TradeStation and Interactive Brokers may be better known as brokers for traders, but they're also popular destinations for people who want to open an IRA, too. In the article below, we'll see how TradeStation and Interactive Brokers compare on features, prices, fund choices, and more.
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Commission prices -- costs matter
Trading costs can really add up, making commissions an important variable to consider when you open an IRA. TradeStation and Interactive Brokers are something of an anomaly in the brokerage business because they have variable commission schedules that may be less expensive than traditional fixed-price commissions.
Data source: Company websites.
Variable pricing adds some complexity when it comes to comparing costs, as both brokers offer discounts to high-volume traders. TradeStation's commissions can fall as low as $4.99 per stock trade, or $0.002 per share, for investors who use its per-share pricing option. Interactive Brokers' tiered pricing schedule starts at $0.0035 per share.
Before you open an account, it may be smart to shop brokers' current special offers for IRAs. It's common for brokers to entice customers with bonuses and commission-free trades worth hundreds, if not thousands, of dollars.
Mutual funds, ETFs, and commission-free choices
TradeStation and Interactive Brokers have their differences when it comes to fund selection.
Data sources:Barron's, company websites, and representatives.
Fund investors should probably be more discriminating when selecting a broker. Although many brokers offer thousands of funds, not all funds make the cut. Furthermore, some of your favorite funds may be costly to buy at one brokerage, but completely free at another. Notably, Interactive Brokers has about 3,000 mutual funds and ETFs that you can buy and sell without paying a commission.
Minimum deposit requirement for IRAs
Interactive Brokers and TradeStation have minimum deposit requirements that are higher than most other brokers. Interactive Brokers requires a $5,000 minimum deposit to open an IRA, while TradeStation requires a $5,500 deposit.
In some cases, depositing more than the minimum may be advantageous. See if you qualify for a perkor bonusbased on your initial deposit.
Interactive Brokers and TradeStation allow you to trade from your phone or tablet. Image source: Getty Images.
International stocks and ADRs
When it comes to investing overseas, brokers tend to fit into two categories: brokers that only allow trading in U.S. tickers (TradeStation), or brokers that can send trades to international exchanges (Interactive Brokers). The table below summarizes the differences between Interactive Brokers and TradeStation for individual stocks and funds.
Data sources: Company websites and representatives.
Generally speaking, investors who stick to large cap stocks will find that many of the companies they want to invest in have a U.S. ticker. For example, Restaurant Brands International (Burger King and Tim Horton's), BP, and Sony are all examples of international companies with U.S.-listed tickers or ADRs. That said, it's rare for small companies to have dual listings, and thus you'll have to trade with an international broker to buy and sell foreign small- and mid-cap stocks.
Mobile app reviews
You can check your account and make trades from your mobile phone or tablet from anywhere around the world. Here's how each broker's users and customers rated their mobile trading apps, as of Feb. 14, 2017.
Data source: Relevant app stores.
Fees on IRA accounts
Fee schedules can be opaque, but there are two fees that are generally avoidable. Maintenance fees, or service fees, are the most basic type of fee. A maintenance fee is usually charged just for keeping an account open. The second type of fee is an inactivity fee, or a charge assessed to accounts that do not meet a broker's minimum trading requirements.
TradeStation charges an annual IRA account fee of $35. In addition, it charges a monthly minimum activity fee of $99.95 if you don't maintain a balance of at least $100,000, or don't meet minimum trading requirements. Minimum monthly trading requirements include meeting one of the following: 10 round-turn futures and/or futures options contracts, 50 options contracts traded, or 5,000 shares traded.
Interactive Brokers eliminated maintenance fees for IRAs in 2017, but it does charge inactivity fees. Interactive Brokers' customers must generate at least $10 in commissions each month, or pay an inactivity fee equal to the difference between the commissions they paid and the $10 monthly minimum. Thus, if you paid $3 in commissions in one month, you'd pay an extra $7 fee to bring the total to $10 for the month. You can avoid this fee by generating at least $10 in commissions, or keeping an account balance of at least $100,000.
Importantly, not all brokers have maintenance or inactivity fees.
TradeStation vs. Interactive Brokers for traditional or Roth IRAs
Depending on how you invest, either TradeStation or Interactive Brokers could be the better choice.The truth is that every broker caters to a particular subset of the market, and for that reason, there isn't a perfect brokerage for every type of investor. It's all about how a broker's pricing and capabilities fit within the specific requirements of your portfolio.
To be clear, The Motley Fool does not endorse any particular brokerage, but we can help you find one that's a good fit for you. VisitFool.com's IRA Centerto compare several brokers all on one page, and see if you qualify for any special offers for opening a new account.
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