Published in: Buying Stocks | Dec. 4, 2018

TD Ameritrade vs. Charles Schwab: Comparing Top Online Stock Brokers

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Millions of people use TD Ameritrade and Charles Schwab, but we'll show you how they compare based on key criteria for individual investors.

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When you're ready to start investing, you can't just walk onto a Wall Street trading floor. But you can bring Wall Street to your home computer or mobile device by opening a brokerage account with an online discount broker that will give you access to invest in everything from individual stocks to five-star funds.

Millions of people use TD Ameritrade and Charles Schwab to place trades and make investments. Here's how they compare on key criteria for investors and traders alike.

Trading costs and commissions

The cost to place a trade isn’t everything, though it is an important point of differentiation among discount brokers. TD Ameritrade and Charles Schwab both allow investors to buy and sell stocks, options, ETFs and mutual funds inexpensively. The brokers' standard commission rates are shown in the following table.

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)
TD Ameritrade $6.95 per trade $6.95 plus $0.75 per contract $49.99 (thousands for free)
 

The important thing here is that the differences in prices between brokers is trivial for most types of trades. Even though TD Ameritrade is technically one of the most expensive brokers, and Charles Schwab is one of the cheapest, the difference amounts to just $2 per trade for the most common trades in stocks and exchange-traded funds (ETFs).

Keep in mind that both of these brokers offer a large selection of mutual funds and ETFs you can trade without paying a commission, thus reducing your average trading costs when the freebies are taken into consideration.

Commission-free funds

Like funds? We have good news! TD Ameritrade and Charles Schwab have long lists of no-transaction-fee (NTF) mutual funds and ETFs, which make it possible for their customers to buy and sell popular funds without paying a fee to do so.

Fund type Charles Schwab TD Ameritrade
Total mutual funds More than 10,100 More than 12,500
No-transaction-fee mutual funds More than 4,300 More than 1,900
Commission-free ETFs More than 250 More than 300
 

If you invest in funds -- ETFs or mutual funds -- no-transaction-fee mutual funds and commission-free ETFs can substantially reduce the cost of trading.

I give Schwab the advantage in this particular category because, although it has fewer mutual funds and commission-free ETFs, its OneSource product line-up is great for mutual fund investors. It offers the ability to invest in thousands of mutual funds with reduced minimums, often as low as $100 for an initial investment, and minimums as low as $1 for each subsequent add-on investment.

TD Ameritrade is no slouch, though. In particular, its commission-free ETF list includes funds from some of the market’s most popular issuers, including iShares and SDPR.

Account minimums

TD Ameritrade and Charles Schwab have no minimum account sizes, which means investors can open accounts with as little as $1.

We'll caution that it would be advantageous to start with a larger initial deposit, as you'll need enough money to buy at least one share of a stock, ETF, or mutual fund to actually make an investment. As far as opening an account goes, a single dollar bill will do.

Trading platform

While infrequent traders and long-term investors might not care about trading platforms, investors who take a more active role in the financial markets may want or need the functionality that comes from a true trading platform.

TD Ameritrade is beloved for its desktop trading platform, thinkorswim. The thinkorswim platform is available to any TD Ameritrade customer, regardless of trading activity or account balances, and is extremely powerful considering that it is completely free. This completely customizable platform offers hundreds of charting tools, robust screeners, and features easy access to economic data for analysis (you can load up virtually any Federal Reserve data set with a single click). As far as free platforms go, thinkorswim is easily one of the best, if not the very best.

Charles Schwab also offers a desktop platform known as StreetSmart Edge, which is also free to use, regardless of trading frequency or your account balance. StreetSmart Edge offers excellent charting, though with fewer tools than many of its rivals. Key features include its “all-in-one” trade ticket, where you can enter orders for multiple securities in one menu, allowing you to buy stocks and simultaneously sell options contracts, for example. It also features a customized layout, so you can put the information that’s most important to you front and center on your screen. Many of the popular features that were present at OptionXpress, which was acquired by Schwab, have been rolled into its platform.

Of course, TD Ameritrade and Charles Schwab both offer a way to trade through a web browser, as well as mobile apps for smartphones, tablets, and other mobile devices for people who need to place trades on the go. Infrequent traders and long-term investors are likely to find everything they need in simplified mobile applications or in a desktop or mobile browser.

International stocks and ADRs

When it comes to international stocks and American Depositary Receipts (ADRs), TD Ameritrade and Charles Schwab differ in a big way. TD Ameritrade only offers access to ADRs, and doesn’t offer a way to trade foreign stocks on foreign markets.

Charles Schwab clients can use a Schwab Global Account to place trades on 12 foreign markets in local currencies, all online. Getting a Global Account is easy, and there are no account minimums or fees associated with getting access. That said, note that almost all brokers charge a higher commission on international trades, which typically varies based on the country or specific market. (For example, trades in Japanese markets may cost more or less than trades in German markets).

Research quality, screeners, and other tools

Both brokers offer research tools that help investors stay informed about their investments and find new stocks or funds to invest in. Both Charles Schwab and TD Ameritrade offer plenty of screeners to help you quickly sort the market for stocks or funds based on key criteria like price-to-earnings ratios, or fund fees, for example.

TD Ameritrade offers numerous daily updates on individual stocks and economic data, plus stock-specific research from several independent research companies. Charles Schwab offers real depth in research, as it offers access to proprietary research and commentary from in-house analysts, as well as third-party research from third-party providers. The volume of material at either brokerage is simply far greater than anyone could ever read.

Together with Fidelity, TD Ameritrade and Charles Schwab round out the list of discount brokers that are especially popular with investors who put a bigger emphasis on the availability of research. If research is a make-or-break point of differentiation, one of these three would be an excellent choice.

TD Ameritrade vs. Charles Schwab: Making a decision

Frankly, TD Ameritrade and Charles Schwab are massive for a reason: They both offer a compelling value proposition in the form of quality platforms, high-quality research content, and low commission prices.

At the end of the day, the big differences are as follows: Charles Schwab is the better choice if you want to trade stocks listed on international stock exchanges, since it’s the only one of the two that offers direct market access overseas. In addition to leading on commission prices, it also boasts a very attractive list of low-minimum mutual funds, which may win over investors who want to start small and build their account balances over time.

That said, TD Ameritrade has one of the consistently highest-rated trading platforms (thinkorswim), especially for high-activity investors and those who want to trade from anywhere with mobile applications. Though it may cost a little bit more per stock trade ($6.95 vs. $4.95 at Schwab), it’s a relatively small difference to pay for an excellent user experience and powerful platform.

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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