TD Ameritrade vs. Robinhood: Comparing Low Cost Brokers

by Matt Frankel, CFP | Dec. 4, 2018

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These days it seems there are as many brokers as there are investments to buy with them, which can result in "paralysis by analysis," as the differences in brokers are numerous. But by sticking to the details that really matter to investors -- costs, investment selection, platforms, and more -- it's easier to review which broker is better on the features that matter most.

In this face-off of TD Ameritrade vs. Robinhood, we'll get to the heart of the difference-making features that may sway you one way or another.

Types of accounts

Investors who are on the fence about opening an account at TD Ameritrade or Robinhood may find that the types of accounts that each broker offers is reason enough to pick TD Ameritrade over Robinhood.

Currently, Robinhood offers only taxable brokerage accounts. So if you want to get the tax benefits of using a traditional IRA, Roth IRA, SEP IRA, health savings account (HSA), 529 College Savings Plan, and so on, Robinhood isn't the place for you. This is by far the biggest trade-off with Robinhood, which otherwise has a compelling value proposition for many investors.

TD Ameritrade offers taxable brokerage accounts, but it also offers just about any tax-advantaged account you can think of. If you're looking to open anything other than a taxable brokerage account, then TD Ameritrade gets an easy win over Robinhood.

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Trading costs and commissions

Broker Stocks and ETFs Options Mutual funds
Robinhood Free Free Not available
TD Ameritrade Free $0.65 per contract $49.99 (more than 1,800 for free)

While TD Ameritrade has joined the zero-commission stock trade revolution, Robinhood has a clear-cut advantage for anyone who wants to buy and sell options. Plus, Robinhood is the only one of the two that offers the ability to buy fractional shares of stock (for now).

That said, TD Ameritrade bridges some of the pricing gap by offering more than 1,800 mutual funds you can buy or sell for free, while Robinhood doesn't offer mutual funds at all.

Commission-free funds and ETF trades

Just because a brokerage charges a commission to make a trade doesn't mean that all trades come with a commission. Although Robinhood offers trades for free, TD Ameritrade also offers thousands of funds and ETFs you can trade without paying a transaction fee or commission.

Fund type Robinhood TD Ameritrade
Total mutual funds None Nearly 12,000
No-transaction-fee mutual funds None More than 1,800
Commission-free ETFs All ETFs are commission free All ETFs are commission free

Of course, transaction fees and commissions are but one price you pay to actually buy a fund or ETF. Over time, a fund's unavoidable management fee, which typically ranges from 0.05% to 1% of the amount invested each year, can easily add up to more than the cost of buying or selling a certain fund or ETF.

Account minimums

Lower investment minimums are among the biggest advantages to online brokers. TD Ameritrade and Robinhood are leaders here, as they both have no required minimums. That is to say that you can open an account and deposit just $1 if you want to.

Trading platform

TD Ameritrade and Robinhood offer a very different user experience, which is the result of the fact they have two very different business models.

We'll start first with Robinhood, which doesn't offer a fully-featured trading platform. Robinhood's mobile app and web browser platform are simplistic by design. Load up your account and you'll see a simple chart for any stock and ETF, a summary of key metrics, a breakdown of analyst ratings, and a list of headlines about the stock or fund.

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Robinhood's clutter-free design makes it really easy to navigate and use, but its simplicity is also a byproduct of the fact it doesn't offer that many features. You won't find full analyst reports or any financial data that goes beyond a stock's earnings per share in recent accounting periods. To sum it up, it's important to remember that Robinhood does offer everything you'd need, just not everything you might want.

One recent addition to Robinhood is its "Robinhood Gold" account, which offers investors access to Morningstar research reports, the ability to trade with margin (including up to $1,000 in margin interest free, an industry rarity), and a few other features. However, it costs $5 per month.

TD Ameritrade is almost on the opposite end of the spectrum, as it offers far more features in its mobile apps and browser platforms than Robinhood. In addition, TD Ameritrade also offers a desktop trading platform, thinkorswim, which is a perennial favorite among active traders, investors, and professional reviewers alike.

From complex charting tools to live video feeds, Level II quotes, and economic data from the Federal Reserve, you can find just about anything you'd need from within the thinkorswim platform. Best of all, it's completely customizable, so you can move windows around as you see fit to ensure that what's most important to you is always front and center.

And unlike many other trading platforms out there, thinkorswim is available to TD Ameritrade customers no matter how much you keep in your account, or how much you trade. Said simply, if there is one thing that separates TD Ameritrade from the pack, it's that it offers one of the most powerful trading platforms out there and doesn't charge you anything to use it.

International stocks and ADRs

TD Ameritrade and Robinhood don't offer access to foreign markets. TD Ameritrade clients can purchase American depositary receipts (ADRs), which trade on U.S. stock exchanges.

Robinhood only recently introduced ADRs on its platform, and it doesn't offer all of them. It offers "over 250" ADRs, which it says includes companies like "Tencent, Nintendo, and Adidas." It's seemingly moving country by country to add the largest ADRs. In a blog post, it said that it will "expand the global list with stocks from France, including most frequently searched companies Ubisoft Entertainment, LVMH, and Michelin."

If being able to trade ADRs is important to you, TD Ameritrade is likely the better pick, since not every ADR is available on Robinhood. As for trading directly on international markets, Fidelity and Charles Schwab may be worth studying more closely, as both offer online access to foreign markets that Robinhood and TD Ameritrade do not.

Research quality and tools

TD Ameritrade offers investors access to third-party and proprietary research tools. It includes access to Morningstar, S&P Capital IQ, and Thomson Reuters research, among other third-party providers. In addition, it offers its clients access to proprietary research and tools to screen stocks and funds by fundamental performance, and it even tracks social-media sites like Twitter for investor sentiment.

Robinhood does not currently offer third-party or proprietary research to its clients, unless they pay $5 per month for Robinhood Gold, which comes with Morningstar research access. Its research suite is comprised primarily of news feeds from free publications and average sell-side research estimates. As it's a no-frills brokerage, saving on commissions does come with some trade-offs in the research department.

TD Ameritrade vs. Robinhood: How to decide

There are a few "make-or-break" features that make it easy to decide between using TD Ameritrade and Robinhood. First, if you want to open any account other than a taxable account (IRAs, health savings accounts, college savings plans, etc.) then TD Ameritrade is the best way to go. Robinhood doesn't offer those types of accounts… yet.

Secondly, TD Ameritrade is the only broker to offer a full list of American depositary receipts and mutual funds. Robinhood offers only select ADRs and doesn't offer any mutual funds. TD Ameritrade is the only one of the two to offer a fully-featured desktop trading platform, too.

Of course, Robinhood has its place for some investors who prioritize the cost of making a trade over everything else. Although it may not offer much in the way of research or supplemental features, it offers no-commission trading on not only stocks, but options as well. Investors who want to start small and place trades for a handful of shares (or even a fraction of a share) at a time might be better off with Robinhood, while more experienced investors should take a closer look at TD Ameritrade.

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