Online Discount Brokers: How Merrill Edge and Ally Invest Compare

This article was updated on Feb 12, 2018 and originally published Dec. 15, 2016.

Before you can buy stocks, options, or funds, you'll need a brokerage account to help you make your trades. Luckily, opening an account with an online discount broker takes just a few minutes and doesn't require a lot of money. Truthfully, shopping around for brokers can be the hard part.

Below, we'll take a close look at how two popular discount brokers, Merrill Edge and Ally Invest (formerly TradeKing), compare on criteria that may be important for investors.

Trading costs and commissions

While picking a brokerage isn't all about finding the least expensive way to make a trade, it is a good idea to make sure you understand a broker's commission schedule before opening an account. The table below shows commission prices to trade various investments at both brokerages.

Data sources: Company websites.

As you can see, the differences in trading costs are relatively small, amounting to just a few dollars for most trades. Notably, Merrill Edge is pretty generous in handing out commission-free trades for people who keep a certain amount of assets in a Merrill or Bank of America account.

Depending on what you invest in, the difference between brokers may be even smaller. Importantly, special offers for traditional brokerage accounts as well as IRA accounts can add up quickly, a reduce your total average trading costs.

Commission-free ETFs and NTF funds

When people think about the cost of investing in ETFs or mutual funds, they usually think about management fees or expense ratios. But transaction fees can also take a chunk out of your investments. Therefore, it may be advantageous to see if your broker has any commission-free ETFs or no-transaction-fee (NTF) mutual funds available to its clients.

Source: Company websites.

At first glance, Merrill Edge has a clear-cut advantage on the availability of no-transaction-fee mutual funds, but it's important to consider that not every fund is on its fee-free list. If a fund isn't classified as NTF at Merrill Edge, you'll pay its standard $19.95 rate to buy it. Ally Invest, on the other hand, charges just $9.95.

Account minimums

Being rich or poor isn't important for getting access to investments any more. Both Merrill Edge and Ally Invest allow new customers to open accounts without meeting an initial deposit requirement. If you have a dollar bill, you have enough to open a brokerage account.

Investors who can commit more to their account may qualify for some added incentives like commission-free trades or bonuses. In that case, it may be advantageous to make a larger initial deposit.

Image source: Getty Images.

Trading platform

The Motley Fool is all about investing for the long haul -- not until the next earnings report. For this reason, we tend not to make trades all that often, and don't really care all that much about the features of a trading platform. 

Long-term investors will find that placing trades through Merrill Edge or Ally Invest is as easy as it needs to be. People who label themselves as "traders" rather than "investors" might have a preference for one or the other, but we'll bow out here -- our experience as investors isn't necessarily applicable to traders.

International stocks and ADRs

One of the wonders of the 21st century is the ability to easily invest in companies that do business all around the world. If buying foreign stocks is your thing, keep in mind that Merrill Edge and Ally Invest both allow you to trade American depositary receipts (ADRs), like most brokerages.

Both brokers also offer plenty of mutual funds and ETFs that are invested in stocks around the world. That said, neither broker currently offers trading in foreign stocks on international stock exchanges. (In truth, only a handful of brokers offer direct access to international markets.)

Mobile app

If you have a smartphone or tablet, you'll be able to trade anywhere you have internet access or cell reception. Here's how each brokers' users and clients rated their iOS and Android apps (as of Feb 12, 2018).

Data sources: Relevant app stores.

Which discount broker is better: Merrill Edge or Ally Invest?

Ultimately, it's all about picking a broker that fits within your requirements, based on your personal portfolio. Merrill Edge sports more no-transaction-fee funds, but otherwise has higher standard commission prices. Ally Invest offers less-expensive trades, particularly for mutual funds, but it doesn't offer any commission-free funds.

To be clear: The Motley Fool doesn't endorse any particular broker, but we can help you select a broker that best fits your needs. Visit Fool.com's Broker Center to compare standard brokerage accounts. If you're looking to open an IRA, then visit the Fool.com IRA Center for information that is custom-tailored for retirement investors.