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How Does Ameritrade Make Money

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 9 minute read

Forms of TD Ameritrade Accounts

A number of different accounts are available through TD Ameritrade:

  • Standard self-directed taxable brokerage account
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • 529 plans
  • Coverdell education savings account
  • UTMA and UGMA accounts (for tax-advantaged gifting to minors)
  • Specialty accounts, including individual trusts, business accounts, and pension accounts
  • Managed portfolios (for hands-off investors)

Before deciding to open a tax-advantaged account, it is recommended that you consult with a tax professional and review IRS guidelines.

Options on the TD Ameritrade Platform

Although the two mobile trading platforms available on iOS and Android share many features in common, all TD Ameritrade account holders have access to four unique platforms with no platform costs or hidden fees:

Online Platform

If you’ve ever traded through a bargain online brokerage, you’ll feel right at home with TD Ameritrade’s desktop trading platform, which includes stock screeners, event calendars, watchlists, and tax reporting. 

SnapTicket, a kind of portable stock listing that displays details of individual stocks at a glance, and a social signals tool that detects real-time changes in company-specific social sentiment via a Twitter API are two of the more unusual features that are exclusive to TD.

Users who only want to dabble in DIY projects now have a perfect platform to do so thanks to the Internet (folks who rarely make more than a few trades per week).

Thinkorswim

Thinkorswim is TD’s high-frequency trading platform, designed specifically for professional traders who make frequent trades and require advanced analytics and charts. 

Thinkorswim, in contrast to the online platform, is designed for professional traders, day traders, and hobbyists who have the time and motivation to spend many hours each week in front of a trading terminal. TD Ameritrade provides a comprehensive introduction to Thinkorswim if you’re interested in learning more.

Mobile TD Ameritrade (Mobile App)

To facilitate trading on the go, TD Ameritrade offers a pared-down version of its full Web interface for mobile use. It contains everything you need to execute simple transactions on the go, and it’s available on Apple and Android devices.

Thinkorswim Mobile

The TD Ameritrade Mobile Trader app, which served as a bridge between the standard mobile platform and the thinkorswim desktop client, has been replaced by thinkorswim Mobile. For seasoned traders on the fly, TD Ameritrade now provides the complete functionality of thinkorswim in mobile mode.

Trading commissions and self-directed investment products at TD Ameritrade

With a self-directed portfolio from TD Ameritrade, you can choose from a wide variety of investment options.

Stocks and ETFs

Commission-free stock trading in the U.S. and certain international markets is made possible through TD Ameritrade. Many hundreds of index, sector and goal-driven instruments are available on its commission-free ETF database.

Mutual Funds

TD Ameritrade provides access to thousands of mutual funds, including load, no-load, and no-transaction-fee options. Although there is a wide selection of no-load funds, the charges are somewhat hefty at around $50 for each trade. 

Your order won’t go through until the next business day at the latest, as is the case with all mutual fund trades (if you place them during regular trading hours). Therefore, investors who are hoping to profit from small, frequent price changes should avoid mutual funds.

Asset-Backed Securities

Government bonds, corporate bonds, and annuities are just some of the fixed-income products offered by TD Ameritrade. 

Pricing varies depending on a number of criteria, including the nature of the goods and the quantity of the transaction. It’s worth noting that there may be tax benefits to including government-issued bonds in taxable portfolios.

Futures

Futures trading at TD Ameritrade is attractively priced across a wide range of assets, including the relatively liquid index futures. The price per trade is $2.25, although that may not include the whole cost of each transaction if you have to meet margin requirements before placing a futures deal.

Forex

About 20 international currencies and many more currency combinations are available for trading with TD Ameritrade. The South African rand, Thai baht, and Czech koruna are just a few of the lesser-used currencies in its database. Foreign exchange (FX) trading fees are affected by a number of variables.

Cryptocurrency

When it comes to cryptocurrencies, TD Ameritrade doesn’t allow for direct trading, but it does provide three options for getting some:

  • Over-the-counter cryptocurrency trusts are similar to closed-end funds with high volatility, limited liquidity, high fees, and risk of loss of principal
  • Crypto mutual funds and ETFs
  • Bitcoin futures through the Chicago Mercantile Exchange (CME)

TD Ameritrade’s clearance may be necessary for these cryptocurrency trading choices.

Portfolios managed by TD Ameritrade

TD Ameritrade offers two managed portfolio solutions, each with its own set of minimum deposit requirements and fee structures, for investors who would rather not maintain a close eye on their investments but still want to make money.

Choose Portfolios

Choice Portfolios, which invest in a wide variety of exchange-traded funds and mutual funds, require a minimum of $25,000 in investable assets and have varying management fees based on the individual investor’s portfolio’s composition, complexity, size, and goals.

The easiest way to describe Selective Portfolios is as a sophisticated version of a Robo-advisor backed by real people.

Personal portfolios

Portfolios at this top tier are completely tailored to the investor and include the services of a financial advisor as well as a separate portfolio manager who is responsible for monitoring the portfolio’s overall health and returns.

Morningstar Investment Management is a well-regarded financial services company with which TD Ameritrade’s portfolio managers collaborate closely.

Reporting for Personalized Portfolios is more robust than that of the other two tiers, allowing for personalized goal tracking and account snapshots across TD and non-TD accounts.

Together, all of your current TD Ameritrade investing accounts must be worth at least $250,000. The cost of management depends on a number of factors, including the size, kind, and objectives of the investor’s holdings.

TD Ameritrade’s Extra Functions

There are some more features available on TD Ameritrade that are useful. In combination, they significantly improve the platform.

Trading on margin

TD Ameritrade’s margin trading division caters to speculative investors that are comfortable with high-risk trading tactics with the potential for large returns.

