TD Ameritrade vs. Robinhood

Wall Street Survivor

While they both have green logos, they’re quite different platforms. Robinhood is the young incumbent and TD Ameritrade is a name that has been around for decades.

But you can’t simply write off TD Ameritrade as a giant investor stuck in the past.

We’ll see that they actually were on the cutting edge of phone and internet trading back in the day.

But have they done enough to keep up with young and hungry investing platforms, like Robinhood?

Meanwhile, Robinhood’s flashy colors and simple UX make it seem like something that you want to be a part of.

But can you even make money on it?

What is Microinvesting?

Once upon a time, investing was something that rich people did after they had paid off their house and fully funded their emergency fund.

Nowadays, millenials and younger generations want to make investing a part of their financial experience earlier in life.

Companies like Robinhood have seen the opportunity to capture a younger audience who expects financial solutions to work on their phone and on the internet with ease.

Swooping underneath older investment platforms, Robinhood quickly grabbed 10M+ users.

But Robinhood and other startup financial solutions rely on more than just cool graphics and catchy logos.

They rely on microinvesting, the concept that you can join the wheel of the stock market with only the price of lunch.

Instead of sinking thousands into a mutual fund, you can actually bet on stocks that you like and be a part of companies that you love, with only $ 5.

Not to be outdone, many giants in the industry, like TD Ameritrade, are making changes to keep up with the new trends.

They are looking to capture a younger audience and go head to head with companies like Robinhood for the pockets of the younger generations.

Robinhood’s Story

Robinhood started when a couple of Stanford roommates, Vlad and Baiju, moved to New York and made a life building software companies that helped larger firms hedge their stock funds.

During this experience they started to realize that the average American can be charged around $ 10 for each stock trade that they make.

Meanwhile, bigger firms and richer people pay almost nothing to make individual stock trades.

Hence, Robinhood the company.

While Robinhood doesn’t exactly steal from the rich to give to the poor, it certainly attempts to level the stock market playing field and make it more accessible to the average investor.

Robinhood set out to build products that would help other people trade on the market.

Robinhood knew that to get a younger audience to flock to its solutions, they would have to build something that was simple, elegant, and beautiful.

So they designed an app and a website that guide people through the process of signing up and trading with a confident simplicity.

Signing up and beginning to participate in Robinhood is fast, and keeps your attention the whole time.

Robinhood: Account Minimum

Robinhood account minimums are set at $ 0.

Yes, one of the things that is really important for Robinhood is access.

So they want you to be able to sign up and get on the app even if you’re not going to spend any money on the service right away.

This free-to-play service has allowed Robinhood to accumulate a larger younger audience.

Anybody can download the app and play around with the system.

While there are no commissions taken out by Robinhood during the trading process, you still pay a standard regulator fee.

These fees come on all trades and are not something that Robinhood is charging in excess of the normal regulator fee.

When ready, people can then easily add money to the system and start trading.

If you set up a margin account with Robinhood—a type of account that basically allows you to trade with borrowed money—then you’ll have to pay interest on the margin that you’re borrowing on, so this is an additional fee.

While there are no minimums, the only type of account that Robinhood offers is a simple taxable non-retirement account, which means you aren’t going to be able to grab the tax-advantages of the IRA with this one.

The $ 0 minimum is carefully calculated to get you onto the platform without requiring you to buy in right away.

That means that you can fully sign up and get set up without paying any money!

If you don’t like the platform, you can walk away from it.

If you like it, you can easily add money to invest.

Robinhood: Investment Options

Robinhood has the goal of keeping investment simple and offering the kind of stocks and investments that people really want.

You’ll have the opportunity to score individual, popular stocks like Amazon and Apple.

But you won’t exactly be building complicated mutual funds or participating in them either.

You can get individual stocks, ETFs, and options contracts for a variety of U.S. ETFs and stocks.

But it isn’t just U.S. based stuff, Robinhood also allows you to trade over 200 global companies.

In another bid to appeal to a younger audience, Robinhood has also opened up the world of cryptocurrency in a much easier setting that searching the web for random sites to buy bitcoin on.

