TD Ameritrade Review For 2023 Review: Is It Right for You? | The Motley Fool (2024)

Although it is widely known as an online broker, TD Ameritrade's history dates back to the 1970s, and it has been a pioneer in the brokerage space for years. For example, the company (then known as Ameritrade), introduced the first system that allowed for order entry from push-button telephones.

The company's modern era started in 1996, when it merged with electronic trading platform operator TransTerra. The dot-com boom in subsequent years also saw a massive rise in online trading, and Ameritrade was a big beneficiary of technology changes. Over the next decade or so, the company grew dramatically, both organically and through a series of acquisitions.

In 2006, Ameritrade acquired the U.S. brokerage business of Canada-based TD Bank, giving TD a 40% stake in the business and changing the name to TD Ameritrade. The thinkorswim trading software company was acquired in 2009, and this was the basis for the trading platform TD Ameritrade offers active investors today.

Two major developments have happened in recent years. First, in 2017, TD Ameritrade acquired major competitor Scottrade. And in 2020, TD Ameritrade itself was acquired by Charles Schwab. For the time being, TD Ameritrade's platform operates independently, but Charles Schwab has started the process of moving TD Ameritrade accounts over to its platform.

Top perks

Commission-free trading

Online stock and ETF trades have no commission.

Online trading platform and mobile app

Investors rate the broker's mobile app highly. Available on iOS, Android, and Windows devices, the mobile app is truly fully featured. Clients can get streaming data, invest in mutual funds, or trade stocks and complex options contracts with a mobile device (smartphone) or tablet.

Diverse account types

TD Ameritrade is a one-stop shop for your investing and cash management needs. Beyond offering traditional taxable accounts, IRAs, and Roth IRAs, TD Ameritrade offers an array of education and managed account options.

Research and screeners

TD Ameritrade offers a laundry list of stock, option, and mutual fund screeners that you can use for free. In addition, customers enjoy access to research and ratings from third parties including Morningstar and CFRA, and stock analysis from a host of investment firms.

Mutual fund selection

TD Ameritrade offers one of the largest selections of mutual funds and commission-free ETFs of any discount broker we've seen. Many brokers cater primarily to active investors and traders, but TD Ameritrade does a good job balancing the needs of stockpickers and hands-off fund investors alike.

Customer support

With branch offices in most major metropolitan areas, TD Ameritrade may win over clients who want the comfort of knowing that face-to-face customer support is just a short drive away.

No minimums

Whether just getting started with investing, or rolling over a $1 million 401(k) into an IRA, TD Ameritrade can take them in. TD Ameritrade doesn't have a minimum deposit requirement to open an account and start placing trades, which is a real benefit to beginner investors.

What could be improved

Margin rates

TD Ameritrade's margin rates can be easily beat by several trading platforms.

As you can see, TD Ameritrade's pricing blows away full-service brokers, and it charges $0 per trade for certain online trades. Though price isn't everything, everyone can get behind $0 commission on trades.

It's also worth noting that the $0 commissions are for online stock trades. TD Ameritrade still charges for automated phone trades ($5) and broker-assisted trades ($25).

Brokers have long fee disclosures that you should read before opening an account. In doing this review, we looked at TD Ameritrade's list of fees and benefits, and while nothing stuck out as particularly onerous, there are some fees (and rebates!) we think you should know about before opening an account.

• ATM fee rebate: Many investors like having a debit card linked to their brokerage account, but don't like the costs associated with it. TD Ameritrade has a very client-friendly policy with respect to debit cards, as it reimburses clients for any ATM fees charged by other banks' ATMs. Reimbursem*nts are unlimited, so whether you use your card daily or once a decade, you won't pay an ATM fee.
• Paper statement fee: Brokers don't like sending documents by snail mail. Accountholders whose accounts are valued at less than $10,000 are charged $2 per paper statement. Opt-in to receive statements electronically, and you can forget this fee even exists in the first place. (Fees for paper statements have become an industry-wide phenomenon in one form or another.)

Traders who like to have a fully-featured trading platform won't be disappointed with what TD Ameritrade has to offer, as its web, desktop, and mobile platforms make placing a trade a snap.

Its web platform is designed for fundamental investors, offering streaming quotes, custom alerts, and screeners to quickly sort through the market based on fundamental and technical parameters. Its highly-rated thinkorswim desktop platform is a favorite among active traders who need functionality like backtesting, level II quotes, and a graphic explanation of a position's expected profit or loss.

TD Ameritrade's mobile platform is no slouch, either, as it offers level II quotes, conditional orders, and even complex option trades on smartphones, tablets and other mobile devices. The app is available on virtually every platform -- iOS, Android, and Windows -- and users can also navigate to its website from their devices to trade from a smaller screen, too.