When traders borrow money based on the value of their portfolios in order to buy more stocks, they increase their potential profits in the event of a price increase and their potential losses in the event of a price decline.

Just choose active trading and put down the minimum $2,000 to get started with a margin account. To protect against the risk of losing the money you’ve borrowed, you must always have at least 30% of your portfolio invested in stocks.

Margin trading is a form of investing that should only be attempted by experienced traders. Margin trading exposes you to much greater financial risk than cash trading, where losses are capped at the portfolio’s cumulative cost basis of its stock holdings.

Resources for Education and Research

When compared to other bargain brokers, TD Ameritrade provides more options for learning about investing. 

Particularly notable are its offerings in the field of education, which include:

  • Immersive trading courses led by actual investing experts
  • Instructional videos, articles, and tutorials
  • Access to dozens of investing publications (some of which may charge subscription fees for premium content)
  • “Talking Green” podcast, a TD-sponsored investing show that regularly produces new episodes
  • TD Ameritrade Network, best described as a subdued, lower-budget version of Bloomberg TV
  • Goal-specific education modules, such as investing for retirement or college education

Some of the helpful market research tools offered by TD Ameritrade are:

  • Market Edge, a compilation of top-shelf market research from third-party sources
  • Social sentiment insights pulled from Twitter — a nontraditional, inexact, forward-looking read on how regular consumers and investors feel about equities in the news
  • Premier List, an exclusive list of top recommended buys hand-curated by experts from Morningstar
  • Market Java, a morning newsletter featuring overnight breaking news and data from overseas markets

Network of physical branches

According to their current branch list, TD Ameritrade has brick-and-mortar locations in the majority of states. Not only do clients of the managed portfolio receive free investment advice from branch workers, but all account holders do.

You should know that these conferences are great chances for TD Ameritrade to upsell customers on more lucrative services like managed portfolios.

Unless you have a very specific type of account that requires in-person financing or paperwork processing, a DIY investor should never need to set foot in a TD Ameritrade branch.

TD Ameritrade’s Advantages

The most notable advantages of TD Ameritrade are the lack of minimum account size for self-directed investors, the availability of multiple trading platforms, the provision of robust trading tools for serious investors, the provision of a wide variety of investment options and account types, the provision of excellent customer service, and the provision of first-rate research tools.

  • Self-Directed Investors are not subject to a minimum balance requirement. Self-directed traders can open accounts with TD Ameritrade without meeting any minimum investment requirements. This is encouraging news for first-time investors with little capital.
  • Traders have free access to four separate trading platforms. Customers of TD Ameritrade can trade on any of the four platforms without paying any additional fees. Futures and currency trades, for example, only incur costs when executed.
  • High-Level Traders’ Use of thinkorswim. Intelligent, high-frequency traders will find the thinkorswim platform to be a useful tool. That’s a tempting offer for self-assured investors who want the security of a full-service brokerage.
  • Multiple Options for Financial Investments. For those who open an account with TD Ameritrade, the investment world is at their fingertips, from the most liquid equities and bonds to foreign exchange. You’ll find it here if it has a public trading market.
  • Many Different Types of Accounts Available. In addition to standard brokerage accounts, TD Ameritrade offers a wide variety of retirement and trust accounts, among other niche products. Compared to some of the other bargain brokerages out now, which only provide the most standard account kinds like taxable brokerage accounts, regular IRAs, and Roth IRAs, this is a huge plus.
  • Selling is available 24/7. Around two dozen exchange-traded funds (ETFs) chosen to provide exposure to various market sectors are available for extended hours trading 24 hours a day, 5 days a week on TD Ameritrade. These assets are available for real-time trading from Sunday evening at 8 p.m. Eastern time to Friday evening at the same time.
  • Support for customers is always available. With TD Ameritrade, you can get in touch with a real person whenever you need help with anything from a technical problem to a simple query regarding your account. Licensed professionals can be reached by phone or in person at unusual times.
  • Superior Research Resources Available for Use. At no extra cost, TD Ameritrade gives its customers access to a wide variety of research tools. Investors and traders can get a deeper understanding of the market with the Market Edge package than they would by reading a book-length study report or paying a fee for a subscription to a third-party research service.
  • Numerous Branches in the Real World. When it comes to physical locations, TD Ameritrade covers the whole United States with a dense branch network (including one branch each in Alaska and Hawaii). If you value meeting in person with financial experts, knowing that a TD Ameritrade office is likely to be within a reasonable driving distance is a great bonus for those who reside in or near a major city.

TD Ameritrade’s Disadvantage

Low product variety, hefty transaction fees for mutual funds, and expensive minimums for managed portfolios are just a few of TD Ameritrade’s disadvantages.

  • Costly commissions for buying and selling mutual funds. TD Ameritrade’s no-load mutual fund trades are expensive since they are not part of the firm’s standard no-transaction-fee bundle. Find another broker if you want to construct a self-directed portfolio heavily weighted toward mutual funds.
  • No centralized marketplace provides access to all available investment options. The full range of TD Ameritrade’s investment options is not available on any of the firm’s four trading platforms. The thinkorswim Mobile app comes close, but it’s not quite ubiquitous. You’ll need to use a minimum of two different TD Ameritrade trading platforms to make full use of the services available to you.

Bottom Line

TD Ameritrade is a brokerage that caters to the needs of virtually every type of investor. It’s great for a wide variety of people but does particularly well for do-it-yourself traders and investors who want to learn the ropes on their own.

The managed side is just as good, but if you want the personalized, white-glove treatment that many people have come to expect from their investments, you’ll need to bring at least $250,000. It is still apparent that TD Ameritrade is a superior brokerage and should be seriously considered by anyone looking for a new location to trade and invest.

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