Sticking With TD Ameritrade For Now
Written: Dec 27 '07
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Product Rating:
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Pros: relatively low, flat-rate commissions on equity trades; electronic deposits and withdrawals; brokered CDs.
Cons: bad cash options; high transaction fee for a lot of popular mutual funds; hacker attack.
The Bottom Line: Depending on your investment choices, TD AMERITRADE may or may not be right for you.
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| WilliamJones's Full Review: Ameritrade |
"You know it’s a very sacred thing, the nest egg" - Albert Brooks, Lost in America
Ameritrade is now TD AMERITRADE, after acquiring TD Waterhouse in 2006.
I've been a TD AMERITRADE client for several years, and plan on staying with them. To be honest though, I can't see my way to giving them higher than a three-star rating, in that I do have some gripes. These issues aren't a "deal breaker" for me—not yet anyway—although I have contemplated a switch to either Fidelity or Schwab. Just so you know.
What I like:
TD AMERITRADE is good news for the do-it-yourself investor in that you can buy and sell stocks, bonds, mutual funds and other financial products. You can do this, more often than not, at a relatively low fee. Online stock trades are always $9.99 (up from the $8 they charged when I first opened my account). They do tack on a $2 fee if you want them to mail you a paper confirmation of your trade, but you can easily opt out by changing a setting in your profile. Then, if you still want a paper copy, you can print it yourself (you'll need Adobe's free Acrobat Reader to do this).
If, like me, you prefer investing in mutual funds rather than individual stocks, they have quite a few no-load funds that are also NTF (or "no transaction fee"). Here you simply pick one from their list and enter the dollar amount you want to invest. Get your order in before 4:00pm EST and you'll get that day's closing price.
These funds all have minimums (typically $2,500, sometimes lower), so you need to check the fund's prospectus to determine that. And while you're at it you'll want to see how long you must hold the fund to avoid a redemption fee. This varies from fund to fund, but you need to be aware that even if your fund doesn't charge a fee, TD AMERITRADE may, if you redeem your shares within 90 days. Currently, that fee is 0.60% of the transaction amount, with a $39 minimum and a $199 maximum.
Because of this some people prefer exchange-traded funds. ETFs trade just like stocks, so you'll take a $9.99 hit to buy and sell. However, there is never a redemption fee to worry about.
TD AMERITRADE also offers a lot of traditional banking products. I don't like the CD rates at my local bank, so I recently purchased a brokered CD through them. While you need to be aware of some subtle differences between brokered CDs and regular CDs, it's worth investigating. CDs are sold in $1,000 increments, and there's a 2 CD ($2,000) minimum. The fee is "on a net yield basis," so it's not apparent to the buyer.
It's also easy to access your money via electronic deposits or withdrawals (not available for IRA accounts). To start, you need to go to "Bank Setup" (click on "Deposit/Withdraw" under the "Portfolio & Accounts" tab) and provide them with your bank info. This includes your bank's ABA number as well as your personal account number. (If you're linking to a checking account, both should appear on your checks.) After you submit this information, TD AMERITRADE will make two small deposits into your account. Both of mine were less than a dollar. This should occur within two business days. Once you know the amounts, click on "Verify Bank Information" and enter them (the order in which you enter the deposits doesn't matter). If they match up, you're good to go. However, if you fail to verify the deposits within 10 business days, the setup will expire and you'll have to start over again.
I like this feature a lot, because it allows me to quickly and easily move money into or out of my checking account. As a security precaution, TD AMERITRADE makes you re-enter your password before you can initiate a transfer. I also receive an e-mail notification whenever I make a withdrawal, which includes a "transaction ID" number.
For me, it doesn't make sense to have a lot of money in a checking account earning very little interest, so now I just keep enough to pay my bills. I only have the one bank setup, but you can enter up to five different ones.
Don't want to do ACH transfers? You can deposit funds by sending them a check. Withdrawals by check are free as well, "if you choose to have your check sent via U.S. First Class Mail."
Another positive, I suppose, are the many trading tools available to you. There are no less than 25 of them, none of which I use (if you're an active trader these may be helpful).
In terms of the website experience, I like it. The site is well designed and easy to navigate, and you can customize certain aspects of it. For example, you can pick which content modules appear on the Home Page. Importantly, the website is always up and running. I've never had a problem accessing the site or my account, and I log on frequently.
What I don't like:
My biggest complaint concerns the cash "sweep" options, or more specifically, the lack of options. Earlier this year they switched clients out of third-party money market funds, forcing them into a money market fund held at TD Bank. Initially, the interest rate was the same, so I didn't say anything. Now, however, I notice the yield has gone down—nearly a quarter of a point, comparatively. Sadly I've come to realize I'd be better off had things stayed the same. Vanguard, Fidelity, Schwab, they all have good in-house money market products. Not TD AMERITRADE.
The cost of buying and selling some mutual funds has also gone way up. I scour the universe looking for the best no-load funds, and sometimes the best are not NTF (i.e., they come with a transaction fee). Two years ago that fee was $18; now it's $49.99. Here, Vanguard and Fidelity have a distinct advantage. Both have their own stable of funds, so they can offer them without a fee. If you have your heart set on some funds in these families, it may pay to open an account with them.
Security has also become an issue of late. In a 2007 press release, TD AMERITRADE announced the elimination of malicious malware from its systems. This security breach affected "[i]nformation such as email addresses, names, address and phone numbers," but did not affect sensitive data, according to the company. This is not something you want to hear, but in the same breath it hasn't shaken my confidence.
Additional info:
* There is no minimum funding required to open an account
* Accounts funded with less than $1,000 are not eligible for any promotions
* Electronic funding minimum is $500
* Margin or option privileges on account require a minimum of $2,000
* No maintenance fees
See:
http://www.tdameritrade.com/standardaccountsdetail.html
Recommended:
Yes
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WilliamJones
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Member: William Jones
Location: Lemon Grove, CA
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