My Review of TD Ameritrade Online Brokerage Account and Free ETF

TD Ameritrade is one of online financial brokerage service provider with an abundant online stock trading platform for its investors as well as traders. TD Ameritrade is part of TD Bank Financial Group, a Canadian Financial Bank company .It offers an opportunity to trade stock, option and mutual fund online whether buy or sell for $9.99 per trade. TD Ameritrade also offers TD Ameritrade Apex software platform that gives traders powerful trading tools including Trade Triggers, QuoteScope, SnapTicket, Market Motion Detector, and StrategyDesk. TD Ameritrade also offers its customers additional financial services accounts such as Money Market accounts, CD’s, and online High Yield Savings account. It also provides a mobile trading platform for blackberry, iphones & other smartphones. Recently, it also offers 100 ETFs for free with no commission if the Exchange Traded Funds ETF was held for 30 days.

As one of largest brokerage in the world, TD Ameritrade was founded in 1971 as First Omaha Securities. The current headquarter is located at Omaha, NE USA. TD Ameritrade is a brokerage and banking company listed in Nasdaq with ticker: AMTD. TD Ameritrade also acquired ThinkorSwim (TOS) this part year.

It currently uses its own clearing service to hold the client asset. TD Ameritrade Clearing Inc, member of FINRA & SIPC, holds and clears all client trade. All TD Ameritrade accounts are insured under SIPC up to $500,000 ($100,000 cash) and supplemental Lloyd’s of London coverage up to $150 million ($1 million cash).

The following is the standard commission for trading using TD Ameritrade platform:

• Products: Stocks, bonds, CDs, UITs, mutual funds, options, forex
• Market Orders: $9.99/trade
• Limit Orders: $9.99/trade
• IVR Phone Orders: $34.99/trade
• Broker Assisted Orders: $44.99/trade
• ETF Market/Limit Orders: $9.99/trade
• Commission Free ETFs: $0.00/trade with requirement
• Mutual Funds: $49.99 for no-load funds. NTF mutual funds: $0.00
• Options: $9.99/trade+$0.75/contract
• Futures: $3.50/contract
• Minimum to Open: $0, $2000 for margin account.
• Electronic funding minimum: $500
• Inactivity Fee: $0.00
• Some Other Fees: Paper Statement: $2.00, DTC Out:$25.00/security, ACAT Out:$75.00.
• Maximum Margin Rate: Based on proprietary base rate

Opening account is straight forward; you just need to fill the online application through TD Ameritrade website. You can open various account types such as individual, joint, custodial, and Individual Retirement accounts (IRA) either traditional IRA or Roth IRA. They may require you to submit driver license identification copy. The application only takes about 10-15 minute. Once you are done, you’ll need to wait for their approval. Then, you can setup how you want to fund your account.

As many typical online brokerages account, there are 4 different ways to fund your TD Ameritrade account:

1. Wire Transfer – usually can be done same business day
2. Transfer an account from other brokers .This will take more than 10 business days
3. Mailing a check will take 5 business days
4. Electronic Transfer (ACH transfer) will take up to 2 business days.

For International or Foreign investor or non US resident, you can apply TD Ameritrade account through website. It will direct you to your regional international website such as TD Waterhouse and Internaxx. Typically, you will need to submit your account by mail. You will need to submit W-8Ben and ID or Passport along with your application. The minimum balance to open an account might be higher than US resident account.

For stock or ETF order, the standard commission is $9.99 per trade with no limit of shares amount. As noted, for broker-assisted trades, the commission is $44.99 per order. When trading during pre and post market hours, there is no additional fee such as ECN fees. TD Ameritrade applies a simplified flat-fee based commission structure. There is no catches or fine print notes for trading using Ameritrade. There is no limit on total trade size or price.

The following order types can be placed on TD Ameritrade: Market order, Limit order, Stop loss oder, Stop limit order and Trailing Stop Loss Order ($ and %).

For option trading, the customer can use their option platform to trade option. The cost of 1 contract will cost $10.74 commission fee ($8.95 ticket fee + $0.75 per contract), while 10 contracts will cost $17.49 commission fee.

For mutual funds, there are about 1,800+ no load no transaction fee mutual funds with no commission fee for buy or sell. It also offers Premier List Mutual Funds by Morningstar. There are 13,000+ mutual funds for selection with $49.95 per trade of mutual funds.

Recently, TD Ameritrade has started offering 100+ commission-free ETFs when the ETF is held for 30 days. The ETFs are selected by Morningstar. Compare to other brokerages (Vanguard, Fidelity and Charles Schwab), TD Ameritrade offering is definitely more. 30 days holding period is definitely a negative compare to other ETF provider. However, If you are a long term investor, this shouldn’t be a problem. Please note, if you don’t hold the ETF for 30 days, you will pay $9.99 commission per trade.

The current ETFs offering include:

• 31 Equity ETFs:
• 3 REIT Sector ETFs
• 32 Bond ETFs
• 31 International ETFs
• 4 Commodity ETFs

I have provided the list of 58 ETFs which has Morningstar rating of 3 stars. Most of these ETFs have low expense ratio and a good vehicle for investment diversification.

Note: The ETFs include Vanguard ETFs, ishares ETFs, SPDR ETFs, Powershares ETF and more.

Advantages of TD Ameritrade Account

• Feature and research rich offering for all client types including research by Morningstar, S&P, and Market Edge, etc
• Customer service is very friendly and knowledgeable
• Offer thinkorswim by TD Ameritrade trade platform.
• Also offer Pre market and Post Market trading for no additional fees.
• Offer 100+ ETFs for free when the ETF is held for 30 days
• Straightforward pricing. There is no hidden fee and there is no minimum account balance.
• Many powerful trading tools for use.

Disadvantages of TD Ameritrade Account

• Commission rate is still higher despite competition with Fidelity & Schwab
• Most tools can only be accessed by paying premium fees

Customer issues from research

1. Some customer has a poor customer service experience
2. Issue with trading platform from time to time
3. Issue with third party marketing ploy
4. Issue with Margin rate not as advertised
5. Order was canceled without notice

In recap, TD Ameritrade offers a standard web based trading platform and a desktop software application of thinkorswim from TD Ameritrade. It also offers a series of mobile applications. Some of the various mobile applications compatible with TD Ameritrade include TD Ameritrade Mobile for the iPhone, ipTrader, another iPhone specific application, and iStockManager, a generic mobile platform that is compatible with iPhone, BlackBerry and most smartphone handsets.

TD Ameritrade does offer a lot of product innovation for brokerage industry but falls flat with poor stock trading execution under extreme conditions for limit trades. Margin rates are also not the strongest part of TD Ameritrade offering compare to other brokers at all balance levels.

With the new offering of 100 ETFs to trade for free, it does create a new opportunity for long term investor or trader. Though the commission fee is still high compare to Fidelity or Schwab or Scottrade, I would recommend you consider TD Ameritrade especially for their premium tool and research report as well as free ETFs offering.