Brokerage Comparison for Long-Term Investors: TD Ameritrade vs. Vanguard

There has never been a better time to be an investor. Online discount brokerages like TD Ameritrade and Vanguard make it easier than ever before to buy and sell stocks, ETFs, and mutual funds from your computer or mobile device. TD Ameritrade and Vanguard are two of the most popular brokers for long-term investors, so here's what you should know before opening a brokerage account with either company.

Image source: Getty Images.

Trading costs

Investors today have it much better than they did just a decade ago. Trading costs and commissions are becoming smaller and smaller with each passing day. Below are standard trading commissions for stocks, ETFs, and mutual funds at TD Ameritrade and Vanguard. 

Data source: Company websites.

Note that you may qualify for volume- and loyalty-based discounts at either brokerage based on how much you trade, how much you have in your account, or how much you have invested in the company's own funds and ETFs. Both TD Ameritrade and Vanguard have some commission-free funds and ETFs, as well as brokerage special offers and IRA account special offers that can further reduce your actual trading costs.

Commission-free funds and trades

Brokerages are increasingly giving investors the ability to buy and sell funds for free. TD Ameritrade and Vanguard both offer commission-free trades in a number of mutual funds and ETFs. If low-cost investing is what you're looking for, then you'll be very pleased with the no-transaction-fee (NTF) funds and ETFs available on either platform. TD Ameritrade offers 101 commission-free ETFs from iShares, Vanguard, and VanEck, along with 3,984 NTF mutual funds. Vanguard offers 55 commission-free ETFs, all from Vanguard, and thousands of NTF mutual funds, which include Vanguard products.

When shopping for commission-free ETFs and NTF mutual funds, keep in mind that transaction fees are just one of the many costs that come with owning ETFs or mutual funds. Don't forget to compare expense ratios and other fees.

Account minimums

TD Ameritrade and Vanguard do not have specific minimum investment requirements for stock, fund, or ETF investors. Some mutual funds have their own minimum investment requirements. Similarly, there are effectively minimums for investing in ETFs and stock: You'll need to be able to buy at least one share to make a trade. 

International stocks

TD Ameritrade does not allow for trading in international stocks. Instead, its clients are limited to American depositary receipts (ADRs), which trade on U.S. markets. Vanguard offers its clients the ability to trade stocks listed on foreign markets, but only through an associate on the Vanguard Brokerage Block Desk. Trades of this type are assessed a commission plus a $50 processing fee.

Trading platform

We at The Motley Fool believe in long-term investing, and we generally don't care too much about the fancy features or charting abilities of a brokerage's trading platform. As buy-and-hold investors, we try to spend as little time as possible buying and selling stocks, as investment returns and trading frequency are usually inversely related; investors who are less active tend to earn higher returns.

That said, preference for trading platforms is largely a personal choice. You'll find plenty of functionality with either brokerage.

Research quality and tools

Both TD Ameritrade and Vanguard offer stock and mutual fund screeners that allow you to sort through potential investments quantitatively. In addition, you'll find third-party research from Thompson Reuters and Standard & Poor's on both brokerage platforms.

Both brokers also offer a number of proprietary research tools. TD Ameritrade has an interesting tool that allows you to see what people are saying about companies on social platforms like Twitter. Vanguard has a helpful portfolio analysis tool to reveal the potential risk and return of a mutual fund portfolio, for example. Depending on your needs, you could be very happy with either broker.

Mobile app

Here's how each broker's users and clients rated the mobile apps' capabilities on iOS and Android devices.

Data sources: Relevant app stores. Data as of Nov. 25, 2016.

Getting to the bottom line

For long-term investors, TD Ameritrade and Vanguard have plenty to offer, including inexpensive commissions, numerous no-transaction-fee funds, and plenty of research tools and resources. To be clear: The Motley Fool does not endorse any particular broker. Learn more about online brokerage accounts or open a brokerage account at Fool.com's broker center.