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.
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.
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.
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.
For a better understanding of these options we recommend you check out our 2022 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.
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.
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, IBKR’s Lite option and TD Ameritrade’s platform offer superb software without the worry of any commission or volume-based requirements.
Both firms offer investors options trading with a fee of just $.65 per contract, while Interactive Brokers does offer futures traders a $.85 fee per contract in comparison to TD Ameritrade’s much heavier price point of $2.25 per contract.
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 2.58%, falling to under a percent for larger qualifying IBKR Pro users.
Meanwhile, TD Ameritrade also operates on a variable rate system, but its rate starts at 9.5% and bottom out at a much higher rate of 7.5%.
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.
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, but offer broker-assisted trading for clients at a price of $25 for TD Ameritrade and $30 per transaction for IBKR.
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 just $15 per mutual fund trade.
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 135 markets in 33 countries throughout the world.
These products include 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 10,882 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.
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.
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 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.
These different approaches highlight IBKRs inclination to cater towards more seasoned, volumed 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 veteran investors options that TD Ameritrade lacks, in terms of both variable pricing and the avoidance of payment for order flow practices.
For more experienced investors, Interactive Brokers offers a more personalized, curtailed investment portfolio that allows access to both cryptocurrency and global markets.
However, for the average investor, IBKR Lite and TD Ameritrade both offer fantastic platforms for 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.