Online brokers come in many different shapes and sizes. And, with so many different online brokers available on the market today, it can be hard to choose which one is right for you. Here at Investing Simple, our goal is to break down the most popular online brokers to supply you with the information necessary to make the crucial first step of your investing journey: opening a brokerage account!
We're going to be taking a close look at the features, fees, pros, and cons of TD Ameritrade vs Betterment, two of the most popular online brokers today. Let's get started!
TD Ameritrade Review 2021: Best Brokerage Platform?
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Betterment Review 2021: Is This The Best Robo Advisor?
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TD Ameritrade is an online broker that offers stock, ETF, and options trading on a world-renowned trading platform called ThinkorSwim. While maintaining low costs is TD's main interest, its features do not fail to impress. We'll get into some of its features later on but first, let's take a look at TD Ameritrade's mission statement to gain a better understanding of the company's goals.
TD Ameritrade's mission is for all of its users to be financially free. This mission is reflected in their action as well! As the saying goes, actions speak louder than words, and TD Ameritrade has acted in the best interest of its users by supplying them with some of the best features in the brokerage industry. Let's take a look at some of them now!
The features of TD Ameritrade truly makes the online broker shine. Remaining competitively priced, TD Ameritrade offers many unique tools on its trading platform to optimize the experience for all of its users.
It would be impossible to talk about the features of TD Ameritrade without mentioning its $0 commission policy on stock and ETF trades. You may think, "$0? There's no such thing as a free lunch!" Well, I can tell you from personal experience that TD has been serving up free commission trades since early October, 2019 and has shown no signs of stopping. And to make things even better, you can execute these trades on ThinkorSwim, TD Ameritrade's world-renowned trading platform or mobile app.
TD Ameritrade's app has all of the features of its website, at the convenience of your smartphone. Compatible on both Android and IOS devices, you can download the TD Ameritrade app completely free of charge! Look at equity research, check your trade history, make a trade, and so much more on the TD Ameritrade app!
And if one app wasn't enough, TD Ameritrade created a second that mimics its ThinkorSwim trading platform. The ThinkorSwim trading platform was created for traders to utilize graphing tools and technical analysis to help map out trades. You can access the ThinkorSwim platform on Windows, Mac, or through the app.
If you have any familiarity with investing, you probably have heard of dividends. If you have not, here's a quick summary. Companies have the option to pay their shareholders cash dividends on a per-share basis. These dividends can be used in one of two ways.
Firstly, you can decide to take your dividends and pocket them (in which case they will be taxed as ordinary income), or you can reinvest those dividends back into the company. Not all brokers offer this reinvestment program, but for those interested, TD does! You can elect to reinvest all of your dividends back into your dividend stock through TD's Dividend Reinvestment Program! This feature is perfect for those who have a long time-horizon and are looking to dollar-cost average their way into investments.
TD Ameritrade does its best to keep fees low for its users. Nevertheless, you should still be aware of some fees that the broker charges if you are interested in opening an account. Here are some of the main fees you should be aware of.
I mentioned that TD Ameritrade offers $0 commissions on stocks and ETFs, but options are a little different. Options are bought and sold on a per-contract basis, and TD Ameritrade's fee for options is $0.65 per contract. While this fee is still competitive with some other online brokers, you should still be aware of if you are interested in trading through TD Ameritrade.
Margin fees on TD Ameritrade are slightly more complicated, as the fee you pay is determined based on how much margin you are deciding to take out. The effective rate for margin below $10,000 on TD Ameritrade is 9.50% versus margin between $250,000 and $499,999's rate of 7.50%. The interest rate that you pay on margin scales downward as your margin number increases. Therefore, the more you take out the less you pay!
Betterment doubles as an online broker and financial advisor, with its motto to "make more of your money." They are set up as a traditional robo-advisor which means they are an all-in-one solution for automating your investing.
You won't be buying individual stocks and ETFs on the platform, instead, you'll fill out a questionnaire on your risk tolerance and investing goals and Betterment will build a portfolio that matches your personal situation. In the past, you had to pay a financial advisor a hefty fee for this service, but Betterment has made this level of care accessible to a wider audience at a much lower price.
Spending, saving, investing, and retiring is made that much easier when using Betterment's service through the various features and initiatives the company has taken. Before we get into some of the most important ones, however, let's start by taking a look at the company's mission.
Betterment's mission is for its users to make the most of their money. By offering advice to you and providing the benefits of an online broker, Betterment is doing its best to act on this mission. Now let's take a deeper dive into Betterment and gain a better understanding of its features!
Betterment's features are vast. From saving to investing, Betterment delivers. Let's start by covering one of Betterment's most well-regarded features, its mobile app.
Betterment's app is supported through both the Apple and Google Play Stores, meaning it is compatible with iPhone and Android devices. On the Betterment app, you will gain access to its fantastic features all at the convenience of your fingertips! And to make things even better, this app will cost you a whopping... wait for it. Wait for it. $0! That's right, this app is completely free!
Betterment offers a checking account and debit card for users of its services. There are no fees associated with Betterment Checking, and you can receive cash-back rewards for using it! With Betterment Checking you can feel safe and secure, especially considering the company is secured under the Federal Deposit Insurance Corporation!
The FDIC is a depository agency that secures up to $250,000 of your cash in a bank account. Because Betterment checking accounts have FDIC insurance, you can feel safe depositing your hard-earned cash into a Betterment checking account!
However, your investments with Betterment will not be FDIC insured. This is because the FDIC only insures bank accounts and not investment accounts. Your investments will be covered by SIPC insurance which is essentially the investment account equivalent.
You can save with 6x the average saving account interest through Betterment's Cash Reserve! Yielding 0.4% APY, Betterment outshines many other brokers (including TD Ameritrade) on its savings program. If you constantly have extra cash laying around in your savings account, Betterment may help you gain more!
Betterment offers stocks and ETFs through its highly automated investing services. You can choose exactly what you are looking to invest and save for, and then Betterment will craft a portfolio given these wishes. Whether you are looking to invest for retirement, open a trust, invest to pay for education, and so many more options, Betterment will have a plan for you.
Betterment's fees vary depending on what features you are interested in accessing. Here is a breakdown of the three plans that Betterment offers to its users to paint a clearer picture.
This plan lets you open up a Betterment account for no excess fees. With a $0 minimum balance, a no-fee checking account, ATM fee reimbursement, and FDIC-insurance up to $250k, you will gain access to Betterment's most basic services.
This pricing plan will cost you 0.25% of you account balance annually. Again, with no account minimums, this may be a great choice for those who have smaller accounts. This pricing plan gives you access to all of the features aforementioned with the addition of Betterment's investing options and tax-incentivized services.
The most expensive pricing option for Betterment is its 0.40% annual fee and $100,000 account minimum. This plan lets you use all of Betterment's features with the exchange of Betterment taking $4 per $1000 in your account annually. You can invest, save, spend, and retire with this pricing option!
TD Ameritrade and Betterment are two of the most popular brokers on the market right now. In my opinion, you can't go wrong with either. It really depends on what you individually are looking for in an online broker. If you are looking for a way to automate your investing and a high-yielding savings account, Betterment may be a better option for you. If instead, you are looking to make trades through your broker and are interested in a tactical trading platform, TD Ameritrade may be best for you.
It all comes down to what you want and we cannot make that determination for you! We hope that this information acts as a roadmap as you choose your online broker. And remember, there is no wrong choice. Assess your goals and make the choice that suits your tastes and preferences best.
Thank you for reading!