While there is certain legislation that prevents Robinhood from offering the crypto on their platforms in every state, there are a variety of states that allow Robinhood to trade cryptocurrency on their platform.

Robinhood: Fees

Robinhood famously offers commission free trading, which allows users to get caught up in the drama of moving around stocks without spending all of their hard-earned trading money paying off commissions.

There is still a small fee paid to stock market regulators, but this is a lot less than a more traditional commission paid for a stock order.

This is the big way that Robinhood is improving accessibility.

For many people, if you have to pay up to $ 10 in commissions just to move stock around, you won’t want to move things around that much.

By getting rid of fees, Robinhood has lowered the financial bar for participation in the system.

Robinhood does make some money off fees, however.

If you want to move your investment portfolio later in life if you get tired of buying more Apple stock on the app, then you’ll have to pay Robinhood $ 75 to regain control of your stuff.

This fee makes sure that people with smaller amounts of money don’t really want to transfer away.

If you’ve got only a few hundred dollars, that $ 75 fee can really eat into your profits.

Finally, if you plan on funding your accounts with wire transfers, or taking money out with wire transfers, you’ll pay $ 25 for domestic moves and $ 50 for international moves.

Most financial institutions charge for wire transfers, so this is fairly standard.

Robinhood: Account Types

Robinhood only has two types of accounts, a basic one, and a gold membership.

Robinhood Gold will run you $ 5 a month, but it gives you access to a lot of new features.

With a gold membership, you can use margin accounts.

Trading on margin basically means borrowing money to complete trades.

While risky, it can also open up high-paying bets.

Additionally, one of the weaknesses of the typical Robinhood solution is limited investment education information.

You will need to pair Robinhood with other solutions to learn the most about the market and how investing really works.

But with Robinhood gold, you get access to a lot more information and education that can help you invest and learn how to invest smarter.

Robinhood: Customer Service

Robinhood relies on the simplicity of their platform and the database of helpful users to shoulder most of the customer service.

With a simple user interface, and an extensive FAQ base and dedicated user group, you should be able to find the answers to your question pretty quickly.

But if something causes you to turn to Robinhood itself, they only offer you customer service through email.

If you are the kind of person that wants to make a call or get someone on facetime to check in, this is not the optimal customer service solution for you.

Robinhood: Other Benefits and Features

The $ 5 monthly membership of Gold gives you quite a bit more power with your investments.

You can easily see the research, ideas, and trends that will help you make smart financial decisions.

One of the other great features of Robinhood is its reliance on the simplicity of their solutions and the speed at which money transfers.

You can load money into your Robinhood account and invest easily through a matter of minutes.

The app and website really do have beautiful colors and simple designs which draw you in and make you feel a part of the wild world of investing.

TD Ameritrade Finance’s Story

While Robinhood might have an inspiring tale of Silicon valley letting the poor take on the rich, TD Ameritrade also comes out of a shakeup in the brokerage world.

After the SEC banned fixed brokerage commissions, a few guys in Nebraska opened up a new securities investment firm.

In 1988, the company was the first in the world to offer trades that could be automated with a touch-tone phone.

You might say that TD Ameritrade broke into the world of digital investing in the same way that Robinhood is disrupting it with an app.

In 1995, the company bought K. Aufhauser & Co., the company who was the first to offer online trading.

That means that TD Ameritrade not only secures a position as the first touch-tone phone trading company, it’s also the first internet trading company.

In 1998, they decided that they were going to offer a flat-rate commission of only $ 8 per trade.

In 1999, Ameritrade broke another barrier by being the first company to offer trading through a mobile device with Sprint’s wireless web.

By 2003 they were promising that any trade could be executed in only 10 seconds.

In 2004, they were launching Amerivest, an online investment advisor that could use data to recommend some allocations based on the goals and risk tolerance of the client.

This launched a new spring of data-driven investing and made Ameritrade a great early place to have internet driven trading.

