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Best Bet for IRAs: OptionsHouse vs. Capital One

By Jordan Wathen - Apr 1, 2017 at 7:03PM

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Let's review what OptionsHouse and Capital One have to offer individual investors who want to save with the help of an IRA.

There may be no better way to save for retirement than by opening an IRA. With all the tax benefits of a 401(K), and all the freedoms of an ordinary brokerage account, IRAs offer investors an opportunity to control their own financial futures. But selecting a brokerage for your IRA isn't always as simple as it seems. Today, we'll look at two discount brokers, OptionsHouse and Capital One, to review what they offer IRA investors. 

Commission prices

Of all the ways to buy and sell stocks, doing it online through a discount brokerage is inherently less expensive. In the table below, you'll see that OptionsHouse and Capital One price most trades at less than the cost of a combo meal.

Brokerage

Stocks and ETFs

Stock Options

Mutual Funds

OptionsHouse

$4.95 per trade

$4.95 + $0.50 per contract

$20.00 per purchase

Capital One

$6.95 per trade

$6.95 + $0.75 per contract

$19.95 per purchase

Data sources: Company websites.

The differences in pricing comes down to just two dollars per trade, a relatively small margin for most investors. But Capital One's higher prices come with an asterisk: The company provides the option to place trades that are not time sensitive and pay just $3.95 per trade. Its so-called ShareBuilder program can be used to purchase stocks, ETFs, and funds. You can also set it to buy automatically for you.

One small secret of the brokerage industry is that prices aren't always concrete. In fact, many brokers' special offers for new clients include commission-free trades and cash bonuses that are added to your account balance. These bonus offers are effectively discounts on the standard price.

Mutual funds, ETFs, and commission-free choices

Not every action in an IRA account comes with a cost. In fact, it's common for brokerages to waive fees on a selected list of ETFs and mutual funds. 

Brokerage

Total Mutual Funds

No-Load, No-Transaction-Fee Funds (NTF)

Commission-Free ETFs

OptionsHouse

More than 12,100

None

5 (O'Shares)

Capital One

More than 1,100

More than 400

None

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

Depending on the role funds play in your portfolio, you could potentially save thousands of dollars in fees by investing in commission-free ETFs and no-load, no-transaction-fee mutual funds. At around $20 per investment, investors who use Capital One and OptionsHouse to make repeated fund purchases every month for a year would pay approximately $240 in fees just to buy their favorite mutual funds. Some brokers have more free funds than others -- compare some popular brokers here.

Minimum deposit requirement for IRAs

You won't have to empty your life savings to open an IRA with Capital One or OptionsHouse. Both brokers feature no minimum-deposit requirements, which means you can open an account with the balance in your change jar. It also means that you can get started now, rather than save up in less lucrative or tax-inefficient accounts before opening an IRA. 

Woman blowing kiss to a piggy bank.

No-minimum IRA brokers help you save for retirement without destroying your piggy bank. Image source: Getty Images.

Investing in foreign stocks and ADRs

If foreign stocks strike your fancy, OptionsHouse and Capital One both enable their investors to trade American depositary receipts (ADRs) from their online accounts. You can think of an ADR as something like a foreign stock ticker that trades on an American exchange. Many of the world's largest companies have them.

However, if it's important that you trade directly on international exchanges, you'll have to settle for a different broker. International trading capabilities are only offered by a select few discount brokerages.

Mobile trading apps

Do you have a tablet or a mobile phone? If you answered "yes" to that question, you'll be pleased to find you can trade from anywhere with an internet connection. Here's how each broker's users and customers rated their mobile trading apps, as of March 15, 2017.

Brokerage

Apple App Store

Google Play

OptionsHouse

1.6 stars

3.1 stars

Capital One

2.5 stars

2.9 stars

Data sources: Relevant app stores.

IRA account fees and service charges

IRA fees are common, but many are avoidable if you know some tricks. Maintenance fees (for having an account) and inactivity fees (for trading too infrequently) are some fees that are more common than others. But there's some good news here: Neither OptionsHouse nor Capital One charge either kind of fee, so investors don't have to sweat that their IRAs will be nickel-and-dimed by unexpected and recurring charges.

OptionsHouse vs. Capital One: A review

Depending on how you invest, OptionsHouse and Capital One could potentially be a good fit. CapitalOne's ShareBuilder service can be a good way for new investors to get started, given its lower costs, and the fact that it can also be used to purchase no-transaction-fee funds completely free on a recurring basis. OptionsHouse might be a better fit for people who trade more actively, or who plan to trade options more frequently.

Ultimately, it's all about how a broker's offerings align with 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. Visit Fool.com's IRA Center to compare several leading discount brokers on one page.

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