Published in: Buying Stocks | Dec. 4, 2018

Vanguard vs. Merrill Edge: Which Top Online Brokerage Should I Use?

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In this head to head of Vanguard vs. Merrill Edge, we’ll compare how these top brokerages compare on commissions, research, fund selection, and more.

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Times are changing. Vanguard isn't just a mutual fund manager, and Merrill Edge isn't an old-school stock brokerage. When you're ready to take the first step toward investing by opening a brokerage account, these two companies might be high on your list of potential suitors.

With millions of accounts between them, Vanguard and Merrill Edge have become go-to investors for traders and long-term investors alike.

Trading costs and commissions

It's become downright cheap to make a trade at most discount brokers, and Vanguard and Merrill Edge are no exception to this rule. When comparing Vanguard vs. Merrill Edge, the difference in standard commission prices adds up to no more than a nickel per trade for most orders.

Broker Stocks and ETFs Stock options Mutual funds
Vanguard $7.00 per trade $7.00 plus $1.00 per contract $20.00
Merrill Edge $6.95 per trade $6.95 plus $0.75 per contract $19.95

Importantly, both of these brokers have ways to save on their base commission prices. Vanguard has thousands of commission-free ETFs and mutual funds, and lowers its commissions based on your balance. For example, investors who have a $500,000 balance pay just $2 per trade.

Likewise, Merrill Edge offers 30 or 100 free stock and ETF trades every month to clients who keep combined balances of more than $50,000 or $100,000 in Merrill Edge and Bank of America accounts, respectively. In addition, it also offers a long list of no-transaction-fee mutual funds that can substantially reduce your trading costs.

Commission-free ETFs and NTF mutual funds

If your portfolio has more funds than individual stocks, you might want to pay close attention to how you can score free trades in ETFs and mutual funds. Brokers increasingly advertise commission-free ETFs and no-transaction-fee (NTF) mutual funds that their clients can trade without paying a fee for every transaction.

Fund type Vanguard Merrill Edge
Total mutual funds More than 3,800 More than 9,000
No-transaction-fee mutual funds More than 1,400 More than 3,000
Commission-free ETFs None More than 1,800

Vanguard recently changed its pricing structure to become the brokerage for exchange-traded funds. Its customers can now trade more than 1,800 ETFs on U.S. markets without paying a dime in commissions. That’s a big change from the past, when it only offered its own ETFs as commission-free choices.

Merrill Edge is somewhat lacking in the fund department compared to Vanguard. That said, because it offers as many as 100 free stock and ETFs per month, depending on your account balances, many people find that they can make all the ETF trades they would ever need to make without paying a fee to buy or sell.

Account minimums

We’ll keep it simple here: Vanguard and Merrill Edge are both no-minimum deposit brokerages. You read that right -- you can open an account at either broker with the change you find between your couch cushions.

For practical purposes, it would be advantageous to start out with a little more than mere pocket change. After all, to make an investment, you'll need enough capital to be able to afford a single share of a stock, ETF, or mutual fund as well as the commission price for the trade. But if you’re worried that these brokers may turn you away because you don’t have a lot of money to invest, think again.

Trading platforms

If you’re looking for a high-powered trading platform, Vanguard and Merrill Edge may not be the best places to look. Vanguard simply isn’t designed for frequent traders, given its roots as an investment company for long-term investors who are most concerned about cost.

Vanguard uses a simple browser-based interface that offers the ability to easily buy stocks, options, ETFs, or funds. That said, if you’re looking for complex stock option trades or level II quotes, Vanguard isn’t the brokerage you’re looking for. Its mobile app, which is available on iOS, Android, Windows, and Kindle, is good enough to place the occasional buy or sell order, but it doesn’t offer full platform functionality, either.

Merrill Edge offers more functionality with its browser-based solution, offering up streaming quotes through its watch list feature. Merrill Edge MarketPro, its desktop platform, is a more powerful solution, offering full customization, more charting options, and hundreds of options to show multiple data points on one screen (you can quickly see a stock’s P/E ratio, or analyst estimates, for example).

The downside to Merrill Edge is that the MarketPro platform isn’t made available to everyone. Customers who make 15 trades per quarter or have $50,000 in total assets qualify for access. If you want access to a high-quality trading platform with no trading or deposit minimums, then TD Ameritrade may be a better alternative.

International stocks and ADRs

Before you ask Siri how to say "limit order" in Spanish, know that you can trade American depositary receipts (ADRs) at Vanguard and Merrill Edge. If you want direct access to foreign stock markets, Vanguard can get you there, but it charges a $50 fee on top of a commission. Merrill Edge doesn't offer trading directly on international markets, however.

Truthfully, most large foreign companies have an ADR that trades in the United States, so buying shares of household name companies shouldn’t be a problem regardless of the brokerage you choose. But if you want to buy shares of a Japanese small cap stock, you’ll need a broker that can help you transact on a Japanese stock exchange, for example.

Research quality and tools

Merrill Edge and Vanguard both offer a wealth of research to their brokerage clients. Both provide a number of screening tools for individual stocks and funds. As far as third-party research goes, Vanguard customers get access to Standard & Poor's, Thomson Reuters, and First Call, just to name a few providers.

Merrill Edge customers get one very big perk in the form of BofA Merrill Lynch Global Research Analysts' stock picks, but it also offers third-party research to its clients. In particular, the company also offers a “story” on many of the largest stocks on the market, helping you get a quick introduction to a given stock before you do your own due diligence.

Vanguard vs. Merrill Edge: The bottom line

If you want to trade directly on international stock markets and have a preference for Vanguard's funds, Vanguard might just win your heart. Vanguard also has a clear advantage for anyone who wants to invest in ETFs, given it has the largest list of commission-free ETFs of any discount broker today. It easily earns a top spot as the brokerage for long-term investors who want to simply manage a portfolio of a few index funds and ETFs.

Of course, if low- or no-cost trades on individual stocks is important to you, you’re likely better suited for Merrill Edge, especially if you can qualify for 30 or 100 free trades each month through its loyalty program. Its easy tie-in with Bank of America also makes it a compelling choice for existing customers who want to keep all of their accounts in one place.

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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