Compare Robinhood versus Vanguard and others: IRA, commissions, investing fees, trading tools, account differences, pros and cons. Which online broker is better in 2019?

Broker Costs

Broker Review Stock/ETF
Commission
Mutual Fund
Commission
Maintenance
Fee
Annual IRA
Fee
Promotion
Offer
Ally Invest $4.95 $9.95 $0 $0 Up to $3,500 cash bonus + commission free trades for new accounts.
TD Ameritrade $6.95 $49.95 $0 $0 Trade free for 60 days + get up to $600.
Fidelity $4.95 $49.95 $0 $0 Get 500 free trades with $100,000+ deposit.
Charles Schwab $4.95 $76 ($0 to sell) $0 $0 Make $100,000 deposit and get 500 commission-free online equity and options trades.
Etrade $6.95 $19.95 $0 $0 At E*TRADE, get $6.95 trades + 65₵ per options contract.
Vanguard $7-$20 $8-$35 $20* $0 None
Robinhood $0 na $0 $0 $0

Services

Broker Review Cost Investment Products Trading Tools Customer Service Research Overall Rating
Ally Invest
TD Ameritrade
Fidelity
Charles Schwab
Etrade
Vanguard
Robinhood

Robin Hood vs Competitors

Robinhood is a new brokerage firm that is basically just a mobile app that became known for only one thing: no commission fees. Robinhood was started a few years ago by two Stamford roommates who wanted to make investing accessible to everyone. Since then, they have grown in popularity thanks to some great guerrilla marketing campaigns and funding from some major venture capitalist firms. Now let’s take a look how it compares to the major online brokerage firms.

Pricing

As mentioned earlier, Robinhood’s (as well as higher rated Firstrade's) major claim to fame is offering commission free trading with no compromises. There are only a few other companies in the business that offer free trades, but only for a select number of stocks and funds. Robinhood allows users to invest in nearly anything with a ticker symbol without worrying about account minimums, commission fees, or almost anything else. This is especially important to users who can’t invest much or buy in very small amounts. For example, a user who can only invest $100 a month at a traditional brokerage will automatically lose 7% or more of their investment right away due to trading fees. This means they will need a little over a year of average market performance just to break even.

Robinhood does charge fees for a very select number of things that most people won’t use. These include: paper statements, buying stocks listed only on foreign indexes, wire transfers, and overnight deliveries.

After hearing about the incredibly low fees, the question many people ask is “How do they make money?” To answer that question simply, they make money from the interest on cash balances users hold in accounts and from people taking out loans to buy securities “on margin”. On top of that, they have the advantage of building this business based on no fees right from the beginning. Thanks to that, Robinhood was able to proactively automate and cut back everything that would get in the way (namely, they have no brick and mortar buildings and don’t pay advertising fees). This all translates to Robinhood being a very lean company that can offer no commission fees to the average customer.

E*Trade and TD Ameritrade both charge $6.95 for buying and selling ETF's and stocks. Investors at Schwab and Fidelity pay $4.95 for the same trade. Clients with under $50,000 in Vanguard products pay $7 for the first 25 trades and $20 for all following trades. Ally Invest is the cheapest traditional broker charging just $4.95 per trade with $1 discount to clients who make 30 or more trades in three months and have $100K account balance.

For derivative traders, E*Trade, and TD Ameritrade charge an additional $0.75 per option contract. Fidelity and Schwab are at $0.65. Option traders at Vanguard pay $1 per contract in addition to a base charge of $1, $7, or $20. Account size determines which base charge is selected. Accounts with under $50,000 in Vanguard funds pay the $20 commission. At Ally Invest options are 65 cents per contract with 15 cents discount for customers meeting above criteria.

Using a live broker to complete a trade at TD Ameritrade costs $44.99, at Schwab the price is $33.95, and Fidelity is at $32.95. E*Trade charges a low $25. At Vanguard, the fee varies, and is determined by account size. Ally Invest has no additional charge for broker-assisted trades so their rates are the lowest - $3.95 or $4.95.

Securities accounts at all firms have no inactivity or maintenance fees. Vanguard does require accounts with less than $50,000 invested in Vanguard ETF's and mutual funds to sign up for electronic delivery of statements.

Fidelity has a $2,500 minimum opening deposit requirement. Schwab has a $1,000 minimum, although it can be waived by opening a Schwab bank account during the application process. To open an account at E*Trade, investors must deposit at least $500. TD Ameritrade, Ally and Vanguard have no initial deposit requirement.

Services

Investors should not expect much from Robin Hood. The only investment products available are stocks, options, cryptos and ETFs. So no mutual funds, bonds, etc. Customer service is email only. Don't expect any third party investment research, education, virtual trading, or serious trading tools or even online access through computer. All investors get is a decent smartphone application.

Schwab can be reached by phone 24 hours a day, 7 days a week. The company has over 325 branch locations in the United States. Schwab can be contacted using an on-line chat system. The firm also offers Chinese-language customer service.

Fidelity also offers phone service around the clock. Presently, the company has over 180 branch locations for investors who want some personal assistance. The broker can be contacted via on-line chat.

Like Schwab and Fidelity, E*Trade, Ally and TD Ameritrade also provide customer service 24/7 over the phone. TD Ameritrade has more than 600 branch locations currently. E*Trade has only 30, Ally - 0. TD Ameritrade does not offer on-line chat, while E*Trade and Ally do have it.

Unfortunately, Vanguard doesn't offer 24/7 customer support. It only offers service during the weekday. The firm has no on-line chat. Vanguard regrettably does not have a nationwide network of branches.

Our Recommendations

Robin Hood attracts young and adventurous people lured by the "no fees" sales pitch. It's unlikely that many customers will be willing to invest life savings or even significant amounts of money with a company that's basically a mobile app. Robin Hood falls far behind the other brokerage firms in this article in all categories, in some cases even including, ironically, mobile trading.

Cost-conscious investors should consider low commission leader Firstrade. Investors with accounts more than $250,000 should look at Vanguard. Vanguard’s commissions for accounts eligible for their Voyager Service ($50,000- $500,000) become very competitive with the low-commission brokers.

All brokers have strengths and weaknesses, and investors should carefully research all options to find the broker that best fits their asset level, amenity level, and trading requirements.

New Account Promotions

Ally Invest: Up to $3,500 cash bonus + commission free trades for new accounts.

TD Ameritrade: Trade free for 60 days + get up to $600.

Firstrade: $0 commissions + up to $200 in transfer fee rebates.

Robinhood: Open account and get one free $3-$6 value stock.