Trading experience

TD Ameritrade has several different versions of its trading experience members can choose to use. Its desktop platform is the easiest place to make a buy or sell order. Upon logging into the site, there is a "snapticket" button that brings up an easy-to-use order ticket. For basic stock transactions, customers enter the desired ticker symbol in the quote field, choose "buy" or "sell," the number of shares they want, and whether they want a market (best available price) or limit (set their own maximum price) order.

TD Ameritrade's mobile app has similar functionality. Both the desktop and mobile platforms can support more complex orders (such as short sales and options trading), but the order tickets are the same. There's also a user-friendly way to enter complex options orders, mutual fund orders, and more. Both versions have excellent customer support, either by phone or online, and one of TD Ameritrade's strengths is its vast library of educational resources.

For more advanced investors, the thinkorswim platform is a bit more complex by design, but entering basic stock trades is very easy. On a quote page, simply hover over the quote of the stock you want to buy, right click and select "buy," and proceed to fill in the ticket. This works in a similar way to the desktop platform.

Investors use margin loans for two reasons. First, they can add leverage to a portfolio, magnifying your investment capital with borrowed money to multiply your gains and losses. This is one of the most common uses of margin, though it significantly increases the chance of losses.

Secondly, margin loans can be used to make an immediate trade after selling a stock. Because it takes two days for a trade to settle, an investor who sells $10,000 of stock on Monday won't be able to invest that money elsewhere until Wednesday. By using margin, the investor can skip the two-day wait, and borrow the money while waiting for the funds to settle in their account.

As for what you'll pay to use margin, TD Ameritrade charges interest based on a sliding scale. The more you borrow, the lower your interest rate will be, although TD Ameritrade's margin rates are on the higher end of what you'll find from top brokers. The list below shows current TD Ameritrade margin rates by debit balance.

• Under $10,000 margin balance: 14.75%
• $10,000 to $24,999 margin balance: 14.5%
• $25,000 to $49,999 margin balance: 14.25%
• $50,000 to $99,999 margin balance: 13.25%
• $100,000 to $249,999 margin balance: 13.00%
• $250,000 to $499,999 margin balance: 12.75%
• Over $500,000: Contact TD Ameritrade

Of course, investors who don't use margin aren't affected by margin rates. And those who use margin for only short periods of time (say, while waiting for deposits to clear, or cash from previous trades to settle) may not mind paying a slightly higher rate for just a few days. Interest is calculated daily, so carrying a small debit balance for a couple of days may add up to just a few dollars.

Discount brokers are designed for self-directed investors who simply need to make a trade, not people who need a lot of help picking stocks or funds. That said, most discount brokers offer third-party and proprietary research, stock and fund screeners, calculators, and other tools to help their clients be better investors.

Some research tools worth mentioning include:

• ETF screener: This tool can be really helpful for finding ETFs that fit your investment needs. With a few clicks, investors can drill down to find ETFs that match specific criteria, such as funds that fit Morningstar's large-cap value category and have a below-average expense ratio, for example.
• Analyst ratings: TD Ameritrade uses First Call Consensus to list stocks that analysts rank as strong buys. Its buy-rated stock screener can also be used to find stocks that are highly rated by CFRA, TheStreet, MarketEdge, and Ford.
• Fixed income reports: TD Ameritrade customers get access to bond reports by Moody's, adding an informed view for people who want to know more about individual bonds and funds.

Discount brokers are able to offer lower fees and trading commissions than full-service brokers because they don't offer many of the frills and handholding of a full-service brokerage firm. That said, TD Ameritrade doesn't cut corners when it comes to speaking to customer service representatives.

One thing that TD Ameritrade has that many brokers do not is the ability to speak to someone face to face with any issues regarding your account. With hundreds of branch offices located in cities across the United States, customer support is just a short drive away. Of course, it also offers 24/7 support by phone, plus email, and text. Interestingly, it now offers customer support via Facebook Messenger and Twitter, and you can even trade stocks by sending a message to its Facebook Messenger chatbot.

If the following statements apply to you, opening a TD Ameritrade account may be a good choice.

• You value customer service and a local branch office. TD Ameritrade has one of the largest branch networks among discount brokers, making it a good pick for people who want in-person customer service.
• You use mutual funds and ETFs. With more than 3,500 no-load, no-transaction-fee mutual funds and no commissions to buy ETFs, TD Ameritrade is an attractive choice for investors who use funds in their portfolios.
• Research is important to you. TD Ameritrade has one of the largest research offerings among discount brokers, which is an especially big differentiator now that most brokers (including TD Ameritrade) offer $0 trading commissions.
• You don't use margin as a core part of your investment strategy. TD Ameritrade's margin rates are higher than most other brokers and carrying a large amount of margin can be costly.