Where Should an Individual Investor Open Accounts? (2022)

with No Comments

Nine years ago in 2013, we wrote an article that evaluated where an individual investor should open an investment account. At that time, Vanguard and TD Ameritrade were the only major custodians that had no minimum balance requirement to open an investment account and Vanguard was the only custodian that offered exchange-traded funds (ETFs) with no transaction costs.

Since then, the options for custodians with no-transaction-fees (NTFs) and no minimum account balances has increased tremendously. Today, Charles Schwab, Vanguard, Fidelity, TD Ameritrade, and E-Trade all offer no minimum balance to open a brokerage account and no transaction fees for online trades of U.S. equity stocks, U.S. exchange-listed ETFs, and no-transaction-fee mutual funds.

The expanded opportunity for consumers to trade securities without transaction fees and open investment accounts with no minimum balance increases the amount of money contributing to the return on their investment. We are pleased to leave in the past the days of sacrificing account value to high trading fees and other expenses.

If you are just getting started with investing and have not yet selected a custodian, in the past we would have recommended Vanguard because of their no-transaction-fees on Vanguard mutual funds and no account minimums. However, Charles Schwab, Fidelity, and TD Ameritrade now all have no-transaction-fees for ETF trades and account opens with no minimum deposit.

Because TD Ameritrade has been purchased by Charles Schwab and is scheduled for being merged under Charles Schwab’s business, we’d recommend selecting either Charles Schwab or Fidelity as your custodian and using the Default Gone-Fishing Portfolio to establish your asset allocation.

Here is how each custodian compares on these major factors.

Account Minimums & Maintenance Fees

Note: many custodians have account minimums for Donor Advised Fund charitable accounts. However, for the purposes of this article, we will ignore those accounts.

Schwab, Fidelity, and TD Ameritrade have no minimum account balance or maintenance fees for investment accounts.

Vanguard has no minimum account balance or maintenance fees if you sign up for e-delivery services. However, if you receive paper statements , then they charge an annual maintenance fee. For most account types, this fee is $20 for each account where the total Vanguard assets you have in the account are less than $10,000.

Unfortunately, E-Trade does not clearly advertise if there is a minimum account balance for their retirement accounts, but they do advertise that there is no minimum account balance for brokerage accounts.

Commission & Trade Fees

Schwab, Fidelity, and TD Ameritrade offer no transaction fees for all ETFs when placing trades online.

Then, each custodian has their own separate lists for which mutual funds have no transaction fee. All the funds not on the NTF list are subject to a transaction fee.

Schwab:

  • All ETFs traded on a U.S. exchange are $0 per trade online
  • No transaction fees for online and automated phone trades of Schwab Funds

Vanguard:

  • No transaction fees for trading Vanguard ETFs (online & by phone), ETFs from other companies (online only), Vanguard mutual funds (online & by phone), NTF mutual funds from other companies (online only)
  • Transaction fees for trading ETFs from other companies by phone ($20-$25), NTF mutual funds from other companies by phone ($40-$45), Transaction-fee mutual funds from other companies online & by phone ($0-$50)

Fidelity:

  • No transaction fees for online trades of U.S. equity stocks, ETFs, Fidelity funds, and NTF non-Fidelity funds
  • Transaction fees for redemption of NTF non-Fidelity funds held under 60 days ($50) and transaction fee non-Fidelity funds ($50; no redemption fee)

TD Ameritrade: No transaction fees for online trades of stocks, ETFs, and NTF funds

E-Trade:

  • No transaction fees for online U.S. exchange-listed stocks, ETFs, and NTF funds
  • Transaction fees for redemption of NTF funds helds under 90 days ($50) and transaction fee funds ($20)

Customer Service

Charles Schwab, Fidelity, E-Trade, and TD Ameritrade offer 24/7 phone line support.

Vanguard only offers their phone support Monday through Friday from 8 a.m. to 8 p.m. Eastern Time.

Conclusions

When compared this way, Vanguard is no longer the best custodian. They have less phone support and account minimums when you have paper delivery.

Now, we would recommend selecting either Charles Schwab or Fidelity as your custodian and using the Default Gone-Fishing Portfolio to establish your asset allocation.

Note that account minimums and trading fees can and do change, so we recommend verifying this information before making your final decision.

All of these companies have online tools for conveniently opening accounts and purchasing securities.

Five choices may seem like a lot, but we encourage you to just pick one and go with it. It is better to begin somewhere than not start at all.

Photo by Amelia Bartlett on Unsplash

Follow Libby Horbaly:

Wealth Manager

Libby Horbaly is a Wealth Manager at Marotta Wealth Management. In addition to writing articles, she is one of our primary editors and image selectors for Marotta on Money. In her spare time, she enjoys reading, sailing, and spending time with her family.

Follow Megan Russell:

Chief Operating Officer, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 700 financial articles. Her most popular post is "The Complete Guide to Your Washing Machine" while one of her favorites is "Funding a 3-Year-Old’s Roth IRA."