Interactive Brokers vs TD Ameritrade
Interactive Brokers vs TD Ameritrade: which brokerage is better for you and your money? In this review we will discuss some of the pros and cons of two of the most popular brokerages available to investors.
In the modern online brokerage world that seems filled to the brim with the newest tools and gizmos available, Interactive Brokers and TD Ameritrade remain at the forefront for traders that are looking to up their technical game.
Both Interactive Brokers and TD Ameritrade hold great renown amongst investors for providing some of the most advanced and cost effective trading platforms on the market. Both brokerages offer clients an incredible amount of resources and tools that range from basic commission free stock trading all the way to international futures trading.
Seasoned investors often compare Interactive Broker’s (IBKR) Trader Workstation to TD Ameritrade’s thinkorswim platform as both programs offer advanced capabilities for complex, frequent trading.
Additionally, both brokerages and platforms offer a number of free to use services for their clients, including full access to their trading software.
While Interactive Brokers largely focuses on expansion through reputation and word of mouth advertising, both firms have seen immense growth in popularity as the retail investor segment of the market continues to grow and flourish.
Nevertheless, not all investing is the same and prospective investors require different solutions for different goals and strategies. Both Interactive Brokers and TD Ameritrade offer an incredible amount of value for prospective clients.
Follow along with us below for some of the biggest pros and cons of each broker and to discover which platform, if either, is right for you.
Commissions
Overall, both brokerages take different but similar approaches to their commission structure.
Interactive Brokers offers two different account versions for its users known as IBKR Lite and IBKR Pro, both of which consist of slightly different pricing and pros and cons of their own. IBKR Pro offers clients the benefit of favorable pricing execution and volume based savings for their trading needs.
For a better understanding of these options we recommend you check out our review of Interactive Brokers.
In this article we will focus on the best options Interactive Brokers has to offer.
For all intents and purposes, IBKR Lite and TD Ameritrade are largely comparable in their pricing structure.
Both IBKR Lite and TD users can trade US Stocks, Equities, and Mutual funds commission-free. Trade stocks & ETFs online commission-free at TD Ameritrade.
However, both options utilize payment for order flow practices that allow the respective brokers to sell client orders to market makers that in return pay to execute the trades themselves, often keeping the bid/ask spread.
This practice allows both parties to offer commission free trading to their clients in exchange for less favorable price execution. Although this may not seem like a huge deal if you only trade a few stocks or ETFs here and there, priority order execution can me the difference between massive amounts of profit or loss for more frequent trading. Trading platforms that offer favorable price execution can make or break day trades, especially on lower volume equities.
However, Interactive Brokers clients that opt for the IBKR Pro model are not subject to payment for order flow and their trades are executed efficiently and directly.
This preferred execution model is largely unique to US brokerage accounts, but comes at the cost of either a fixed commission rate per transaction, or a tiered commission structure based on the amount of average monthly volume a trader executes.
For the novice or average investor looking to trade stocks or mutual funds, IBKR’s Lite option and TD Ameritrade’s platform offer superb software without the worry of any commission or volume-based requirements. This ability to trade without worry of stacking fees is comparable to many of the mobile based brokerages of today with the added bonus of including innumerous amounts of additional tools and resources.
Interactive Brokers offers investors options trading with fees of just $0.15-$0.65 per contract, while TD options are fixed at$0.65. Furthermore, Interactive Brokers does offer futures traders a $.025-$.85 fee per contract in comparison to TD Ameritrade’s much heavier price point of $2.25 per contract.
Margin
One of the biggest pros of Interactive Brokers for seasoned investors is the firm’s world class margin rates.
For Lite users, IBKR offers margin for rates as low as 7.8%, falling to 5.8% for larger qualifying IBKR Pro users.
Meanwhile, TD Ameritrade also operates on a variable rate system, but its rate starts at 13% and bottom out at a much higher rate of 9.25%.