Basically, while Robinhood can certainly claim some data and disruption in their stock market practices, Ameritrade can’t be written off as some old trading machine that is no longer relevant.

They’ve been innovating since the early days of telecommunications and the internet, and will continue to do so.

TD Ameritrade: Account Minimum

Just like Robinhood, there is no minimum balance required to open a new account.

But you will need at least $ 50 to fund the account electronically and begin trading.

However, if you want to use margin—a practice that allows you to basically borrow against your stock trading—you’ll need a balance of at least $ 2K.

This ensures that you have plenty of money to cover things that happen in margin trading.

So while Robinhood makes a name for itself with no minimum balance, TD Ameritrade and many other older trading companies have followed suit.

That’s a theme that we will see throughout many of these comparisons.

While Robinhood is known for certain things, the new trend of app investing and microinvesting has forced established names to make changes to their practices.

TD Ameritrade: Investment Options

Just like Robinhood, TD Ameritrade is going to offer a variety of trading options.

The average user can trade stocks, ETFs, mutual funds, options, futures, and even some fixed income options.

Unlike Robinhood, which relies heavily on single stocks, TD Ameritrade offers a bigger portfolio of investment options.

TD Ameritrade: Fees

TD Ameritrade also allows you to trade stocks commission free.

However, there are a few eligibility requirements with the commission free trades that they encourage.

Keep in mind that stocks traded over the phone or through a broker will cost $ 5 and $ 25, respectively.

This fee structure is repeated for other investment options.

There are also ETFs that can be traded for free online.

Mutual funds will run no commission if they are NTF (No transaction fee) or load, but if they are no load mutual funds, then it will be a $ 50 commission.

When you trade options online, you will pay $ 0.65 per contract and there will be some index options that you’ll have to pay an exchange fee on top of.

If you’re looking for something that is a bit more stable, TD Ameritrade also offers bonds and CDs which allow you to get a more fixed income from investments.

TD Ameritrade: Account Types

TD Ameritrade offers a variety of account types, including a standard account, but extending out to retirement accounts, education accounts, and professionally managed accounts.

TD Ameritrade: Customer Service

TD Ameritrade lets you talk to customer service over the phone in a bunch of different languages, and they also have facebook messenger, Twitter dms, and a text message service.

They even have 275 brick and mortar locations all over the United States so you might be able to show up and have someone help you in person.

TD Ameritrade: Other Benefits and Features

Unlike Robinhood, TD Ameritrade offers a much more extensive data and analysis platform for you to do some more heavy-duty predictions and research.

A full suite of education and research tools lets you learn the stock market while you invest over time.

Pros and Cons of Robinhood vs. TD Ameritrade

Robinhood: Pros and Cons

Robinhood is a great, simple investment platform that focuses on the mechanics of the market and individual stocks.

It won’t have many education and higher-level investment options.

But it is a simple way to learn the stock market without tying massive piles of cash into it.

TD Ameritrade: Pros and Cons

TD Ameritrade is a great, more complex investment platform that is built to help you learn and give you access to higher level mutual funds.

It is a bit more complex and has a higher entry bar and more complicated fee structure than Robinhood.

But if you are going to own stocks for your whole life, it could be good to start with the system that you think will carry you through retirement.

Robinhood vs. TD Ameritrade: Which is Best for You?

If you’re looking to micro invest and see how the stock market works, Robinhood is still the better option.

The simple system and ability to pick up pieces of stocks and trade things on your phone can’t be beat by TD Ameritrade.

But, on the other hand, TD Ameritrade probably has the better long term trajectory.

They have a more extensive system and more powerful options that you can grow into.

Is Microinvesting Worth It?

Microinvesting is probably not going to make you a millionaire from $ 100.

But it will show you what to do with your money as you start accumulating more and more of it.

It’s a great way to learn the stock market early without tying up piles of your money.

Have you tried using Robinhood or TD Ameritrade? Got any tips for us? Tell us your microinvesting stories in the comments!

The post TD Ameritrade vs. Robinhood appeared first on Wall Street Survivor.

Wall Street Survivor