E*Trade at a glance
What it is
E-Trade is one of the oldest online brokers, founded in 1982 and offering its services on the very first internet providers including America Online and Compuserve. The company has been focused on growth ever since, most recently through the $725 million acquisition of trader-oriented broker OptionsHouse at the end of 2016 in a bid to take its platform to the next level.
In many ways, the high-powered tools of OptionsHouse are exactly what E-Trade needed. Many of its tools are incredibly useful and accessible. However, it's still a bit outside industry norms on its standard pricing model, charging a bit more than its peers.
Still, with a very in-reach discount model available to traders and a large menu of commission-free ETFs, there are a few ways to keep your costs down. And even if you can't get under standard pricing, the broker's hands-on tools may be worth it to many investors.
If you're a buy-and-hold investor focused on funds then perhaps Ally isn't a great place for your money. But even rookie traders will like the low cost structure and the incentives that unlock once your portfolio and activity reaches a moderate level.
What it costs
E-Trade's standard pricing is a bit high, with stock trades starting at $6.95 and options pricing at $6.95 plus an additional $0.65 per contract.
However, with more than 200 ETFs, E-Trade does offer a robust suite of commission-free products that could bring your actual costs down. This is one of the highest counts of no-cost funds, and includes popular large-cap index funds from firms like iShares but also more tactical trading vehicles from ETF providers like Direxion and WisdomTree.
Roughly 4,400 no-load, no-transaction-fee mutual funds to complement that lineup should also appeal to the buy-and-hold crowd despite the higher base pricing than competitors.
It's also worth noting that there's a more competitive tier for active or wealthy traders that drops pricing to $4.95 for stocks and ETFs, and $4.95 plus $0.50 a contract for options. A minimum account balance of $250,000 is admittedly prohibitive, but the volume-based requirement is a minimum of 30 trades per quarter – or 10 a month. That's typically within reach for active traders.
What it offers
Even if you can't get your trades down to $4.95 per stock or fund transaction, which is increasingly the bar set by discount brokers online, don't feel E-Trade is just overcharging you.
While some brokers have cut services to keep costs down, E-Trade is committed to using its fees to fund useful tools and research products that assist investors.
Some of these specific features worth noting include:
What it lacks
Of course, many traders don't need help discovering new ideas. They simply want quality research to give them confidence in the ideas they already have. In that respect, E-Trade doesn't offer the depth of experience that other brokers do, allowing you to dig deeply into third-party white papers or fundamental analysis with just a few clicks.
Similarly, sophisticated investors may not feel satisfied with some of the functionality that infringes on their workspace. While I appreciated many of the suggestions when charting a stock or exploring options trades, there were a handful of head-scratchers that simply were not helpful – and for the inexperienced, may simply turn into an over-complicated distraction.
It's also worth noting that despite a few top-notch offerings for options investors, a few irritations remain such as rather vanilla options chains that don't bother to prioritize in-the-money strike prices. Furthermore, for all the resources on E-Trade proper, there isn't an easy way to get between the OptionsHouse platform and the flagship portal despite roughly two years of shared ownership. This may make it a bit more challenging to those folks new to options.
To be clear, E-Trade offers a quality experience that straddles the world between a niche platform solely for traders and a lowbrow broker catering to the "set it and forget it" crowd. But pulling off such a Goldilocks approach that is not too intimidating but not too shallow is not without its difficulties.
This broker is best for...
E-Trade has some shortcomings, including a standard pricing that is a bit high and a few holes in tools. However, the platform seems to put a priority on practical trading experience by giving functional tools to place trades instead of just high-powered screeners for the pros and fluffy educational videos for the newbies.
That alone is a plus, but the ability to grow with E-Trade makes that an even more compelling proposition. With just 30 transactions a quarter, customers win a discount on your fees – and after veterans deploy its more sophisticated OptionsHouse charting platform, it's going to be hard not to spend time researching and trading.
If you're looking for rock-bottom prices or a more academic approach to investor education, E-Trade may feel like it comes up short. But for relatively new investors looking for a little bit of help as they earn practical experience, E-Trade is worth the moderately higher fee structure.