TD Ameritrade Review 2021: Pros, Cons, and Fees of the Online Discount Broker
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Investing is an important part of your financial life. In fact, it’s one of the best ways to save and grow your money over the long term.
Traditional brokerage companies like TD Ameritrade give you some of the most flexible investment options out there, allowing you to invest in a variety of assets using different types of accounts.
In this review, we’ll discuss the benefits and drawbacks of working with TD Ameritrade and whether it’s the right brokerage firm for your needs.
What is TD Ameritrade?
TD Ameritrade is a large brokerage firm that offers many different types of accounts, stocks, ETFs, mutual funds, and more. They have brick-and-mortar offices and many different online tools and educational resources. They're a well-known brokerage firm with a wide array of offerings and a positive reputation.Show Hide more
- Wide range of options
- Diverse trading platforms
- Lots of trading tools, education, and access to research
- No maintenance fees
- Good customer support
- Trades are more expensive than some other competitors
- Some short-term trading fees (pay attention to the fine print when selling)
TD Ameritrade is an Omaha, Nebraska-based brokerage firm that’s been around since 1975. It positions itself as a pioneer in the brokerage industry, touting itself as one of the first companies to offer discount-rate trade commissions and use technology to make investing faster and easier. However, they do operate approximately 250 branches, so customers have the option of in-person assistance in addition to the web-based and app platforms.
Known for its exceptional customer service and powerful research tools, as well as accounts that charge no maintenance fees and no minimum opening balances, TD Ameritrade has received multiple awards from Stockbrokers.com, including #1 overall broker.
It has a B rating with the Better Business Bureau and a 4.5 of 5-star rating in the Apple App Store. Android users rated the app a little lower, giving it a 3.5 of 5-star rating. Some customer reviews of TD Ameritrade state that the Android app is a little glitchy and the options can be overwhelming for beginners. However, overall, users report loving the easy-to-use trading platforms, low fees, and multiple options for investing and trading.
To protect customer data, TD Ameritrade uses firewalls and 128-bit encryption. They also train their staff to detect fraudulent activities and restrict employee access to customer data. Users can opt for security questions or one-time codes to protect their accounts, and TD Ameritrade offers free downloads of malware scanning software.
Below is a summary of the key features and fees of TD Ameritrade.
|Commission fees||$0, except for options ($0.65 per contract)|
|Securities||ETFs, Stocks, Bonds, Mutual funds, Options, Futures, Forex, and Cryptocurrency|
|Trading platforms||TD Ameritrade website or thinkorswim; mobile apps also available|
|Fees and features are accurate as of October 2020.|
Who is it best for?
TD Ameritrade is a solid choice of brokerage for beginner investors. Its lack of account minimums and $0 commissions make it great for people who are just starting out. More seasoned investors can also benefit from their extensive research tools and multiple trading platforms.
Opening an Account with TD Ameritrade
Opening an account with TD Ameritrade is simple. You’ll need to provide a username, password, and some personal information. This information will be used to prove your identity so that you can begin using their services
Once you’ve created your profile, you’ll link a checking account to your TD Ameritrade account. This is the account that you will use to fund your investment purchases. If you ever make withdrawals, this is the checking account that the money will be sent to.
There are no minimums required to open an investing account with TD Ameritrade. However, for options and margins trading, you will need $2,000 in your account. You can fund your account with bank or ACH deposits, wire transfers, check deposits, or account transfers. Note that there is a $50 minimum for electronic funding.
Types of TD Ameritrade Accounts
When deciding to use TD Ameritrade, users can choose from five different types of accounts.
This is their most common and flexible type of brokerage account and includes individual, joint, tenants in common, and guardianship or conservatorship options. The type of account you’ll want to open depends on how many people will own the account and what interest or ownership each person has.
Each type of account has different client profiles available, but all come with no minimum deposit and require a $50 minimum for electronic funding. You can read more about the Standard accounts by visiting the TD Ameritrade website.
Planning for your future is essential, and TD Ameritrade offers a number of retirement accounts to choose from. Options include a Traditional, Roth, SEP, or Rollover IRA, Solo 401(k), or pension or profit plan.
You can also open a SIMPLE IRA. Each type of retirement account comes with its own funding and withdrawal rules, so make sure you read those carefully before selecting an account.
If you’d like to save for your child’s education, you can do that with a TD Ameritrade education account. You can choose between a 529 plan, a Coverdell Education Savings Account, or Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA).
Before deciding which account to open, make sure you fully understand the contribution and withdrawal limits and what types of expenses each one covers.
TD Ameritrade’s specialty accounts are mostly targeted towards business owners. This is different from many of its competitors, who only offer investment products and accounts for individuals. Specialty accounts include:
- Limited partnership
- Investment club
- Sole proprietorship
- Limited liability (LLC)
- Corporate (profit or nonprofit)
- Small business plan
Depending on your needs, it might be worth checking out some of these features to help you at tax time and throughout the year.
According to their site, “Managed portfolios offered by TD Ameritrade Investment Management, LLC, are goal-oriented portfolios built on recommendations from the professionals at Morningstar Investment Management, LLC.” Customers can choose from Essential portfolios, Selective portfolios, and Personalized portfolios.
