Getting started with investing can be a daunting task for many. With so much conflicting information regarding different brokerage accounts, it can be difficult to figure out which may be the best fit for you.
As firms move to more readily available applications for the average person, the barriers to entry for retail investors have greatly diminished over the past decade. Now, you can simply sign up with your phone to begin investing.
Online brokerages have come a long way in recent years, with one of the biggest changes being a move to commission-free trading.
These advancements and changes in brokerage functionalities have attracted a lot of attention from investors. But, where do you start? How can you tell which app or service is the best for you?
In this article, we will be providing analysis on two brokerage services; Merrill Edge and Betterment.
Our aim here is to provide clarity on some of the most frequently asked questions surrounding them. It is never too late to begin your journey down the road of saving, accumulating, and building your wealth. We hope that this article can help you decipher what vehicle is right for you.
Merrill Edge is the online brokerage service associated with Merrill Lynch and an arm of Bank Of America. The firm is headquartered in New York City and has been a trusted bank since 1914.
Merrill Edge is an online brokerage service that is committed to providing self-directed investing services to all of its clients. The main goal of Merrill Edge is to offer online streamline investing as well as other guided alternatives to suit the investor’s goals.
Offering $0 brokerage fees on online stock, ETF, and options trades, Merrill Edge has positioned itself at the forefront of brokerage services offering a low-cost way for clients to finance their investment ideas and goals.
The Merrill platform provides traders with a state of the art trading platform. This helps increase their efficiency through available real-time data, interactive charting, and gives them a step up on the competition.
For an annual fee of 0.45%, Merrill offers the ability to have your portfolio managed by a professional.
The minimum investment in this type of portfolio, however, is $5,000. This service should appeal to those who are not interested in making their own investment decisions and feel more comfortable with a professional managing their money.
This is similar to Merrill’s Guided Investing Service, but with the guidance of a professional to discuss your investment goals and priorities. The annual fee for this service amounts to 0.85% annually with a minimum investment of $20,000.
Merrill Lynch prides itself on the cutting-edge research that it provides to clients.
This award-winning research helps clients decipher market uncertainties and guide the decision-making process that all retail investors face when investing. Merrill also provides its investors with access to Bank of America’s Global Research through its Merrill Edge MarketPro(®) platform.
Merrill Edge provides top of the market customer support 24/7.
This live support can provide a vital tool for investors to tap into when getting started with the service.
Clients receive various benefits and incentives to save through several Merrill directed programs.
Merrill offers different cash rewards as you continue to increase your account size. That is, the more money you put into your account, the greater the cash reward that Merrill offers.
On top of the extensive array of features that Merrill Edge offers, the broker has developed a mobile app to organize them all! Merrill Edge's motto "Find what you want faster" is only reaffirmed by its customizable dashboard. And to make the trading process easier, interactive charts and sector heat maps right at your fingertips! The mobile app can be downloaded for free on the Google Play and App Store.
While Merrill Edge does have many exceptional features, there are still some fees that you should be aware of when looking to open an account with the broker.
Representative Assisted Fee
While stock & ETF trades are free to make on your own with Merrill Edge, there is a $29.95 fee for making trades through a live representative. If you are someone who likes to have a second opinion when making trades, make sure to keep this fee in mind!
You can make option trades through Merrill Edge for $0, but a contract will tack on $0.65. This fee also increases if you are looking for a representative-assisted options trade, which will run you $0.65 plus a $29.95 fee for a financial professional's opinion.
If you decide to "lever up" your investments, you will need to borrow money from your broker. This is called "investing on margin." These borrow funds do not come without a cost, however, and you will need to pay interest on this money. The table below shows Merrill Edge's margin rates depending on the amount you borrow.
Loan Amount Margin Rate Effective Rate $100,000+ For balance tiers $100K and above, call 855.332.5920 for more information about our latest rate offers. N/A $25,000 - $99,999 Base + 2.250% 7.500% Less Than $25,000 Base + 3.375% 8.625%
John Stein, Betterment’s founder, believes that money should work for you just as hard as you work for it.
His goal and reason for creating the app is to combine proven investment strategies with cutting edge technology in order to drive down costs and help investors achieve their goals. He created this Betterment with the goal to meet and exceed those measures.
Betterment is striving to empower its clients to make the most of their money. They are acting as a bridge between those in the Financial Services Industry and people who want to change their wealth habits.
Betterment's features are extensive and especially geared to the passive investor. Through a highly digitized platform, Betterment is able to introduce highly automated features including an automated portfolio! Let's take a closer look now.
Betterment invests your money for you. You choose your investment goals and time horizon, and Betterment will automate the rest of the process for you. With Betterment, they choose the investment for you since this is a robo-advisor only. You cannot pick and choose individual stocks.
Betterment offers a high-yield cash account as well called Betterment Cash Reserve. This service provides investors with the option to keep their money in their accounts idle while still accruing high amounts of interest. In other words, this is essentially a zero-risk way to earn interest on your money.
Betterment offers retirement accounts as well, one being its IRA. a Roth IRA (Individual Retirement Account), let's you save with tax-advantages for your retirement. The one caveat to a Roth IRA account is that your tax-incentivized cash can only be accessed after the age of 59 1/2. While the money is not locked into the account per say, if you want to access it you will have to pay a fee. While this account encorages saving for retirement, you should make sure that any money going into a Roth IRA account is money that you are willing to put aside for the long haul.
On top of Betterment's fantastic features comes an easily navigable mobile app. Betterment's app is easy to use and extremely beginner-friendly. Betterment is perfect for newcomers to the financial markets and those seeking a highly simplified investment experience.
Betterment offers different rates and management fees based on the plan that you decide to engage in. These plans are laid out below.
This package includes portfolio automation, tax efficient management, investment advice, and cutting edge customer support. The annual fee for this plan is 0.25% and there is no minimum balance requirement.
This plan includes all of the benefits of the Digital plan, plus some.
The key benefit here is access to Betterment’s team of financial professionals and licensed financial experts. This can be great for the investor who wants to know more about the decisions that Betterment is making with their money. This also includes increased monitoring of portfolio plan by licensed financial experts.
The annual fee for this portfolio is 0.40% with a $100,000 account minimum.
Betterment not only gives you access to the financial markets, but also provides educational articles that are sure to increase your financial knowledge. As preached by veteran investors like Warren Buffett, your biggest asset is your mind. In order to invest, you need to learn about markets, and Betterment gives you the opportunity to do this through the educational articles that it offers. And what is even better, they are accessible for no extra cost.
Betterment offers no withdrawal fees, making it cheap and easy to access your money.
Both Merril Edge and Betterment offer attractive ways to grow your wealth. The real debate and decision comes down to your personal investing style and goals.
Do you have interest in personal investing and making your own decisions on stocks and other financial instruments? If so, Merrill Edge may be a great option. It allows its clients to initiate trades with $0 brokerage fees and provides research from one of the world’s most prestigious banks, Bank of America.
On the other hand, if you are less confident in your personal ability to choose the right investments, and feel like it is a better choice to “leave it to the professionals," Betterment is a fantastic option. Just make sure you realize the fees are mostly for financial planning and investment management.