TradeKing vs. Merrill Edge: Best Choice for an IRA Account

IRAs can be a powerful savings tool, as they allow your savings some protection from Uncle Sam while giving you an incredible level of flexibility to invest how you want to. But you shouldn't jump in with both feet by opening an IRA at the first broker you see. 

The brokerage you choose can affect important variables such as what you pay to have an account, and ultimately the returns you enjoy on your portfolio. With this in mind, let's look at how two brokers, TradeKing and Merrill Edge, compare for IRAs.

Commission prices

For years, brokerage prices were fixed and investors paid a fortune in commissions to make a trade, large or small. That all came to an end in the 1970s, and in the years that followed, the rise of the internet made the brokerage business more competitive than ever before.

The result is that commission prices have dropped quickly, and most brokers are now priced mere dollars and cents apart. This is the case with TradeKing and Merrill Edge, where two dollars makes the difference for stock and ETF trades.

Data source: company websites.

Notably, many brokers offer discounts on top of their already low commission prices. Merrill Edge offers commission-free trades just for maintaining a minimum balance in your IRA or Bank of America accounts. Likewise, you can qualify for discounts when you sign up. Learn more about special offers for IRAs, and how you can qualify for a deal.

Mutual funds, ETFs, and commission-free choices

Investors who like to use funds need to be more selective when it comes to picking a broker. It's not well known that not every broker offers the opportunity to invest in every mutual fund. Likewise, some funds that are free to buy and sell at one brokerage will incur a transaction fee at another.

Data sources: Barron's, company websites, and representatives.

What really matters is what you'll pay to invest in the funds you prefer. While Merrill Edge offers more than 2,300 mutual funds that you can buy without paying a fee in any form, TradeKing has lower commissions ($9.95 vs. $19.95) for funds that aren't on its free list.

Minimum deposit requirement for IRAs

Not all brokers are open to everyone, but TradeKing and Merrill Edge are. These two brokers don't require a minimum deposit just to open an account. This can be advantageous to new investors who would prefer to make routine contributions over time rather than make a large deposit on day one. 

A low or no-minimum IRA broker makes it easier to size your deposit to get the maximum tax benefit. Image source: Getty Images.

International stocks and ADRs

Investors who want to take their portfolios international will need to be more selective when picking a brokerage for their IRA. TradeKing and Merrill Edge enable investors to buy American depositary receipts (ADRs) and foreign stocks listed in the United States (think Toyota, or GlaxoSmithKline), but neither offers the ability to trade directly on exchanges in foreign countries.

If you'd like to trade on exchanges around the world, the list of discount brokers that offer international market access is shorter than those that don't.

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. 24, 2017.

Data source: Relevant app stores.

Fees on IRA accounts

You should always give a broker's fee schedule a review before opening an account, but two fees are common across the industry. One is a maintenance fee, or a charge just for having an IRA. The other is an inactivity fee, or a service charge for failing to meet a broker's requirement for trades or commissions.

In many cases, one or both types of fees are avoidable.

TradeKing has an annual inactivity fee of $50, but you can avoid it by making at least one trade per year, or by maintaining a balance of $2,500 or more. Merrill Edge doesn't charge either type of fee on customer IRA accounts. 

Better for IRAs: TradeKing or Merrill Edge?

In a perfect world, one broker would be the very best for investors of all types, but that just isn't the case. It really depends on how you plan to manage your investments. TradeKing may win over cost-conscious stock and options traders for its lower standard commission prices. Investors who have accounts with Bank of America may prefer its integration with Merrill Edge, and the fact that their checking or savings balances may entitle them to free trades every single month.

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. Visit Fool.com's IRA Center to compare several brokers all on one page, and see if you qualify for any special offers for opening a new account.