Depending on which type of managed portfolio you choose, you will need to meet account minimums and pay advisory fees. Selective and Portfolio fees vary, but the Essential portfolio comes with a flat 0.30% advisory fee.
Investing with TD Ameritrade
Beyond funny Super Bowl commercials, TD Ameritrade is known for its various investment options with $0 commissions on ETF, stock, and options trades. You can choose to conduct your trades via two different platforms, TDAmeritrade.com or thinkorswim. Both have desktop and mobile options.
Investors can also place trades through direct messaging on social media platforms including Twitter, Facebook, and Apple Business Chat. This is a good choice for users who are often mobile but still want to conduct trades throughout the day or while they’re traveling.
Make sure you review the entire fee schedule before signing up for an account. This way, you’ll know exactly what you’re required to pay for and you’re not surprised when you are charged a fee.
For those just getting started with investing, Exchange-Traded Funds (ETFs) might make the most sense. And by investing with ETFs through TD Ameritrade, you’ll get commission-free trades, no extra fees, and the thinkorswim trading tool. There’s also an extensive resource library to help you make informed decisions, and you have the ability to trade select securities on your schedule.
TD Ameritrade offers more than 120 equity-focused ETFs, more than 70 bond ETFs, and nearly 100 international ETFs, making it easy for you to design a diversified portfolio without paying a single commission fee. Many of these ETFs are low-fee index funds, which means you can save a lot of money on management fees.
If you’re interested in trading stocks through TD Ameritrade, you have two choices: the investing web platform or the thinkorswim platform. The former is for more beginner investors while the latter offers more robust tools and options for experienced investors.
Both platforms come with no subscription or platform fees along with intelligent order routing and access to free independent research. However, unlike some of its competitors like Schwab, M1 Finance, and Robinhood, you can’t purchase fractional shares when trading with TD Ameritrade. You must buy whole stocks.
Trading options via TD Ameritrade offers many of the same features as ETFs and stocks, including access to resources, multiple platforms, and $0 commissions and fees. However, there is a $0.65 fee per contract, and that fee is tacked on to other available services with options trading including broker-assisted trades.
One interesting feature of the options trading with TD Ameritrade is the nickel buyback. This allows customers to buy back single order short option positions without any commissions or contract fees if the price is $0.05 or less.
Investing in mutual funds with TD Ameritrade is easy. According to the site, you’ll have access to over 13,000 mutual funds from leading fund families and a broad range of no-transaction-fee funds. It also states that it “covers a range of investment objectives, philosophies, asset classes, and risk exposure,” so you can use their resources and tools to choose funds that match your goals.
You can visit the website to learn about all the features of mutual fund trading, including the search tools, side-by-side comparison of various funds, fund profiles, and reviews so you can make the best selection for your needs.
Other investing tools
TD Ameritrade customers can also invest in cryptocurrency, bonds and CDs, futures, forex, annuities, and other choices. As with any type of investment, make sure you do your research. This will help you understand the risks, requirements, and fees associated with those products.
You can do your own research or take advantage of TD Ameritrade’s research tools and library of educational resources. Some of their more robust tools include:
- Market Edge, which offers technical analysis and market news that you can use to get up to date on individual stocks or markets as a whole.
- The ETF Market Center, which uses a variety of settings to help you screen the ETFs that best meet your needs.
- The Social Signals tool, which taps into social media platforms like Twitter to help you get a feel for public sentiments surrounding the market and various companies.
TD Ameritrade also offers a full course catalog on topics including retirement planning, income investing, and trading options. Additionally, customers can use webcasts, the Talking Green podcast, and in-person workshops and events to educate themselves.
How TD Ameritrade Compares
When looking at TD Ameritrade in comparison to competitors like Schwab, Robinhood, and M1 Finance, users will find that TD Ameritrade stands out in a number of areas.
Investment options: While TD Ameritrade and its competitors both have low-cost or commission-free trades, TD Ameritrade has a larger selection for investment products like mutual funds. They also offer a broader scope of investments, not just limiting customers to stocks or ETFs.
Virtual trading simulator: Another feature that sets TD Ameritrade apart from its competitors is the paperMoney® virtual trading simulator. Through this desktop-only platform, users can test their trading strategies in simulated situations using $100,000 in practice “money”. This platform allows new investors to get a handle on what’s involved with stock market trading while also allowing experienced investors to try new strategies like investing in options, all without spending actual money.
Regardless of your investing experience, it can be an excellent risk-free educational tool. Note, though, that you must be an existing customer to use it, or you can register for an account.
Reasonable broker-assisted trade fees: While TD Ameritrade used to have higher-than-average broker-assisted trade fees, they are currently at $25, putting them more in line with their competitors.
TD Ameritrade Review Summary
TD Ameritrade is a full-featured brokerage account that offers everything you need to execute a solid investing strategy, along with the research tools to help you make informed decisions. Customers who value powerful research tools and access to fee-free trading options will benefit the most from using TD Ameritrade.
The lack of account minimums and extensive educational resources also makes it great for novice investors. Additionally, its powerful research tools make it useful for seasoned investors as well. However, this is a self-directed investing platform. Those who want more automation tools might be better served using a robo advisor.