When you want to start making long-term investments, it's pretty easy to open a brokerage account. The hard part is picking just one brokerage from the many choices available. Today, we'll focus on just two brokerages, OptionsHouse and Merrill Edge, and compare them based on commission prices, features, and functionality, with a focus on using a broker for long-term investing.
Trading costs and commissions
The online brokerage industry is all about driving down prices. From the early days, discount brokerages have had a clear advantage in charging less per trade, and most online brokers are now priced within mere dollars and cents of one another.
Here's how OptionsHouse and Merrill Edge compare on trading prices by different types of investments.
Source: Company websites.
Notice that pricing differences are minimal, and the truth is that it's likely your average trading cost will be even lower than the advertised price. First and foremost, brokers tend to use special offers like cash bonuses and commission-free trades as a lure to attract new investors, which serve as an effective discount. Secondly, Merrill Edge, which appears more expensive from the table above, offers customers 30 free trades for keeping minimum account balances, a benefit that isn't reflected in the pricing table above.
Finally, some brokers allow you to place some trades without paying any commissions or fees at all.
Commission-free ETFs and NTF Funds
If you prefer to invest in mutual funds or ETFs, you may have a preference toward brokerages that waive commissions on selected ETFs and mutual funds. The table below shows the number of commission-free ETFs and no-transaction-fee (NTF) mutual funds provided by each broker.
Source: Company websites.
Importantly, Merrill Edge has a large collection of NTF mutual funds that its clients can buy and sell. However, when it comes to ETFs, neither brokerage currently offers commission-free ETF trades; thus, OptionsHouse might earn the advantage because of its lower standard commission price ($4.95 vs. $6.95 per trade).
Neither Merrill Edge nor OptionsHouse have a required initial minimum deposit. As no-minimum brokers, investors are free to open an account with whatever balance they feel appropriate. However, keep in mind that many mutual funds have their own minimum investment requirements. Similarly, you'll need to be able to afford at least one share of a stock or ETF, plus pay the commission, to buy an investment from the exchanges.
No-minimum brokers make it easy for new investors to get started at their own pace. Image source: Getty Images.
We at The Motley Fool tend to prefer to hold for the long haul instead of trading in and out of stocks for small gains. Thus, we tend to find that virtually any trading platform can meet our very basic needs, and we don't have strong opinions about the quality of any given platform.
Realistically, personal preference plays a big part in how anyone views a trading platform, and no two investors will rate a platform similarly. If you want to spend a lot of time trading in and out of stocks and a platform is important, it's worth trying a platform out for yourself rather than listening to someone else's opinion. If not, Merrill Edge and OptionsHouse make buying or selling a stock or fund as easy as a few clicks, which is all we really ask of a platform, anyway.
International stocks and ADRs
It's now possible to buy investments all around the world from the comfort of your living room. While you sleep, the companies you have invested in will be hard at work making money for you. But the extent to which you can invest overseas depends on the broker you choose.
Here's how international investment options differ between these two brokers.
Source: Company websites.
If you prefer funds as a way to invest in foreign stocks, you won't be disappointed by either brokerage. Similarly, both brokers offer the ability to buy ADRs, which represent ownership of foreign companies, but trade on U.S. exchanges. If, however, you want to invest directly on international stock exchanges, you'll have to look elsewhere, as neither brokerage currently offers that capability. (In fairness, only a few brokers route trades overseas for their clients.)
Research quality and tools
We generally think that having access to more research tools and information can help individual investors make better decisions. Both brokers offer a number of research tools just for having an account.
Merrill Edge provides research from Bank of America Merrill Lynch, Morningstar, S&P, and news from major wire services. OptionsHouse provides pre-market and intraday stock reports, plus webcasts featuring guest analysts throughout the trading day. It also adds ResearchLAB and Reuters reports to add some reading to the mix of webcast watching.
All in all, investors can find plenty to like about the research provided by either brokerage. Plus, it's free, so you don't have to feel bad if you don't use it to its fullest.
Mobile app reviews
If you have an internet connection, you can now trade from just about anywhere with mobile trading applications. Here's how users and clients of each broker rated their iOS and Android apps (as of 1/04/2017).
Source: Relevant app stores.
The better brokerage: OptionsHouse or Merrill Edge?
Depending on your needs, you can make the case for either brokerage. On one hand, OptionsHouse has lower standard commissions, but it doesn't offer as many fee-free funds. Merrill Edge may be slightly more expensive for investors who pay the standard rates, but investors can qualify for commission-free trades by keeping a higher balance. Current Bank of America customers may also like its online banking integration.
Ultimately, there isn't just one brokerage for every type of investor. It's all about finding the best mix of features and functionality to fit your portfolio.
To be clear: The Motley Fool doesn't endorse any particular broker, but we can help you compare brokerages to help you in the hunt for the best broker for you. Visit Fool.com's Broker Center for a comparison of features and special offers for traditional brokerage accounts. The Fool.com IRA Center is specifically designed with the retirement saver in mind.
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