Published in: Buying Stocks | Dec. 3, 2018

Charles Schwab vs. Merrill Edge: Comparing Top Online Brokerages

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Charles Schwab and Merrill Edge are top online brokerages perfect for self-directed investors. Here’s how they compare on commissions, trading platforms, and international investments.

man online looking at stocks

Image source: Getty Images.

It wasn't all that long ago that buying stock or funds could only be done by phone, and each buy and sell carried a very steep commission. Today, the top online brokerages offer more bells and whistles -- research, international stocks, and more -- at a fraction of the cost of brokerages in the past.

Two well-known and widely used brokers, Merrill Edge and Charles Schwab, offer individuals access to the markets through their computers or phones. Below, we’ll review each broker’s features, and how they compare to one another.

Trading costs and commissions

As trading costs drop toward zero, the differences in trading commissions at online discount brokers has declined to just about $2 per trade. For its part, Charles Schwab has been one of the leaders in driving down commission costs in recent years.

Broker Stocks and ETFs Stock options Mutual funds
Charles Schwab $4.95 per trade $4.95 plus $0.65 per contract $76.00 (thousands for free)
Merrill Edge $6.95 per trade $6.95 plus $0.75 per contract $19.95 (thousands for free)

 

All commission prices deserve an asterisk, however. Many people actually pay much less than a broker’s standard rate because some trades can be placed for free, and many brokers have special offers that significantly reduce the cost of trading.

Merrill Edge may be costlier at $6.95 per stock trade, but Bank of America and Merrill Edge customers can score up to 100 free trades every single month (30 free trades for balances of $50,000 and 100 free trades for balances above $100,000). Likewise, Charles Schwab’s mutual fund commissions appear high at $76.00 per purchase, but it offers one of the largest selections of mutual funds you can buy without paying a transaction fee.

Commission-free ETFs and NTF mutual funds

Does your portfolio include a lot of exchange-traded funds or mutual funds? If so, you'll want to check out the availability of commission-free ETFs and no-transaction-fee (NTF) mutual funds. These are funds that brokers allow their clients to buy and sell without paying a commission or fee just to buy or sell.

Fund type Charles Schwab Merrill Edge
Total mutual funds More than 10,100 More than 3,800
No-transaction-fee mutual funds More than 4,300 More than 1,400
Commission-free ETFs More than 250 None

 

Charles Schwab easily gets the win here for having a wider selection of no-transaction-fee mutual funds, as well as a long list of commission-free ETFs. Its commission-free list includes some of its own Schwab index ETFs, which carry super-low expense ratios, making them a favorite of long-term retirement investors.

Of course, if you meet the requirements to receive free trades with Merrill Edge, you can make the case that every exchange-traded fund is effectively a commission-free fund. To receive 30 free stock and ETF trades per month, you’ll need to have a balance of at least $50,000 in eligible Bank of America deposit accounts and/or qualifying Merrill Edge accounts. When comparing Charles Schwab vs. Merrill Edge, whether or not you qualify for free trades at Merrill Edge has a big impact on which one is better from a cost perspective.

Account minimums

Neither Charles Schwab nor Merrill Edge has a minimum initial deposit, thus enabling you to open an account with whatever you deem appropriate. As some brokers have minimums that can rise as high as $10,000, no-minimum account requirements can be a boon for investors who are just getting started.

Of course, some mutual funds have their own minimum thresholds for investing, which can range from as low as $500 to as high as $10,000. Notably, Charles Schwab offers a number of mutual funds with special, $100 initial minimums with add-on investment minimums of just $1, which is a compelling feature for investors who want to start small.

Trading platforms

Both Merrill Edge and Charles Schwab have trading platforms their customers love. Merrill Edge uses a web browser-based platform, as well as a mobile platform for Android and iOS. If you keep a balance of at least $50,000, make 15 trades per quarter, or qualify for free trades through the loyalty program, you can get access to Merrill Edge MarketPro, which is the brokerage’s more-powerful browser-based platform.

Charles Schwab offers a browser-based, desktop, and mobile app-based platform to its clients. Its web browser-based Trade Source platform offers streaming quotes, news for all your portfolio positions, and a tab-based navigation so that you can quickly move to and from different stocks or funds. Those who want a full desktop platform experience may prefer its StreetSmart Edge product, which boasts more advanced charting, access to research, plus a fully-customizable layout. Best of all, there are no activity or trading volume restrictions for using its desktop platforms.

International stocks and ADRs

The internet makes it easier to invest in foreign companies than ever before. Both Merrill Edge and Charles Schwab enable investors to buy American depositary receipts (ADRs), which represent ownership of foreign companies, but trade domestically. Most major foreign companies (think Adidas, for example) have an ADR that enables investors to invest in a company without transacting on international markets.

If you'd like to trade overseas, Charles Schwab offers ways to trade on foreign markets. A Schwab Global Account offers access to electronic trading in 12 markets, while its Global Services desk makes more than 30 markets available to its clients. Additional commissions may apply, however, with prices varying by the security and exchange. Merrill Edge does not currently offer trading directly on international markets.

Research quality and tools

Although discount brokerages are generally defined as providing fewer services than full-service brokers, the industry has bridged the gap over time. Discount brokers that once offered little more than just a way to place a trade now offer full libraries of research on individual stocks and funds directly from their trading platforms.

Merrill Edge customers get access to research and investment tips from Morningstar, S&P Capital IQ, and its own BofA Merrill Lynch stock analysts, just to name a handful of things clients can expect. Meanwhile, Charles Schwab provides research and updates from Credit Suisse, Schwab proprietary ratings and research, and news and reports from S&P, Reuters, and more. It also offers completely free Morningstar research reports for individual stocks, which may be a major selling point for those who prefer to pick individual stocks.

The top online brokerage: Merrill Edge or Charles Schwab?

Both brokers have their pros and cons. Merrill Edge is a likely winner for anyone who has an existing deposit or investment relationship with Bank of America, since maintaining combined balances of $50,000 qualifies you for 30 free trades per month. For this reason, those who have larger balances will find Merrill Edge to be one of the most cost-effective ways to build and manage a portfolio of stocks and ETFs.

On the other hand, Charles Schwab offers lower commission prices at $4.95 per trade, a true desktop trading platform, and a lengthy list of mutual funds and ETFs you can buy without paying a commission or transaction fee on the trade. Lowered minimum investments on many popular mutual funds you can buy through its OneSource™ platform also make it a top pick for new investors.

Using the wrong broker could cost you serious money

Over the long term, there's been no better way to grow your wealth than investing in the stock market. But using the wrong broker could make a big dent in your investing returns. Our experts have ranked and reviewed the top online stock brokers - simply click here to see the results and learn how to take advantage of the free trades and cash bonuses that our top-rated brokers are offering.

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