TD Ameritrade vs Vanguard

TD Ameritrade and Vanguard are both popular choices when it comes to long-term investments and opening an IRA. They both offer very attractive features for many kinds of investors. In the following article, we are going to see the comparison between TD Ameritrade vs Vanguard in terms of fees and costs and features. Simply put, TD Ameritrade does provide better initial advantages, but Vanguard can give you the most benefit in the long run.

Commission Fees

The first thing that we are going to compare between TD Ameritrade vs Vanguard is their commission fees. This is an important factor especially for people who are going to trade actively. A commission fee will directly reduce the total profit that you can get from each trade, so make sure that you are choosing a brokerage platform that is the most suitable. However, this becomes less of an issue if you are planning to trade only commission-free funds, which we will discuss further in the next section.

TD Ameritrade is great because their commission fees are relatively low. The fee for stocks and ETFs is $9.99 per trade, and the fee for stock options is $9.99 + $0.75 per contract. Meanwhile, the fee for mutual funds is pretty high, $49.99 per purchase. See also: Scottrade vs TD Ameritrade.

On the other hand, Vanguard has a lower fee for stocks and ETFs, which is $7.00 per trade. However, for stock options, the fee is $20.00 + $1.00 per contract. The fee for mutual funds is $35.00 per purchase.

But before you decide the winner, note that Vanguard also comes with some offers that can greatly reduce your expenses. If you have at least $50,000 in Vanguard, you can enjoy much lower commission fees of $7.00 + $1.00 per contract for stock options and $20 per purchase for non-Vanguard mutual funds.

Commission-Free Funds

Both TD Ameritrade vs Vanguard comes with thousands of funds and various no-load no-transaction-fee (NTF) mutual funds. Both brokerage platforms also offer commission-free ETFs. If you are planning to trade only such kinds of funds, you don’t really need to worry about possible additional fees.

TD Ameritrade has more choices when it comes to mutual funds and commission-free ETFs. TD Ameritrade has more than 11,800 mutual funds, with more than 3,800 NTF mutual funds. In addition, it also has 101 commission-free ETFs from multiple sponsors, including iShares, VanEck, and Vanguard. TD Ameritrade does not have all Vanguard ETFs, but it does have the largest and the most popular ones.

On the other hand, Vanguard has more than 7,500 mutual funds with more than 1,300 NTF mutual funds. Vanguard has 70 commission-free ETFs, all of which are sponsored by itself. Obviously, Vanguard is the only place where you can find all Vanguard ETFs being commission-free.

However, keep in mind that the number of choices is not a really big factor for determining the quality of the platform. A list of funds that you’ll never buy is worthless. So, make sure that the platform of your choice does have the funds that interest you the most.

International Stocks and ADRs

If you want to develop a truly diversified portfolio, it is a great idea to invest in international companies. Investing in companies that operate all over the world will make your portfolio very diversified. In this case, both TD Ameritrade and Vanguard enable you to invest in foreign companies, but Vanguard is the only one that allows you to trade in international stock markets.

TD Ameritrade provides ADRs as well as mutual funds and ETFs of foreign companies. However, it does not give you direct access to trade in international stock markets. On the other hand, Vanguard provides ADRs, mutual funds and ETFs of foreign companies, and direct access to trade in international stock markets. So, with Vanguard, you can send an order to the London Stock Exchange to buy a company’s stock.

However, note that trades in international markets have higher fees. Vanguard charges a processing fee for each of such orders. More often than not, it is better to trade locally using an ADR instead of trading internationally. It will cost you fewer additional fees.

Minimum Deposit for an IRA

If you want to open an individual retirement account (IRA), both TD Ameritrade and Vanguard are great choices. This is because neither of them requires a minimum deposit amount in order to open an IRA. So, you can get started with whatever money that you have. Still, there are a few factors that you have to consider when choosing between TD Ameritrade vs Vanguard.

Usually, mutual funds have their own minimums. They may range between $1,000 and $3,000. Vanguard has a minimum of $1,000 for target-date mutual funds. Most other platforms carry a minimum of $3,000. Nevertheless, if you want to start with less amount of money, individual stocks and ETFs make better choices, as you will only need to buy one share in order to put an investment.

Research Tools

Finally, both TD Ameritrade and Vanguard come with stock and mutual fund screeners that enable you to sort and filter potential investments quantitatively. Both platforms also provide multiple third-party research tools, including from Standard & Poor’s and Thompson Reuters. Both platforms also have their own proprietary tools.

TD Ameritrade comes with a tool which allows you to see other people’s comments about companies on social media. This is quite useful when you want to learn more about a company. On the other hand, Vanguard comes with a useful portfolio analysis tool which helps to reveal potential risk and return.

Both TD Ameritrade and Vanguard are also available as mobile apps for Android and iOS. Interestingly, Vanguard’s iOS app has a much lower score.

TD AmeritradeVanguard
- $9.99 per trade (stocks and ETFs), $9.99 + $0.75 per contract for options, $49.99 per purchase for mutual funds- $7.00 per trade (stocks and ETFs), $20.00 + $1.00 per contract for options, $35.00 per purchase for mutual funds
- Good for beginners and low-budget investors- Much lower fees and better benefits if you have at least $50,000
- Has ADRs and stocks/ETFs of foreign companies- Has ADRs, foreign stocks and ETFs, and access to international stock markets
- Has a social media tool for research- Has a portfolio analysis tool

Conclusion

If you have a limited budget to start your investment and you want to trade stocks and options, TD Ameritrade is probably a better choice. The commission fees for stocks and options are lower. In addition, TD Ameritrade is also a good place to find a variety of NTF mutual funds and commission-free ETFs. However, if you have prepared at least $50,000 (or if you are confident that you will get such amount of money), Vanguard makes a better choice. Vanguard is the way to go if you want access to international stock markets.

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