Published in: Buying Stocks | Dec. 4, 2018

Online Brokerage Comparison: E*Trade vs. Fidelity

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If you’re considering E*Trade and Fidelity for your next brokerage account, here’s a rundown of each brokerage’s advantages.

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Over the past couple of decades, the way Americans invest has evolved tremendously. The emergence and evolution of online brokerages has allowed millions of people to buy stocks, bonds, mutual funds, and more at a bare minimum of expense, and virtually instantaneously.

However, not all online brokerages are the same. While most popular brokerage platforms share some similarities, there are some primary differences investors should consider before opening an account. Two of the most popular online stock brokers are E*Trade and Fidelity, so here’s a rundown of the key similarities and differences that should factor into your decision.

Comparing the costs

For most stock and option investors, Fidelity is the cheaper of these two brokerages. For both stocks and options, Fidelity’s standard commission rates are less than E*Trade’s. For mutual funds, both brokerages offer an extensive list of no-transaction-fee mutual funds, but if you choose a no-load fund that’s not on the list, E*Trade is the cheaper of the two.

Broker Stock trades Option trades Mutual funds (no-load)
E*Trade $6.95 $6.95 + $0.75 per contract $19.99
Fidelity $4.95 $4.95 + $0.65 per contract $49.95

Notice that I said Fidelity is cheaper for “most” stock and option investors. For clients who trade frequently -- which E*Trade defines as at least 30 trades per quarter -- E*Trade has a more favorable commission structure. Stock commissions are cut to $4.95 for these active investors, matching Fidelity’s standard stock-trading commission, and the per-contract options commission drops to just $0.50, even better than Fidelity’s rate.

Mutual fund access

Both E*Trade and Fidelity offer excellent access to mutual funds and have a long list of no-transaction-fee options. As of the latest available information, Fidelity has the larger total selection of funds, with 12,200 altogether versus E*Trade’s 9,000. However, E*Trade offers 4,400 of these funds on a no-load, no-transaction-fee basis -- 600 more than Fidelity.

To be perfectly clear, all of these numbers are quite large. Unless you have a specific mutual fund in mind that you’d like to buy, you shouldn’t have much of an issue with finding a suitable commission-free mutual fund on either platform.

Commission-free ETFs

Over the past few years, commission-free ETFs have become a valuable perk of investing through certain discount brokers. Not only do exchange-traded funds allow investors to construct a diverse portfolio of stocks, bonds, or commodities at a low ongoing cost, but commission-free ETFs make it far more cost effective to build such a portfolio over time.

As an example, let’s say that you invest about $500 per month, and that you split your investments among four ETFs. Over the course of a year, this amounts to 48 purchase transactions. Even based on a $4.95 commission rate, those four ETFs being commission-free would save you about $238 per year. That’s an additional $238 that can be invested, which can make a big difference to your long-term returns.

Both of these brokerages offer commission-free ETFs, but E*Trade really shines in this area. Fidelity offers a diverse selection of nearly 100 commission-free ETFs, but E*Trade offers about 250. Plus, E*Trade is unique in that its commission-free ETF selection includes 32 dirt-cheap Vanguard ETFs, which are often favorites among value-conscious investors.

Minimum opening deposits

It’s 2018, and the majority of online brokerages no longer have a minimum account balance. Fidelity is one of them -- you can literally open an account with a dollar, and you can start investing as long as you can afford a single share of whatever investment vehicle you choose.

On the other hand, E*Trade requires a minimum initial deposit of $500 to open a brokerage account. While this isn’t exactly a high deposit requirement, especially compared with the requirements of many full-service brokers, it is a significant difference between the two.

Trading tools and research

Both brokerages offer clients access to independent research from a number of different providers. Fidelity offers a particularly wide availability of research from over 20 different independent providers.

And, while we at The Ascent are more buy-and-hold oriented, both brokerages offer special platforms for active traders. Fidelity has its Active Trader Pro software, and E*Trade offers the company’s OptionsHouse trading platform (despite the name, it isn’t just for options trades).

International stock trading

E*Trade used to have a global trading platform, which allowed investors to trade directly on international stock exchanges, but it was discontinued a few years ago. On the other hand, Fidelity still provides investors access to foreign markets.

To be clear, you can invest in international stocks that trade on U.S. markets, including those that trade as American Depository Receipts (ADRs) with either brokerage. However, if you want to be able to trade directly on an international stock exchange, Fidelity is the way to go.

Just to name a few, as of this writing, Fidelity’s brokerage clients can trade on international stock markets in Australia, Canada, Germany, Hong Kong, Japan, and the U.K. In all, Fidelity clients can trade on 25 foreign markets, and can use either U.S. dollars or each market’s local currency.

Mobile platforms

As is typical of brokerages in 2018, both E*Trade and Fidelity offer mobile trading apps. E*Trade is a pioneer in mobile trading, and its mobile app is highly rated with a 4.7 out of 5 on the Apple App Store. Plus, E*Trade also offers an active trader-focused app, designed to compliment its OptionsHouse active trading platform.

The Fidelity Mobile app is also highly rated, with the same 4.7 out of 5 rating on the App Store. It’s fair to say that if mobile functionality is a priority for you, both of these brokerages should have what you’re looking for.

ATM and debit card access

The majority of online brokerages allow clients to obtain a debit card connected with their account. These two are no exception, and also offer fee-free ATM access.

Fidelity reimburses non-bank ATM fees up to five times per month, and charges $1 for ATM withdrawals beyond five. E*Trade also reimburses up to five ATM fees per month, but offers unlimited fee reimbursement for clients with $50,000 or more in E*Trade accounts (including non-brokerage bank accounts).

So, both brokers are pretty evenly matched here, with a slight edge to E*Trade for clients with relatively large accounts.

In-person investing help

To be clear, one of the perks of using an online brokerage is that you don’t need in-person help to invest. In addition to user-friendly online and mobile platforms, both of these brokers offer well-staffed help lines, plenty of educational tools, and more.

Having said that, sometimes you may want to speak to an investment advisor face-to-face. In this area, Fidelity is the clear winner.

E*Trade does have physical branches, but it only has 30 of them in 16 U.S. states and Washington DC. On the other hand, Fidelity has nearly 200 branches located across the United States, so for many people a Fidelity branch will be far more convenient than your nearest E*Trade branch.

Which is right for you?

Both Fidelity and E*Trade are excellent online brokerages, and there’s a reason they’re among the most popular in the business. However, like most financial comparisons, there’s not a one-size-fits-all answer to the question of “which is better?”

The better choice out of the two may depend on some of your personal investment priorities, as well as your current financial situation. With that in mind, here’s a breakdown of the key advantages each of these brokerages has over the other:

You might prefer Fidelity if:

  • You want to be able to trade on international stock exchanges.
  • Low commissions are your main priority, and you aren’t an active trader.
  • You want ready access to face-to-face investment help, but don’t live near one of E*Trade’s branches.

You might prefer E*Trade if:

  • You want top-notch trading tools.
  • You have more than $50,000 to invest and want frequent ATM access to your cash.
  • You plan on making at least 30 trades per quarter (10 per month). 

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