Fidelity and TD Ameritrade are two of the most popular brokerages in the world. I’m a customer of each. My 401K and Health Savings Account (HSA) is through Fidelity while my Roth IRA and taxable account is through TD Ameritrade.
I’ll preface this article by stating I don’t think you can go wrong with either one. But there are some meaningful differences which warrant knowing. Especially considering the type of investor (or trader) you are: fundamentalist or market technician.
This article will be different from most others on the topic. I’m not going to discuss trading commissions, fractional shares, account fees, etc… The two brokerages are quite comparable in these areas.
Instead, I’m going to focus on the practical use of each platform from a retail investor’s perspective. And to uncover which brokerage outshines the other in areas that matter most.
How Do They Differ?
Probably the biggest difference between the two companies is that Fidelity manages employee benefit programs (i.e. retirement plans) whereas TD Ameritrade doesn’t. I have a Fidelity account because it’s sponsored through my employer.
However, Charles Schwab, which acquired TD Ameritrade for $22 billion in 2020, does offer employee benefit programs similar to Fidelity. So, while TD Ameritrade doesn’t manage employer retirement plans like Fidelity, parent company Charles Schwab does.
Fidelity still remains as the largest retirement plan provider in the United States. But Charles Schwab has more assets under management.
Aside from this, Fidelity and TD Ameritrade offer all the products and services needed by retail investors.
Fidelity vs TD Ameritrade
Brokerages allow investors to buy and sell stocks, bonds, commodities, mutual funds and exchange-traded funds (ETFs). But this is the bare minimum product. Fidelity and TD Ameritrade also offer additional features which are invaluable to retail investors.
This is where the wheat is separated from the chaff.
Stock Screener
Finding good stocks to buy is half the battle in investing. A stock screener is a tool which allows investors to narrow in on stocks meeting specific criteria based on fundamental and/or technical data.
From a fundamental perspective, Fidelity’s stock screener is leaps and bounds better than TD Ameritrade’s. This is because Fidelity provides more fundamental data, such as gross margins and operating cash flow. Fidelity’s stock screener is also more customizable.
You can review one of my favorite Fidelity stock screens here.
From a technical perspective, TD Ameritrade’s stock screener is much better. TD Ameritrade operates a trading platform called thinkorswim (more on this later). The “scan” feature in thinkorswim is highly customizable and allows users to scan for stocks based on technical trading criteria. This may include trading volume, RSI, percent above/below a moving average, etc…
Fundamentalists would favor Fidelity, while market technicians would favor TD Ameritrade.
Mobile App
A lot of buying and selling takes place via smartphones these days. So having an intuitive, easy-to-use mobile app is non-negotiable.
For this one, TD Ameritrade takes the prize. Actually, the company offers two mobile apps. One for TD Ameritrade which matches the desktop version. And another for the thinkorswim trading platform.
Both of TD Ameritrade’s apps are intuitive, aesthetically pleasing and place information at your fingertips. Placing trades within the apps is also easy.
Fidelity’s mobile app, on the other hand, leaves much to be desired. While it’s aesthetically pleasing and covers the basics, its charts aren’t great and access to fundamental and technical data is limited.
Fundamentalists and market technicians would both favor TD Ameritrade.
Trading Platform
At some point in your investing career, you may be enticed into the world of trading. While I’d advise against it (here’s why), Fidelity and TD Ameritrade both offer trading platforms. Fidelity’s platform is called Active Trader Pro while TD Ameritrade’s is called thinkorswim.
I don’t have personal experience with Active Trader Pro. But after reading reviews, it sounds like the wanna be little brother of TD Ameritrade’s thinkorswim. I have a lot of experience with thinkorswim.
thinkorswim is an excellent trading (and charting) platform for retail investors. I unsuccessfully used it during my trial run at day trading. But it wasn’t the platform that caused my demise. It performed swimmingly.
It takes time and practice to learn to use thinkorswim to its full potential. But after a few weeks and a lot of YouTube videos, you’ll be up and running.
As a fundamentalist, I don’t pay much attention to technical indicators and charts. But when I do, I always use thinkorswim. For this reason, fundamentalists and market technicians would both favor TD Ameritrade.
Fundamental Data
As the name implies, fundamental data is what fundamentalist investors find most important. Fundamental data is information on a company’s operational performance. This may include gross margins, free cash flow growth rates and debt-to-equity ratios.
Fidelity provides a lot of historical information on past operating performance. I can easily look back at a 5 year history of operating cash flow, for example. And find return on invested capital (ROIC).
TD Ameritrade offers surface-level fundamental data. Covering only the basics on company operating performance. As a result, Fidelity takes the prize.
Technical Data
Market technicians believe you can tell where a stock is going based on where its been. This is where technical indicators come into play. Technicians use indicators like simple/exponential moving averages, relative strength index (RSI) and volume weighted average price (VWAP).
You’ve probably guessed it by now, but TD Ameritrade provides the best technical indicators and charts via thinkorswim. They’re easily customizable, and users can write script to build their own indicators. Click here to access TD Ameritrade’s thinkorswim learning center.
Fidelity offers charting and technical indicators as well. But nowhere near the depth and user-friendliness of TD Ameritrade.
Margin Rates
I’m generally not a fan of investing on margin, but to each their own. If you’re unfamiliar with margin, it’s basically a loan from your broker. So, it comes down to who offers the lowest interest rate, which currently is Fidelity.
An investor who takes out a $10,000 margin loan at Fidelity can expect a 12.575% interest rate. While the same investor at TD Ameritrade can expect a 13.5% interest rate.
Keep in mind, margin rates vary based on economic conditions and Treasury yields.
And The Winner Is…
If limited to a single brokerage, I’d recommend fundamentalists go with Fidelity and market technicians go with TD Ameritrade. Fortunately, investors aren’t limited to a single brokerage.
Regardless of investing philosophy, my ultimate recommendation is to use TD Ameritrade as your primary brokerage. But to pair it with Fidelity’s stock screener.
TD Ameritrade’s mobile app, charts and order execution are better for buying and selling. But Fidelity’s superior fundamental data and stock screener is how you’ll find stocks to buy in the first place.
Pair the two and make good use of each’s best features.
Bottom Line
When it comes to the basics: no cost trading, account types, investment vehicles, etc…, Fidelity and TD Ameritrade are near identical. For retail investors, the separator is within the features.
Fidelity’s stock screener reigns supreme and its fundamental data can’t be matched. TD Ameritrade excels in all the areas Fidelity doesn’t.
When the dust settles, Fidelity and TD Ameritrade are both excellent brokerages. And you can’t go wrong with either. But a pairing of the two may be the best recipe.