For many frequent and more advanced traders, low margin rates can make the difference between profitability and losses, and many utilize IBKR’s Pro structure for these volume-based savings.
Fees
Both TD Ameritrade and Interactive Brokers are great options for avoiding the many fees associated with full service brokerages.
The fees they do have are quite low and are commonplace in the brokerage industry.
Both firms offer free trading on their applications.
Although neither firm has a minimum balance requirement for opening an account, TD Ameritrade does charge its clients a $75 fee for fully withdrawing their funds.
Additionally, both firms offer a wide range of free mutual funds for their clients, but for other available funds TD Ameritrade charges a substantial $74.95 fee per transaction, while IBKR charges a maximum of $15 per mutual fund trade. For investors that are only seeking to average into mutual funds over time, this lower fee could provide significant advantages.
Product Offerings
Despite both brokerages offering extensive options for investors looking to trade US based equities, TD Ameritrade lacks some of the overall options available to Interactive Brokers clients.
Interactive Brokers prides itself on offering its investors access to international trading through 150 markets worldwide.
These products include asset classes such as stocks, options, futures, forex, bonds, and funds, in addition to IBKR now offering access to Bitcoin, Etherium, Litecoin, and Bitcoin Cash.
TD Ameritrade does offer some qualified investors limited access to cryptocurrencies through Bitcoin Futures, but for the most part is at this point in time nonexistent in the space.
Furthermore, Interactive Brokers offers its clients access to 18,000+ no load mutual funds in comparison to TD Ameritrade’s much smaller 4,606 offering.
Although somewhat of a different comparison, TD Ameritrade does offer its investors a significant amount of advisor services that are respectively not available at IBKR. Interactive Brokers may be a better trading platform for investors that already have a financial advisor or don’t require additional financial advisement.
Research and Education
One of the biggest distinctions between Interactive Brokers and TD Ameritrade is their vastly different approaches to investor education and access to market data and research. However each trading platform can offer potential clients an incredible amount of education, research, and data whether they are learning about mutual funds or looking to compare ETF trades.
TD Ameritrade is widely known to have some of the best educational resources available to investors and averages over 500 webinars on a monthly basis that are available to its clients (in comparison to IBKR’s 20).
Interactive Brokers offers its clients a large amount of market information, trading strategies, and news for free, but does require investors to pay a la carte or in package deals for the vast majority of its partnered research vendors.
Meanwhile TD Ameritrade takes investor education seriously and offers an immense amount of market news and research free of charge for its clients. Interactive Brokers is best for investors that already have access to industry and market research and news. However, the ability to purchase a la carte subscriptions provides a lot of flexibility for fluctuating budgeting and needs.
These different approaches highlight IBKRs inclination to cater towards more seasoned, active traders that already have many sources for market data and research, while TD Ameritrade aims to provide a one size fits all education solution.
Which Brokerage is Right for You?
Overall, Interactive Brokers and TD Ameritrade both provide great pricing structures and investment options to prospective clients, especially with their respective state of the art trading platforms.
Both firms carry slightly different fees and trading structures, but Interactive Brokers does provide sophisticated traders options that TD Ameritrade lacks, in terms of both variable pricing and the avoidance of payment for order flow practices. These advantages could mean equate to massive advantages for intelligent investors.
For active traders, Interactive Brokers offers a more personalized, curtailed investment portfolio that allows access to both cryptocurrency and global markets. Furthermore, IKBR offers high volume investors with an immense amount of per trade savings over the long run with its tiered pricing structure. These savings could amount to thousands of dollars over the course of a trading year.
However, for the average investor, IBKR Lite and TD Ameritrade both offer fantastic platforms for technical analysis, growth, and commission-free trading of US based stocks and ETFs, while TD Ameritrade does cater more towards beginner investors by offering significantly more tools and educational resources.
If you are interested in comparing the safety and security of Interactive Brokers check out our article here.