Published in: Buying Stocks | Jan. 21, 2019
E*Trade vs. TD Ameritrade: Which Online Brokerage Is Best?
By: Jordan Wathen
E*Trade and TD Ameritrade are two of the biggest discount brokerages on the block. Here’s how they compare on prices and the features that matter most to investors.
As some of the oldest online discount brokers with more than 16 million accounts between them, E*Trade and TD Ameritrade are two of the largest discount brokerages in existence, and for good reason: Both offer features common of the best brokerage accounts, including low commissions, low (or no) minimum deposit requirements, and long lists of mutual funds you can trade on their platforms.
Below, we’ll look at a head-to-head comparison of E*Trade vs. TD Ameritrade on every make-or-break feature and product offering to help you decide which is better for how you trade and invest.
|Broker||Stocks and ETFs||Stock options||Mutual funds|
|E*Trade||$6.95 per trade||$6.95 plus $0.75 per contract||$19.99 (thousands for free)|
|TD Ameritrade||$6.95 per trade||$6.95 plus $0.75 per contract||$49.99 (thousands for free)|
Of course, determining exactly how much you'll pay isn't as simple as looking at the standard commission schedule. These two brokerages diverge when it comes to active investors and traders, as E*Trade charges a reduced commission ($4.95 plus $0.50 per options contract) when you place more than 30 trades per quarter.
But rest assured that you don’t have to churn your account to score discounts. Both E*Trade and TD Ameritrade have a select list of mutual funds and ETFs that you can trade without paying a commission or transaction fee, which can substantially reduce your average trading cost over time.
Mutual fund selection and commission-free choices
E*Trade and TD Ameritrade have a lot to offer the fund investor, as both offer thousands of mutual funds and ETFs that you can buy and sell without paying a commission. This table summarizes the differences between these brokers' fund freebies:
|Fund type||E*Trade||TD Ameritrade|
|Total mutual funds||More than 9,000||More than 12,500|
|No-transaction-fee mutual funds||More than 4,400||More than 1,900|
|Commission-free ETFs||More than 250||More than 300|
The number of funds isn't everything. Though E*Trade offers fewer commission-free ETFs than TD Ameritrade, its list is arguably better suited for long-term retirement investors. For example, E*Trade is the only broker that offers low-cost Vanguard ETFs (32 of them) on its commission-free lineup, including Vanguard’s wildly popular S&P 500 ETF, Total Stock Market ETF, and Dividend Appreciation ETF. Curiously, E*Trade put some of these popular Vanguard ETFs on its commission-free list shortly after TD Ameritrade dropped them from its line of commission-free funds.
TD Ameritrade offers a handful of low-cost SDPR ETFs, which can be used as the building blocks of a diversified portfolio. It offers a total of 24 ETFs with expense ratios of 0.10% or less in its lineup, many of which are SPDR and iShares index ETFs. In comparison, E*Trade offers 27 commission-free ETFs with similarly low expense ratios, a list which is dominated by Vanguard ETFs.
Minimum deposit requirements
Neither TD Ameritrade nor E*Trade have particularly onerous initial deposit requirements. TD Ameritrade is technically a no-minimum discount brokerage where you can get started with as little as $1, and E*Trade only requires a $500 deposit to open an account.
I’ll give TD Ameritrade a win on deposit requirements, though it comes with an asterisk. Yes, you can open a TD Ameritrade account with pocket change, but the truth is that you’ll need enough money to buy at least one share of a stock, an ETF, or a mutual fund, in order to actually invest your money. For this reason, the practical minimum deposit for any no-minimum broker is probably closer to $100, if not more.
TD Ameritrade and E*Trade are designed to fit the needs of long-term investors and frequent traders alike. Both brokers offer basic web browser-based platforms for long-term investors as well as fully-featured platforms for high-activity traders.
TD Ameritrade offers web browser, mobile app, and desktop platform capabilities. Its desktop platform, thinkorswim, is a favorite among investors who trade most actively. The thinkorswim platform is free to use, and doesn’t require a minimum balance for access, which also makes it one of the most accessible platforms offered by any discount broker. That you can deposit as little as $1 and get immediate access to a top-shelf trading platform is a big advantage for TD Ameritrade customers.
