When you're ready to become an investor, you can't just walk onto a Wall Street trading floor. But you can bring the stock market to your home computer or mobile device by opening a brokerage account with an online 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. That value hasn't been lost on the brokerages themselves. In fact, in November 2019, Schwab agreed to purchase rival TD Ameritrade for $26 billion in stock.
Someday we may be talking about a combined firm. For now, the two remain separate. Until the two combine to make one gargantuan brokerage, here's how Charles Schwab vs. TD Ameritrade compare on key criteria for investors and traders alike.
The cost to place a trade isn't everything, but it's an important point of differentiation among discount brokers. Let's compare Charles Schwab vs. TD Ameritrade on trading fees. Both allow investors to buy and sell stocks, options, exchange traded funds (ETFs), and mutual funds inexpensively. In fact, you can make an online stock trade with either broker for free. The brokers' standard commission fees are shown in the following table.
|Broker||Stocks and ETFs||Stock options||Mutual funds|
|Charles Schwab||$0 per trade||$0.65 per contract||$49.95 (thousands for free)|
|TD Ameritrade||$0 per trade||$0.65 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. That's especially true now in the era of commission-free stock trading. TD Ameritrade pricing used to be among the highest in the industry, and Charles Schwab pricing was among the lowest. But the gap in pricing has since closed.
Keep in mind that both of these brokers offer a large selection of mutual funds and ETFs that you can trade without paying a commission. The freebies can help you reduce your average trading costs overall.
Like funds? We have good news. Charles Schwab and TD Ameritrade are somewhat evenly matched. They both have long lists of no-transaction-fee (NTF) mutual funds and ETFs. Customers at both brokerages can buy and sell popular funds without paying a fee to do so. Whether you invest in a mutual fund or an ETF, the transaction fee is a big deal. The absence of a trading commission or trading fee can substantially reduce the cost of investing.
|Fund type||Charles Schwab||TD Ameritrade|
|Total mutual funds||More than 10,100||More than 13,000|
|NTF mutual funds||More than 4,300||More than 4,100|
I think Charles Schwab is the brokerage firm with the advantage in this category. Although it has fewer mutual funds, its OneSource product lineup is great for mutual fund investors. You can invest in thousands of mutual funds with reduced minimums, often as low as $100 for an initial investment. Minimums as low as $1 for each subsequent add-on investment.
TD Ameritrade is no slouch, though. Its commission-free ETF list includes funds from some of the market's most popular issuers, including iShares and SDPR.
TD Ameritrade and Charles Schwab have no minimum account sizes. Investors can open accounts with as little as $1.
We'll caution that it would be advantageous to start with a larger initial deposit. You'll need enough money to buy at least one share of a stock, ETF, or mutual fund to actually make an investment. But as far as opening an account goes, a minimum deposit of a single dollar bill will do.
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. Here's how Charles Schwab vs. TD Ameritrade stack up.
TD Ameritrade is beloved for its desktop trading platform, thinkorswim. The thinkorswim trading platform is available to all TD Ameritrade clients, regardless of trading activity or account balances. It is extremely powerful considering that it's completely free. This customizable platform offers hundreds of charting tools and robust screeners. It also 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, the thinkorswim platform is easily one of the best, if not the very best.
Charles Schwab offers a desktop platform known as StreetSmart Edge. It's 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. You can enter orders for multiple securities in one menu. This allows you to buy stocks and sell options contracts simultaneously, 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 OptionsXpress, which was acquired by Schwab, have been rolled into its platform.
Of course, TD Ameritrade and Charles Schwab both offer other trading tools. With either, you can trade through a web browser. Each brokerage offers a mobile app, especially handy for that trader who wants 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.
When it comes to international stocks and American Depositary Receipts (ADRs), the Charles Schwab vs. TD Ameritrade match-up differs 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 online trades on 12 foreign markets in local currencies. Getting a Global Account is easy. 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. The trading commission typically varies based on the country or specific market. For example, trades on Japanese stock markets may not cost the same as trades on German markets.
Both brokers offer research tools that help investors stay informed about their investments and find new stocks or funds to invest in. Looking at Charles Schwab vs. TD Ameritrade, both offer plenty of screeners to help you quickly sort through the market for stocks or funds based on key criteria like price-to-earnings ratios or fund fees.
TD Ameritrade offers numerous daily updates on individual stocks and economic data. It also offers stock-specific research from several independent research companies.
Charles Schwab offers real depth in research. Clients get access to proprietary research and commentary from in-house analysts. They also get 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 prioritize the availability of research. If research is a make-or-break point of differentiation, any one of these three would be an excellent choice.
Frankly, we are comparing these two massive brokers for a reason. Charles Schwab vs. TD Ameritrade is a toss-up that's going to land you with a great stock broker no matter which one you choose. They both offer user-friendly platforms, high-quality research content, and no commissions on most trades.
At the end of the day, here are the big differences between Charles Schwab and TD Ameritrade.
Charles Schwab is the better choice if you want to trade stocks listed on international stock exchanges. It's the only one of the two that offers direct market access overseas. Schwab also boasts a very attractive list of low-minimum mutual funds. That may win over investors who want to start small and build their account balances over time.
TD Ameritrade has one of the consistently highest-rated online trading platforms (thinkorswim). It's especially beneficial for high-activity investors and those who want to trade from anywhere with mobile apps. We have to give TD Ameritrade the edge when it comes to its trading platform, especially now that zero-commission trading has leveled the playing field.
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