Any investor who has been around long enough is aware of E*Trade. They are the original online discount broker that burst onto the scene. If you wanted to trade online, you really had 2 options, E*Trade and Scottrade.
But as the years have passed, the industry has changed. There are a lot more online brokers out there and they all offer a little something different. As a result, it is more important than ever to make sure you are picking the right broker for your needs and goals.
In this post, I am going to tell you everything about E*Trade, the good, the bad and the ugly. This will help you to better understand if this broker is a fit for you.
So let’s get started my E*Trade review so you can decide if they are a fit for you!
E*Trade Review Summary
- Ease of Use
- Account Fees
- Account Types
- Customer Service
E*Trade has a reputation for being an excellent online broker and there is good reason why. Low commissions, lots of investment options and tons of research at your fingertips. It's no wonder why they have stayed at the top of the online brokerage game for so long. You are doing yourself a disservice if you don't at least consider them.
My E*Trade Review
E*Trade History and Background
Even if you aren’t an investor, odds are you know of E*Trade. They became a household name when they began their advertising campaign of talking babies during Super Bowl commercials.
E*Trade was founded in 1982 and was originally a place for investors who were willing to pay more for better information and service. As the years passed however, the philosophy changed and they turned into a discount broker, offering commissions in-line with the other big players in the industry. But don’t think that their service was reduced as well, because it wasn’t. More on this below.
Things were going well for the company until the early 2000’s. In 2003, they tried to merge with TD Waterhouse, but the merger failed. Then in 2005, they put in an offer to buy Ameritrade, but that too was rejected. Later in 2005 however, the winds shifted for the company. They bought both HarrisDirect and Brown and Company.
When the housing bubble hit, E*Trade survived by selling off its subprime mortgage portfolio to Citidel. Had they kept that portfolio of subprime debt, there is a good chance they would not be around today, or at least not as we know it. Fortunately, they made the right decision and are now stronger than ever and a leader in the online discount broker space.
Now that you know a little more about E*Trade, let’s talk about their features that make them so great. I’ll just touch on a handful here and go into more detail further down.
$7.99 online trades (note that E*Trade does have a tiered commission schedule.) The $7.99 price is for those investors that place between 150 – 1,000 trades per quarter. Less than 150 trades costs you $9.99 in commission. If you place more than 1,500 trades, you can negotiate a lower commission directly.
No surcharge on penny stocks. Many brokers charge extra for investing in penny stocks, but not E*Trade.
Streaming quotes are free for investors. Most other brokers give you free delayed quotes (they are delayed up to 15 minutes). If you want streaming quotes from these brokers, it will cost you.
Futures and Forex trading is included in your account. Most other brokers make you open a second account or apply to be able to trade futures and/or forex. With E*Trade, you have the ability to trade these when you open your account.
Trade foreign stocks. With an E*Trade account, you can trade stocks in France, Germany, Hong Kong, United Kingdom and Canada.
Tons of investment options for investors. Choose from stocks, bonds, exchange traded funds, mutual funds (over 8,000), options and CDs. You can invest in non-retirement, retirement and educational accounts as well.
Easy to use website. There is a lot to be said when you find a website that is easy to navigate and find what you are looking for. I found this to be the case with E*Trade. I had no issues finding what I was looking for.
E*Trade Pro for some clients. If you want more research and tools at your fingertips, look no further than E*Trade Pro. This is a desktop client you install on your PC or Mac. The cost is free if you make 30 trades per quarter, otherwise it is $99/moth. Its features include:
- Extended hours trading
- Technical screening and backtesting
- Sector and industry tracker
- Options tools (including straddles, butterflies, iron butterflies, condor and iron condor)
- Real-time streaming news
- Real-time gains/losses and portfolio value\
- Advanced charting
- Live streaming of CNBC
- Excel manager (import/export data to Excel)
- Access to the E*Trade community
- Fully customizable
The benefits to E*Trade are enormous. They are a great choice if you are an active investor (E*Trade Pro alone is incredible. I’m a buy and hold guy and was blown away at this service they offer) or even if you are a passive investor. The site is very user friendly and there is a ton of free research and education tools to help you be a successful investor.
They even has its own bank, so transferring money is no longer a hassle. With their checking account you get a free ATM/Visa debit card, free online bill pay, free ATM withdraws, unlimited ATM refunds and same day fund transfers between your checking account and your E*Trade investment accounts.
Other benefits include:
Low account opening fee. You need $500 to open an account. This is a great thing for those looking to invest with a little bit of money. If you want to have the ability to trade on margin, the account minimum is $2,000.
Amazing Customer Service. You can email, call or chat with representatives or walk into one of their branches. If you call or chat, customer service is available 24/7.
Low Fees. E*Trade has close to 1,500 mutual funds that can be bought/sold without a fee. They also offer 100 commission free ETFs as well (learn why this is important here). There is no inactivity fee either. The only fees you will encounter are the typical wire fees, return check fees, etc. that everyone else charges.
Downsides To E*Trade
With all of the great things E*Trade offers, there has to be some downsides right? Here are a few that I notice:
- Trading Commission. The price for those not trading a lot is $9.99. While this is not a deal-breaker, you can get a lower commission by going with a competitor to E*Trade. But with the other things you get, like research, commission free ETFs, the higher commission isn’t a huge deal.
- Low Interest Bank Account. If you open an E*Trade checking account, you won’t be getting much in the way of interest. Currently, you earn 0.01% on balance up to $5,000. Plus, if you don’t have at least $5,000 in the account, then the service charge is $15! Luckily, you don’t need the bank account to have an investment account. Personally, I would pass on the bank account and look into Capital One 360. No fees and a higher interest rate.
Who Is E*Trade For?
If you are an active trader, E*Trade is the best option of all of the brokers I’ve reviewed to date. I encourage you to spend 15 minutes looking at the E*Trade Pro video. Trust me when I say it will blow your mind with how in-depth it gets. It’s like Christmas morning multiplied by 10 for active traders. Here is a screenshot as a tease:
For passive traders, or buy and hold investors, E*Trade is competitive with other online brokers by offering some no-fee ETFs. However, for these investors, I would encourage you to look at other brokers as well, since others offer lower trading commissions and different no-fee ETFs and mutual funds.
Regardless of which online broker you do choose, you should check out my book, 7 Investing Steps That Will Make You Wealthy, to ensure you earn the highest return with the least risk possible.
Alternatives To E*Trade
Who are some of the competitors to E*Trade? Here is a short list.
Ally Invest: This is a powerful competitor to E*Trade. Ally Bank bought TradeKing and merged the amazing trading tools there with the amazing customer service of Ally. Together they offer investors an incredible experience with lots of tools, advice and low costs. You can get started with Ally Invest here.
M1 Finance: A player on the scene, this online broker allows you to invest in stocks and ETFs for free. They don’t have the bells and whistles that E*Trade has, so if you are purely an active investor, this might not be the best fit. But if you want to trade stocks without a commission, you have to consider M1. You can get started with M1 Finance here.
Charles Schwab: Schwab has been around for a long time and offer investors a huge amount of tools to go along with their low costs and great customer service. They don’t match up perfectly with what Ally Invest and E*Trade offer, but if you don’t need all of the features they offer, Schwab is an excellent choice. You can get started with Schwab here.
In the end, if you are considering an online broker, you can’t go wrong with E*Trade. They offer a ton of tools and features at competitive prices. But this doesn’t mean you should just settle for them. Many other brokers offer many tools and features as well. You need to do your homework to figure out which one is the best fit for you.