Vanguard vs. TD Ameritrade

Retail investor using a mobile trading app

Editor’s Note: Schwab acquired TD Ameritrade in 2019 and has since migrated TD Ameritrade accounts onto its own platform. Former TD Ameritrade clients now have access to the thinkorswim trading platform and other educational resources through Schwab.

As you begin investing, you’ll likely hear about two popular online investing companies: Vanguard and TD Ameritrade. These are two of the largest brokerage firms in the U.S. While the companies have a few similarities, they each cater to vastly different investors. In either case, it’s wise to work with a financial advisor to develop financial goals and realistic steps to reach that goal. Here is what you need to know before deciding to work with Vanguard or TD Ameritrade.

Vanguard vs. TD Ameritrade

Both Vanguard and TD Ameritrade offer robust online brokerage solutions to investors who are looking for some guidance while also investing on their own. Both allow investors to buy and sell a variety of investment types, from stocks to mutual funds. With either platform, you’ll have access to a very similar assortment of funds and stocks. In fact, you can even buy many of Vanguard’s funds through TD Ameritrade.

The best online brokerage for you is going to depend on more than just the types of available investments. You’ll want to analyze how much help you need to make investment decisions, how much each brokerage will charge you in fees and what their overall experience is like. Everyone is likely to have a different answer as to what is most important to them. With that said, let’s analyze how each option stacks up against one another.

Brokerage Fees

There are usually four types of fees to look out for when choosing a trading platform. You should look out for these when evaluating any investment or trading service:

Trading Fees: Any fixed charge attached to each trade that you make. This can come in the form of a flat fee or what’s known as the “spread.” This is when your broker charges you based on the difference, if any, between the buying and the selling price of an asset.
Trading Commissions: This is when a broker will charge you a percentage based on the volume or value of each trade.
Inactivity Fees: Any fees that the broker charges you for not trading, such as for keeping money in a brokerage account.
Non-Trading/Other Fees: Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account, taking money out of it or signing up for additional services.

In recent years, online trading platforms have had to be increasingly competitive. Therefore, many have dropped or reduced their fees for certain kinds of trades.

Account Trading Fees

Both Vanguard and TD Ameritrade have a $0 account minimum. Additionally, they allow for $0 fees for trading stocks and exchange-traded funds (ETF). However, outside of these necessary trades, their fee schedules are different.

Options Trading Fees

Vanguard charges a $1 fee for all options contracts traded by clients with less than $1 million invested in Vanguard ETFs and mutual funds. For clients with between $1 million and $5 million invested in Vanguard ETFs and mutual funds, the firm offers the first 25 trades for free and charges $1 per contract thereafter. Finally, clients with more than $5 million invested in Vanguard ETFs and mutual funds, get 100 options trades for free, but pay $1 fee per contract after that.

TD Ameritrade charges $32.50 for 50 options contracts. Per-contract options commissions are $0.65 when made online. All broker-assisted options, stock and ETF trades cost $25. Users can trade no-transaction-fee mutual funds without commission, but no-load mutual funds cost $49.99 to trade. TD Ameritrade does not charge for online trading of stocks, mutual funds and ETFs.

Services and Features

Vanguard caters to buy-and-hold investors who do not need streaming data and up-to-date charts, technical indicators and more. Therefore, their desktop services and features are relatively limited. The buy-and-sell process on the desktop app can be relatively cumbersome. Additionally, their data has a short delay of 20 minutes when making a trade. This delayed trading fits with building a long-term portfolio rather than doing day trading.

TD Ameritrade has an online platform called thinkorswim that provides users with advanced charts and tools to evaluate their potential trades. Their website follows the market in real time and helps users master their trading skills through charts that show trends and more. Users can also use the online platform to make trades, customize order templates and more.

Mobile Experience

Vanguard’s online mobile app offers quotes and trading options. Users can use the app to monitor their positions, analyze their portfolios, read up-to-date news about the market and place some orders. However, due to Vanguard focusing on buy-and-hold investors, the app is not as comprehensive as other online brokerages.

TD Ameritrade has two mobile apps. The first, TD Ameritrade Mobile App, is designed for active traders and allows for real-time data and asset trading. The second, thinkorswim Mobile, offers to chart, watch lists and trading.

Vanguard vs. TD Ameritrade: Who Should Use It?

Vanguard is generally designed for buy-and-hold investors. Therefore, if you have a long-term investing strategy that does not include frequent trades, Vanguard can be the best option for you.

TD Ameritrade’s mobile and desktop platforms have robust information for users to research the latest trends and information, allowing them to generally make the best buying and selling decisions. TD Ameritrade is typically the better option for people that intend to buy and sell often.

Bottom Line

Both TD Ameritrade and Vanguard are online brokerages that have proven track records. However, different users might use each company for different reasons. TD Ameritrade has more robust reporting software and is better for people that are making frequent trades. Vanguard is better for buy-and-hold investors and has less real-time information available to users.

Tips for Investing

All investing should start with a carefully thought-out financial plan and corresponding investment strategy. Therefore, you should consider talking to a financial advisor for expert help in both areas. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Now that you know how these platforms stack up, it’s a great time to learn more about them. In our dedicated brokerage reviews, we go into the details on both Vanguard and TD Ameritrade.