E*TRADE Review

This E*Trade review will show how the online stock broker simultaneously caters to active traders with multiple trading platforms and $0 commissions, while also appealing to long-term investors with thousands of mutual funds and ETFs that can be traded completely free. We’ll tell you everything you need to know about the online broker, from how to get free trades every month to outlining what kind of investor E*TRADE is really the right fit for.

The best stock brokers have a “special sauce” and we look for the features that define the service offering as a whole. For E*TRADE, we think it all boils down to a few big advantages:

1. Platform -- Though we’re long-term investors who don’t necessarily care about flashy charts, it’s hard to deny that E*TRADE has built a large following who love its browser and desktop-based platforms. It’s free OptionsHouse platform has a particularly large fan base among options traders.
   
2. Commission-free ETFs -- One major advantage of E*TRADE is that it offers the ability to buy and sell Vanguard ETFs commission-free. Vanguard ETFs have some of the lowest expense ratios, but very few discount brokers make them commission free.
   
3. Branch offices -- People who live near an E*TRADE branch get an additional avenue for customer support through one of its brick-and-mortar branches. Given its branch network isn’t as robust as TD Ameritrade, Fidelity, or Schwab, you may want to see if there’s an E*TRADE nearby before opening an account. (Frankly, 24/7 phone and online chat support is good enough for most investors, anyway.)
   
4. Low minimum deposit -- E*TRADE does have an account minimum, but at just $500, the minimum deposit to open an E*TRADE account allows just about anyone to get started with relatively small sums of money. Of course, mutual funds offered through E*TRADE can have their own minimum investment requirements that are higher or lower than the minimum to open an account.

The discount brokerage industry has changed for the better. As prices have only gone down over time, the difference between the costliest brokers and the cheapest brokers now amounts to just a couple dollars per trade.

E*TRADE is now in line with most of the industry by offering $0 commission. Customers who make at least 30 options trades per quarter, see a discount of $0.50 per contract. E*TRADE’s option fees fall from one of the highest among discount brokers to one of the lowest for active traders who qualify for lower pricing.

E*TRADE’s commissions are flat, too, so those who use E*TRADE to trade low-priced stocks (penny stocks) won’t endure higher commissions for buying thousands of shares in one transaction. Likewise, E*TRADE’s dividend reinvestment feature allows for reinvesting dividends on certain stocks without paying a commission, and it also allow dividends to be reinvested into partial shares of stock. These combined cost-cutting perks are common areas we think make for the best online stock brokers for beginners.

Fund investors will find plenty to like about E*TRADE. That’s because it offers a wide selection of mutual funds, and many mutual funds and ETFs can be purchased without paying a commission or transaction fee. E*TRADE list of commission-free ETFs particularly impressive, given it includes some fund managers other brokers leave out.

Importantly, E*TRADE offers 32 Vanguard ETFs on its commission-free ETF list, including investor favorites like the Vanguard S&P 500 ETF (VOO), and Vanguard Total Stock Market ETF (VTI). These ETFs, which were once commission-free at its rival, TD Ameritrade, may be a major selling point for buy-and-hold index investors.

Furthermore, with more than 4,400 no-load, no-transaction-fee mutual funds, E*TRADE offers far more truly free funds than most other brokers. Though many may think of E*TRADE for day trading, it’s just as much a brokerage for long-term mutual fund investing, too.

The costs of having and using a brokerage account or IRA go beyond what it costs to make a trade. Discount brokers also charge certain fees for activity, and it’s worth reading a broker’s fee disclosures in full before opening an account. That said, we took a look at E*TRADE’s fee list, and thought there were a few fees that necessitated some discussion.

• Early redemption fee for no-load, no-transaction-fee funds -- Though discount brokers offer mutual funds you can buy and sell for free, they won’t let you trade them for free. If you redeem your investment in a no-load, no-transaction-fee fund after holding it for less than 90 days, you’ll incur a $49.99 redemption fee.
  
• Short-term trading fee for commission-free ETFs -- E*TRADE charges a fee when you sell a commission-free ETF after holding it for less than 30 days. The fee starts at $19.99 for customers who have placed less than 150 stock and options trades during the quarter, and falls to $15.99 for customers who have placed more than 150 stock and options trades during the quarter. These fees are found across the industry, but note that the short-term trading fee exceeds the normal commission an E*TRADE customer would pay to buy and sell an ordinary ETF at the rate of $6.95 per trade, or $4.95 per trade ($13.90 or $9.90 per roundtrip, respectively).

Other than these two fees, there aren’t any fees that stick out as being particularly notable. E*TRADE doesn’t charge an inactivity fee, so investors don’t have to worry about seeing their balance getting drained if they do not log in to make a trade very few months.