The fully-customizable thinkorswim platform offers hundreds of charting tools, powerful options strategy builders, and an impressive earnings report tool to show you how a stock has performed in the days leading up to and after an earnings release, just to name a few of the key features that users love.
E*Trade also offers web browser, mobile app, and desktop platform trading capabilities. Its powerful E*Trade Pro desktop platform is a favorite among active traders, though it comes with a catch: To avoid the $99/month fee for the platform, you’ll need to have a balance of at least $250,000, or place at least 30 trades per quarter. It’s certainly an impressive piece of software, though the minimum activity and minimum balance requirements price out new investors and less-active investors.
Those who trade stocks and stock options may find its free browser platform to be perfectly suitable. The browser platform carried over from OptionsHouse, which E*Trade acquired and merged into its platform in 2017. It remains a favorite among options traders, given its easy-to-use format and quick profit and loss calculators to find interesting options trading ideas. It’s safe to say that options traders may actually prefer the free OptionsHouse platform to the not-exactly-free E*Trade Pro platform.
And as far as mobile trading goes, it’s a toss-up between E*Trade and TD Ameritrade, both of which rank among the top for trading on the go. From conditional orders to complex option trades, both brokers have iOS, Android, and Windows apps that offer desktop-platform tools and functionality on smaller devices. E*Trade gets a slight edge in mobile trading, though, as it offers mutual fund trading by mobile device, whereas TD Ameritrade does not. Of course, mutual funds are meant to be held for the long haul, so that small distinction may not matter to traders rather than investors.
International stocks and ADRs
When it comes to international stocks, E*Trade and TD Ameritrade stick with the pack and only offer trading on U.S. tickers. Thus, investors can invest in foreign companies by way of American depositary receipts (ADRs), or by purchasing shares of companies with dual listings on domestic exchanges, but neither brokerage will route orders to international stock exchanges.
The truth is that a minority of online brokers offer the ability to send orders over international borders. If you want to transact directly on a foreign stock exchange, you may want to consider Charles Schwab and Fidelity, both of which feature electronic trading on international exchanges.
Research reports and commentary
In the earliest days, discount brokers were nothing more than a portal to the stock markets. They offered little more than just a way to place a trade, and as a result, discount brokers could charge lower commissions than their full-service rivals.
Over time, though, discount brokers have beefed up their research offerings as a value-add to their paying customers. For example, TD Ameritrade customers get access to nearly 50 different daily market reports, stock analysis from multiple third parties (CFRA, Credit Suisse, Market Edge, and more), as well as time-sensitive commentary on major events like earnings reports and economic releases.
Likewise, E*Trade offers a compelling research suite that includes reports from the likes of Moody’s, Thomson Reuters, Morningstar, and more. In addition, the company provides daily market commentary from Morningstar, major financial publications, and more, completely free, on all of its platforms.
I’ve barely scratched the surface here. If you wanted to read up on your portfolio and watch list around the clock, both brokers are chock full of content to keep you busy. Plus, both brokers, like all discount brokers, also offer a wealth of scanners and screeners in which you can sort the market for stocks and funds that meet specific parameters (dividend yields, price-to-earnings ratios, earnings growth, and so on).
The best online brokerage: E*Trade vs. TD Ameritrade
These two brokers are so close on so many things -- prices, fund selection, and research -- that picking a winner of the two largely comes down to a few “make-or-break” features.
TD Ameritrade has the clear advantage for new investors, considering that it has a no-minimum deposit requirement and the fact it makes its premier trading platform (thinkorswim) available to everyone, regardless of their activity or account balance. In addition, it also has an impressive offering of mutual funds and commission-free ETFs, which can be a great way to get started in the market when you’re working with relatively small sums.
In contrast, E*Trade has a “barbell” value proposition. On one hand, it is a compelling choice for long-term investors who are concerned about costs (commission-free Vanguard ETFs are a big advantage), and traders are likely to love its E*Trade Pro platform for making 30 trades per quarter or carrying a balance of $250,000 or more. Those who trade most actively may benefit from E*Trade’s variable pricing, which rewards its customers with $4.95 stock trades and $0.50 options contracts for placing more than 30 trades per quarter.
So, for the cost-conscious fund investors who don’t care about trading platforms and the most active of active investors, E*Trade gets the clear advantage.
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