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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.
Of course, not all online brokerages are the same. While most popular brokerage platforms share 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 between the two.
Like most brokerages, E*TRADE and Fidelity have dramatically lowered their pricing structures recently. Both have zero-commission online stock and ETF trades. 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||$0||$0 + up to $0.65 per contract||$19.99|
|Fidelity||$0||$0 + $0.65 per contract||$49.95|
Also, for clients who trade frequently -- which E*TRADE defines as at least 30 trades per quarter -- E*TRADE has an even more favorable commission structure. The per-contract options commission drops to just $0.50, even better than Fidelity’s rate.
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.
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Most online brokerages no longer have a minimum account balance. Fidelity and E*TRADE are among them -- you can literally open an account with a dollar and start investing, as long as you can afford a single share of whatever investment vehicle you choose.
Both brokerages offer clients access to independent research from a number of providers. Fidelity offers a particularly large amount of research, from more than 20 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 Power E*TRADE trading platform.
E*TRADE used to have a global trading platform that allowed investors to trade directly on international stock exchanges, but it was discontinued a few years ago. 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.
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 U.S. dollars or each market's local currency.
As is typical of brokerages in 2020, 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 version of its Power E*TRADE platform, which has a 4.5 out of 5 rating on the App Store. For Android users, E*TRADE and Power E*TRADE have Google Play Store ratings of 3.9 and 3.6 respectively, so reviews seem to be slightly less favorable on that platform.
The Fidelity Mobile app is also highly rated, with a 4.7 out of 5 rating on the App Store and a 4.5 out of 5 on the Google Play Store. It's fair to say that if mobile functionality is a priority, both of these brokerages should have what you're looking for.
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 ATM fees, but offers unlimited fee reimbursement for clients with $50,000 or more in E*TRADE accounts, or who make at least 30 stock or option trades per quarter.
Both brokers are pretty evenly matched here, with a slight edge to E*TRADE for clients with relatively large accounts.
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 brokers offer well-staffed help lines and plenty of educational tools.
Still, 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 only about 30 in the United States. Fidelity has nearly 200 branches across the United States, so for many people, a Fidelity branch will be far more convenient than the nearest E*TRADE branch.
Fidelity and E*TRADE are both excellent online brokerages, and there's a reason they're among the most popular in the business. However, as with most financial comparisons, there's not a one-size-fits-all answer to the question of which is better.
The better choice 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 might prefer E*TRADE if:
Uncover the names of the select brokers that landed a spot on The Ascent's shortlist for the best online stock brokers. Our top picks pack in valuable perks, including some that offer $0 commissions and big bonuses.
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E*TRADE services are available just to U.S. residents.
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