Active traders love E*TRADE’s basic web platform, as well as its advanced platform for active traders who qualify for access.

Starting first with the basic web platform, it contains many of the features active traders and investors like to see -- free streaming market data, market commentary, analyst research, and a lengthy list of screeners to sort the market to find good investments. Making a trade is as easy as making a few clicks, simple enough for investors of all experience levels.

Alternatively, E*TRADE has a powerful web-based platform thanks to its acquisition of OptionsHouse, a competing brokerage it acquired in 2017. The OptionsHouse platform offers impressive charting capabilities, and options trading features that have made it one of option traders’ favorites. In particular, the platform produces graphics to show the maximum profit or loss and breakeven point for a given options trade, which makes it easy to see the potential risks and rewards of complex (multi-leg) options positions.

E*TRADE Pro is the discount broker’s fully-featured platform for active traders. Made for desktop or laptop users, it requires Pro Elite status (30 stock or options trades per quarter, or a balance of $250,000). Alternatively, it can be purchased at a price of $99 per month. With features that include Level II quotes, advanced charting tools, and even a live Bloomberg TV feed, it’s built with active traders in mind.

E*TRADE Mobile and E*TRADE Mobile Pro are available on iOS, Android, and Windows devices, giving customers a powerful platform on which they can place trades on just about any device, at any time. Importantly, the OptionsHouse platform also scales for mobile devices for a browser-based solution on mobile devices and tablets, so you don’t have to download an app to place trades on devices with smaller screens.

Like most brokers, E*TRADE offers margin loans to investors with rates that vary on a sliding scale. The larger your debit balance (the amount borrowed) the lower the interest rate you pay on margin loans. The table below shows what E*TRADE charges based on the amount borrowed.

E*TRADE has some of the highest margin rates of brokers we’ve reviewed, given it isn’t until an investor carries a balance in excess of $50,000 that the interest rate falls out of the double digits. For investors who use a lot of margin, the cost of carrying a balance at a high rate may quickly overshadow the benefits of lower commission prices or a fancy trading platform, since carrying a balance as small as $5,000 on average would cost more than $500 over the course of a year.

Of course, few long-term investors use margin anyway, choosing instead to simply use a cash account in which they buy or sell investments with cash they have in their account. If you use a cash account rather than an E*TRADE margin account, the cost of margin is irrelevant.

Though discount brokers don’t offer the handholding that full-service brokers do, they offer some level of customer support by phone and online. E*TRADE has 24/7 phone and online chat support, which investors have come to expect of any large discount brokerage.

Investors who want to speak to an agent in person may find they live near a brick-and-mortar office. E*TRADE has 30 branches in 16 states and Washington D.C., fewer than some of its large brokerage peers, but more than the vast majority of online discount brokers. E*TRADE’s branch locations are limited to the largest cities in the United States (cities in the top 25 metro areas by population, primarily).

Discount brokers aren’t known for having large in-house research arms, which helps them keep costs low, but they don’t leave investors in the dark, either. E*TRADE offers a number of research reports and tools, some of which are detailed in the list below.

• Independent research reports -- E*TRADE customers enjoy access to four independent research providers, getting access to reports from Thomson Reuters, MarketEdge, Morningstar, and SmartConsensus.
  
• TipRanks -- E*TRADE pulls consensus price targets from analysts who are ranked on TipRanks, an online service which tracks the accuracy of sell-side analysts, columnists, and other market followers.
  
• Screeners -- Stock, ETF, and mutual fund screeners are numerous, but one area where E*TRADE really shines is in options, owed to its OptionsHouse platform. StrategySEEK enables an investor to search for options trades based on their view of where a stock may trade in the future, to maximize the profit or loss, or minimize the cost of making the trade, for example.

Realistically, we’ve only scratched the surface here. To be sure, any of the household name discount brokers have an incredible amount of research and screening tools. If you wanted to read up on stocks or tinker with screeners all day, every day, you would find plenty to keep you busy -- we have no doubt about that.

Keeping it simple, we think an E*TRADE account may be worthy of additional investigation if one or many of the following statements apply to you.

• You want more commission-free ETFs and NTF mutual funds. When combined, E*TRADE offers more than 4,700 commission-free ETFs and no-load, no-transaction-fee mutual funds, which is a major selling point for fund investors. Buy-and-hold investors could easily create a diversified portfolio using its free funds alone.
  
• You care about the trading platform. Setting aside E*TRADE Pro, which is only free for customers who reach a certain level of activity or account balances, the browser-based OptionsHouse platform has a lot of bells and whistles considering it doesn’t require a minimum monthly level of activity, or a high minimum balance requirement for access.