Published in: Buying Stocks | Dec. 4, 2018

Online Brokerage Comparison: E*Trade vs. TD Ameritrade

While E*Trade and TD Ameritrade have a lot in common, there are some key differences investors should understand. This comparison of the two online brokerages can help make your investment decision easier.

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The investing world has evolved considerably over the past couple of decades. There are now plenty of online stock brokers which allow everyday Americans to purchase stocks, bonds, mutual funds, and ETFs with a simple click of the mouse, and for a fraction of the cost of investing through a full-service brokerage.

Two of the most popular online discount brokerage firms are E*Trade and TD Ameritrade. While the two platforms share many similarities, there are some key differences investors should be aware of before choosing one over the other. With that in mind, here’s a comparison of these two online brokerages that can help make your decision of where to open a brokerage account easier.

Comparing the costs

The most compelling reason to use an online brokerage as opposed to a full-service brokerage firm is for the cost advantage. To be clear, price certainly isn’t the only thing you should look at -- after all, that’s why this comparison doesn’t simply end after this section -- but it is a key factor.

When it comes to pricing, E*Trade and TD Ameritrade are on pretty equal footing. Both brokerages’ standard stock and options commissions are identical, and while both have plenty of no-transaction-fee (NTF) mutual funds to choose from, E*Trade has a slight edge for investors who choose no-load mutual funds that aren’t on the NTF list:

Broker Stocks and ETFs Options Mutual funds
E*Trade $6.95 $6.95 plus $0.75 per contract $19.99 for no-load funds
TD Ameritrade $6.95 $6.95 plus $0.75 per contract $49.95 for no-load funds
 

While TD Ameritrade prides itself on having one simple pricing structure for everyone, E*Trade offers a discounted commission structure for frequent traders (defined as more than 30 trades per quarter). In this case, your commissions would drop to $4.95 for stock and ETF trades, and for options trades, the per-contract fee would be reduced to $0.50.

So, while the cost structures will be the same for most investors, we have to give E*Trade the edge for active traders and investors who want mutual funds that aren’t on a NTF list.

It’s also worth mentioning that if price is your primary concern, there are others you may want to take a closer look at. Fidelity and Charles Schwab are two examples, both with $4.95 commissions for all customers.

Mutual fund access

Both brokers offer a wide selection of mutual funds -- TD Ameritrade offers about 12,500 different funds as of the latest available information, while E*Trade has a slightly-smaller selection of about 9,000.

However, while TD Ameritrade has a little more than 1,900 mutual funds on its no-transaction-fee list, E*Trade’s NTF list is more than twice as long, with 4,400 to choose from.

The takeaway is that both brokerages offer a vast selection of mutual funds without transaction fees, so unless you want a specific mutual fund that isn’t on one or both brokers’ lists, this shouldn’t be a major focal point.

Commission-free ETFs

Over the past few years, commission-free exchange-traded funds, or ETFs, have become a major perk offered by many major online brokers, and these two are no exception. Not only do ETFs offer an easy way to invest in a diverse portfolio of stocks or bonds with low ongoing expenses, but commission-free ETFs allow you to add to your portfolio periodically with no additional cost.

For example, let’s say that you are building a portfolio by investing monthly in three different ETFs, so you’re making 36 purchases per year. Choosing commission-free ETFs (with either brokerage) saves you over $250 per year -- that’s a pretty significant amount of money.

TD Ameritrade offers more commission-free ETFs, with 303 versus E*Trade’s 250. However, and this is a big deal for many investors, E*Trade offers a selection of 32 dirt-cheap Vanguard ETFs, which are favorites among value-conscious investors.

Minimum opening deposits

While most online brokerages have done away with account minimums, E*Trade is one of the few that still has a mandated minimum starting balance. Specifically, to open a brokerage account with E*Trade, you’ll need at least $500 to get started.

On the other hand, TD Ameritrade has no minimum balance requirement. You can literally open an account with a dollar, and you can get started investing as long as you can afford a single share of whatever investment you want to buy.

Trading tools and research

Both of these companies offer a wide variety of trading tools to use. E*Trade customers have access to the company’s OptionsHouse trading platform (not just for options), while TD Ameritrade offers its thinkorswim trading software. While we aren’t frequent traders, if you are, these platforms should both have the features you’re looking for.

For more long-term-oriented investors, both brokerages offer access to stock research from several different firms, such as Credit Suisse, Thomson Reuters, Morningstar, and more. The bottom line is that these are two of the more feature-packed of the discount brokers, so neither company is lacking in this department.

Mobile investing and trading platforms

E*Trade offers a standard mobile app, as well as an advanced trading app designed to compliment its OptionsHouse trading platform. TD Ameritrade has a similar structure. There is a mobile app that is suitable for most investors’ needs, while the TD Ameritrade Mobile Trader app is designed for more active traders.

Both brokerages’ apps are highly-rated. The E*Trade Mobile app currently has a 4.7 out of 5 rating on the Apple App Store, while the TD Ameritrade Mobile app has a 4.2 out of 5. Although E*Trade has a slightly higher rating, it’s fair to say that both brokerages have high mobile functionality.

ATM and debit card access

Both brokerages offer their clients debit cards linked to their account, and also offer ATM fee reimbursement, so it may not cost you anything to withdraw cash directly from your brokerage account.

In E*Trade’s case, customers with $50,000 or more in their accounts (including E*Trade bank accounts, if you have one) get unlimited ATM fee reimbursement. If you don’t exceed the $50,000 threshold, you’re limited to five reimbursements per month.

TD Ameritrade is a bit more generous, extending the fee reimbursement to all of its brokerage customers, regardless of account balance. Plus, keep in mind that clients can use TD Bank ATMs for free, without having to keep track of whether their fees have actually been reimbursed.

In-person help

While phone support, live chat, and educational tools on a brokerage’s website are nice, sometimes it’s just better to get advice from an actual person.

This is another area where TD Ameritrade shines. While E*Trade does have a physical branch network, it has just 30 locations in 16 states and Washington DC. On the other hand, TD Ameritrade has a network of hundreds of branches located across the United States. So, depending on where you live, it could be far more convenient to visit a branch and get face-to-face help with your investments as a TD Ameritrade customer.

So, which is best for you?

To sum it up, both E*Trade and TD Ameritrade are excellent online brokerages. Neither is particularly cheap in the context of the competitors on the market, but these are two of the most popular and feature-packed online brokerages you can choose from.

And, like most financial topics, there’s no one-size-fits-all best option. The better choice for you depends on your personal preferences and your particular financial situation. So, to wrap it up, here are some of the reasons you may be better off with one of these brokers than the other.

You may prefer E*Trade if:

  • You want to invest in mutual funds that aren’t on the no-transaction-fee list.
  • You plan to trade stocks or options more than 30 times per quarter.
  • You want to invest in Vanguard ETFs commission-free.
  • You want to buy stocks on international markets.

You may prefer TD Ameritrade if:

  • You don’t have at least $500 to start investing right away.
  • You plan on using ATMs frequently to access your account’s cash.
  • You want access to in-person help. 

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