What TD Ameritrade is
TD Ameritrade has been in the discount brokerage space for long time. It launched its internet-based trading platform in 1995 – and before internet trading was common, it developed a touch-tone order entry system in the 1980s.
It's no surprise, then, that TD continues to be one of the leaders in democratizing all asset classes for the "little guy." Its pricing structure may not be best in the market, but a massive array of commission-free ETFs makes up for some of that shortfall.
Furthermore, robust educational resources and a user-friendly interface provide powerful potential without making the platform inaccessible to newcomers.
If you want depth to your broker but don't want to just get tossed into the ocean without a life vest, TD has you covered.
What TD Ameritrade costs
Admittedly, $6.95 per trade is at the high end of the marketplace for online brokers. And with only hundreds of no-cost mutual fund offerings (some providers offer several thousand options), there are certainly places where TD can improve on costs.
But at present, it's hard to find any other broker that offers more commission-free ETF options than TD. This includes popular broad market funds from major firms like Vanguard as well as niche funds from smaller providers if you want a tactical bet on something much more narrow – like the First Trust Global Wind Energy ETF (FAN).
With TD's suite of exchange-traded funds, you don't need access to thousands of additional mutual funds that don't really provide any new strategic opportunities. TD knows that the world is moving away from mutual funds and toward ETFs, so it has made the decision to discount what people are increasingly interested in.
Be careful, however, because trading quickly in and out of a theoretically commission-free ETF can still lead to charges. The fine print reveals that typically you have to hold an exchange-traded fund at least 30 days to be truly free of any charges.
In other words, if you're trading actively and at volume – either in short-term ETF positions, individual stocks or options – the fees may make TD cost prohibitive versus platforms that offer a much better pricing structure.
What TD Ameritrade offers
This cost structure has its flaws but shouldn't scare you. Because in many ways, the broker is designed to take relatively inexperienced investors and hold their hands until they are ready for more sophisticated strategies.
In short, it's all about service and usability.
What TD Ameritrade lacks
The biggest drawback for TD Ameritrade is the cost structure. At $6.95 a trade, it's hard for active investors to justify this brokerage platform even considering all the depth it offers.
Of course, it's because of this slightly higher cost structure that the broker can afford such a robust suite of tools and training – so don't mistake its commissions for a reflection that TD doesn't care about its customers. You're getting a lot for your money – and more features are constantly coming online, including a live daily broadcast during market hours that launched last year as the TD Ameritrade Network.
The philosophy is clearly about helping investors grow and thrive. If you're a rookie investor, this much care and attention is great. You're not placing that many trades, so you get great value in return for the extra few dollars you're paying for each transaction.
That said, if you trade at any volume and are already very comfortable with the markets, it's hard to justify the expense.
TD Ameritrade is best for...
Disinterested investors who want to simply buy and hold mutual funds forever may not find the best structure on TD. Nor will veterans who trade frequently, and thus are more sensitive to costs.
But if you're an investor who wants to get serious and learn more, with the flexibility to access more sophisticated tools when you're ready, TD Ameritrade shines. The entire platform seems designed to make all markets and asset classes accessible, and to build the confidence of its users over time.
This is a compelling proposition because most investors fall into this category. It's irresponsible to be a lazy investor, and many folks who consider themselves Wall Street pros still have much to learn.
There's something to be said for paying a small premium in exchange for better customer service and a higher-quality product. This is particularly true with something like investing, where even minor decisions can be stressful and the intangible costs of your emotions cannot be discounted.
