When you've paid off high-interest debt and balanced your personal budget, it may be wise to start saving for the future by opening an IRA. Individual retirement accounts have a lot of advantages, but the biggest advantage is the complete freedom to invest exactly how you want to.
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To get started, you'll need to open a brokerage account. Here's how TradeStation and Merrill Edge compare for investors who want to take control of their retirements by opening an IRA account.
Commission prices per trade
Price isn't necessarily a big differentiator between TradeStation and Merrill Edge, as both are priced within $5.00 on every single trade type. Both also offer ways to reduce commission costs, which we'll explore below.
Data source: Company websites.
TradeStation's pricing structure is different than many other brokers, as its clients can opt for fixed or variable commission prices. Its fixed prices start at $8.99 per stock trade and can go as low as $4.99 per trade, depending on a customer's trading volume. Its variable prices start at $0.01 per share of stock traded, but can go as low as $0.002 per share, again based on volume.
Merrill Edge's discounts typically have more to do with assets than activity. Its clients can qualify for 30 commission-free trades just by maintaining a minimum balance in their Merrill Edge or Bank of America accounts.
We've yet to delve into other ways to save, like commission-free mutual funds or ETFs (exchange-traded funds), or special offers for opening a new IRA account. The point is that a broker's standard published prices are frequently more of a guide than indicative of true trading costs.
Fee-free mutual funds and commission-free ETFs
In the early days of the online brokerage industry, trades and transactions cost $40 or more across the board. Now, two decades later, many brokerages offer thousands of investments that can be purchased at no cost.
Data source:Barron's, company websites and representatives.
Fund investors who plan on making recurring investments should spend some time dissecting a broker's fee-free lists. TradeStation and Merrill Edge price mutual fund transactions at $14.95 and $19.95, respectively, which adds up to hundreds of dollars per year, per fund, for investors who make monthly contributions.
Minimum deposit requirement for IRA accounts
Although brokers have generally reduced client minimums over time, the minimum initial deposit requirement isn't extinct, just yet. Merrill Edge offers a true no-minimum IRA account, but TradeStation requires a $5,500 minimum initial deposit to get started.
Low minimum deposit requirements make it possible to start small. Image source: Getty Images.
International stocks and ADRs
Not all brokers offer the same access to foreign stocks or foreign stock markets. Currently, neither TradeStation nor Merrill Edge offer the ability to trade on international exchanges. However, both enable their clients to invest in foreign companies by investing in ADRs (American depositary receipts), mutual funds, and ETFs that trade in the United States. See Fool.com's IRA Center to compare IRA accounts for international investing.
Data source: company websites and representatives.
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. 9, 2017.
Data source: relevant app stores.
Fees on IRA accounts
There's a fee for just about everything in the financial industry, IRAs included. That said, investors can typically avoid or minimize two common types of fees -- maintenance fees and inactivity fees -- by meeting certain criteria.
TradeStation charges an annual IRA account fee of $35. In addition, it charges a monthly minimum activity fee of $99.95 if you do not maintain a balance of at least $100,000, or do not 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.
Merrill Edge doesn't currently charge a maintenance or inactivity fee on its IRA accounts.
TradeStation vs. Merrill Edge for IRAs
Depending on how you invest, certain attributes of either brokerage may be a better fit for you. For example, TradeStation's variable commission prices can be a boon for high-volume investors, but others may not trade enough to qualify, or may find its inactivity fees off-putting. Merrill Edge's vast collection of no-load, no-transaction-fee mutual funds may be a difference maker for fund investors, but investors who use a lot of stock options might find its pricing higher than other brokers.
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 nooks and crannies 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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