Brokerage Comparison

What's a good brokerage for investing with Portfolio Recipes?

 

For implementing Tactical Portfolio Recipes (which have "t." in their ID) and Strategic Portfolio Recipe (which have "s." in their ID) choose a brokerage that has 1) low trading fees to reduce the rebalancing cost 2) an easy-to-use trading interface to save time.

 

Financial advisors usually have separate software or an advisor-only trading interface that allows quick portfolio rebalancing.

 

For do-it-yourself investors, we describe below three types of brokerages that can work with Portfolio Recipes. If would like to suggest an additional solution for implementing Portfolio Recipes, please contact us.

  

1. Portfolio Brokerage

We use the term "Portfolio Brokerage" for a broker that provides an online tool which allows rebalancing your entire portfolio based on percentage allocations. We like FolioInvesting.com for easy investing and rebalancing with Portfolio Recipes. FolioInvesting.com offers the following features that, as a group, are unmatched by other brokerages:

  1. Unlimited trades for a flat, annual fee. This saves money since you can rebalance as often as you need at no extra cost. They use a "window trade" system whereby trades are executed twice per day, but you can also place market orders for an extra fee. Their Unlimited Plan is $290 per year.
  2. Automated portfolio rebalancing tool. This saves time and prevents errors since it's just a few clicks to update your portfolio's composition.
  3. Buy and sell fractional shares of ETFs. This saves having to round to the nearest whole share. This allows you to follow a Portfolio Recipe's percentage allocation more closely. 
  4. Rebalance portfolios using percentages. This saves having to translate from a target percentage to a target dollar amount, then to a target share amount.

Brokerage Feature & Cost Comparison

The chart below compares costs at FolioInvesting, Schwab, Vanguard, and Fidelity.

  FolioInvesting Schwab Vanguard Fidelity
Cost to buy/sell ETF using a window trade $0 per trade (on Unlimited Plan) not available not available not available
Cost to buy/sell ETF using market order $4 per trade (on Unlimited Plan) or $10 per trade (regular plan) $6.95 $7.00 per trade (or less if you own $500K of Vanguard products) $7.95 per trade
Number of ETFs with no transaction fee 1938 (on Unlimited Plan) 228 70 (all Vanguard ETFs) 91
Cost to buy a transaction-fee mutual fund $0 (on Unlimited Plan) $76 $35 $49.95
Cost to sell a transaction-fee mutual fund $0 (on Unlimited Plan) $0 $35 $0
Number of mutual funds with no transaction fee 1626 4010 2623 3617
Early redemption fee for no-transaction fee (NTF) mutual funds $0 $0 $50 if sold within 60 days of purchase $49.95 if sold within 60 days of purchase

2. Discount Brokerages

The brokerages, such as Charles Schwab, Vanguard, and Fidelity have per-trade fees under $10, have a selection of no-fee exchange-traded funds, and have a mutual fund "supermarket."

 

Using No-Transaction Fee ETFs

One approach to keeping costs low at a Discount Broker is to use their no-transaction fee (NTF) ETFs. Many of the Tactical Portfolio Recipes (i.e., those recipes with an ID starting with "t.") are created using specific ETFs, such as EEM, that may have a transaction fee. FolioInvesting's Unlimited Plan gets rid of those fees, but if you're using a Discount Broker like Schwab, Vanguard, or Fidelity you have another option.

 

You may substitute no-transaction fee ETFs for the ones specified in the Portfolio Recipe. This is analogous to substituting margarine for butter (or vice versa) in a recipe... it won't be exactly the same, but it could be close.   See the table below, "How to Use No-Transaction Fee ETFs with Tactical Portfolio Recipes"

How to Use No-Transaction Fee ETFs with Tactical Portfolio Recipes

  What to buy at FolioInvesting

What to buy

at Schwab

What to buy

at Vanguard

What to buy

at Fidelity

 If a Portfolio Recipe calls for EEM: EEM SCHE VWO IEMG
 If a Portfolio Recipe calls for EFA: EFA SCHF VEA IEFA
 If a Portfolio Recipe calls for GLD: GLD SGOL GLD (no substitute available) GLD (no substitute available)
 If a Portfolio Recipe calls for IWM: IWM SCHA VB IJR
 If a Portfolio Recipe calls for IYR: IYR  SCHH VNQ  FREL
 If a Portfolio Recipe calls for QQQ: QQQ  SCHG VUG ONEQ
 If a Portfolio Recipe calls for SPY: SPY  SCHX VOO IVV
 If a Portfolio Recipe calls for TLT: TLT TLO VGLT TLT (no-fee at Fidelity)
 If a Portfolio Recipe calls for DBC: DBC USCI DBC (no substitute available) DBC (no substitute available)

3. Deep Discount Brokerages

These brokers offer low-cost or zero-cost trades. These brokerages have per-trade fees at $5 or less.

  Interactive Brokers Robinhood.com Tastyworks.com Tradezero.co
Cost to buy/sell ETF using market order 1/2 cent per share (minimum $1.00) $0 per trade $5 to buy, $0 to sell 1/2 cent per share (minimum $0.99)
Trading interface desktop app (Mac or Windows or Linux), web, mobile (Android or iOS) mobile only (Android or iOS) desktop app (Mac or Windows), web desktop app (Windows), web, mobile (Android or iOS)
Cost to buy a transaction-fee mutual fund $14.95 not available not available not available
Cost to sell a transaction-fee mutual fund $14.95 not available not available not available
Number of mutual funds with no transaction fee 2912 not available not available not available
Early redemption fee for no-transaction fee (NTF) mutual funds $0 not available not available not available