucrative.
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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. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.