E*Trade versus Vanguard - compare IRA, commissions, investing fees, trading tools, account pros and cons. Which online broker is better?


Overview of Vanguard and E*Trade

Vanguard and E*Trade both offer discounts to large accounts and active traders. Their similarities, however, don’t go much further than that. Before you open an account with one of them, you’ll want to be aware of the following differences:


Broker Fees

Broker Fees Stock/ETF
Commission
Mutual Fund
Commission
Options
Commission
Maintenance
Fee
Annual IRA
Fee
Vanguard $7-$20 $8-$35 $30 + $1.50 per contract $20* $20*
Etrade $6.95 $19.95 $6.95 + $0.75 per contract $0 $0


Services

Broker Review Cost Investment Products Trading Tools Customer Service Research Overall Rating
Vanguard
Etrade


Range of Financial Instruments

Inside our Vanguard account, we found bonds, stocks, options, certificates of deposit, ETF’s, and mutual funds. These investments can be traded in a variety of accounts, including IRA’s, individual 401(k)’s, 529 education plans, and UGMA/UTMA accounts, too.

E*Trade customers can buy and sell ETF’s, bonds, stocks, derivatives, mutual funds, and futures. The last financial instrument gives it an edge over its competitor. E*Trade also offers access to IPO’s, something we didn’t find inside our Vanguard account.

As for accounts, E*Trade offers IRA’s, Coverdell savings plans, custodial accounts, and self-employed 401(k) plans. We did not find 529 plans or UGMA/UTMA choices.


Managed Portfolios

If you’ve never thought of hiring a professional to manage your investments, you really need to check out the options that Vanguard and E*Trade offer. For a minimal cost, you can hire your brokerage firm to make all trading decisions in your account.

E*Trade offers several packages. The first is a computer algorithm that buys and sells ETF’s. It costs a very low 0.30% (the first year is actually free) and comes with a $5,000 investment requirement. Human advisors cost a little more, but you get a lot more in return. Instead of ETF’s only, the traditional portfolios can include bonds, stocks, and mutual funds. You also get a licensed financial planner to work with you and develop tax-efficient strategies. The cost varies from 0.65% to 1.25%, and minimums start at $25,000.

Vanguard offers just one choice. It’s a human being buying and selling in your account, but at a robo cost. The price is the same as E*Trade’s software program: 30 basis points. While this may sound like the better value, Vanguard doesn’t have any brick-and-mortar locations, so there will be no sit-down session. E*Trade has thirty offices, so the broker’s human management is closer to a traditional service. Vanguard’s minimum investment is $50,000, which is higher and lower than some of E*Trade’s minimums.


Mutual and Exchange-traded Funds

Speaking of ETF’s and mutual funds, both brokerage firms have good resources here. Using E*Trade’s screener, we found 8,445 mutual funds that were open to new investments. More than 4,200 have neither load nor transaction fee. Vanguard clients have access to about 7,100 mutual funds, with less than 3,000 coming with no load and no transaction fee.

As for mutual fund resources, we definitely like E*Trade better. Its screener is easier to use, and it offers an All-Star Funds list. This is a pre-selected group of mutual funds (149 to be exact) chosen by E*Trade investment analysts. The funds are expected to go up in value more than their peers, and access to the list is free for E*Trade customers.

Moving to exchange-traded funds, Vanguard hits a home run...no, wait a minute...a grand slam, by offering almost 2,000 ETF’s with zero trading fees. Vanguard’s list represents about 90% of ETF’s trading on American exchanges. More than 70 are Vanguard ETF’s, and there are about 100 fund families available. E*Trade offers about 17 fund families on its commission-free list (Vanguard is one of the families).

E*Trade clients have access to 300 ETF’s that are commission-free. Compared to Vanguard, it looks rather small, but it’s pretty good judged by industry standards. E*Trade also has an All-Star ETF list.


Banking Features

If you think you’re going to have uninvested cash in your brokerage account, you’ll definitely want to know how your future brokerage firm handles this. Vanguard offers a brokerage-deposit account called VanguardAdvantage. It can trade some securities, but not all. Checks and a debit card are attached to it, although there’s a $30 yearly fee. ATM withdrawals at PNC bank locations are free of charge. Vanguard does require a very steep $500,000 in assets to open the VanguardAdvantage account.

At E*Trade, there are three choices: two checking accounts and a savings account. The latter pays a very impressive 2.1% APY, while the other two come with checks and a debit card. The Max-Rate Checking account offers unlimited ATM fee rebates, but does charge a $15 monthly fee. It can be avoided by maintaining a $5,000 average monthly balance. The checking accounts require a $100 deposit to open.


Trading Software

If you’re opening a self-directed account, trading tools obviously will be important to you. E*Trade customers have a really nice, well-designed website. While it doesn’t have a trade bar, it does offer very advanced charting with many tools.

Trades can be placed on simple web pages with multiple order types and real-time market data. If you prefer to trade on a platform, the brokerage house offers Power E*Trade, a browser-based system. It offers some very nice features, such as multi-leg derivative strategies, Bloomberg video news, an economic calendar, and portfolio analysis tools.


Etrade Pro


Last, but definitely not least, is E*Trade’s desktop program. Available to active traders, it provides Level II information, time & sales data, direct access to market makers, the day’s market movers, and advanced derivative analysis tools. Multiple charts can be set up simultaneously.

Vanguard lags behind E*Trade in this category. It doesn’t have a browser platform or a desktop system. Trades are placed on its website, which is more difficult to navigate than E*Trade’s.


Vanguard versus Etrade


Mobile Trading

Our two brokers haven’t forgot the needs of mobile investors, and E*Trade doubled up with two mobile platforms. One is called Power E*Trade; it’s modeled after its desktop twin. It offers multiple watch lists, market indexes, Level II quotes, option chains (including multi-leg strategies), and futures contracts. While we didn’t care for its charting program, the regular E*Trade app offers a better program here. For example, a chart can be displayed horizontally, and Bloomberg Business News streams free of charge in HD.


Etrade app


Vanguard has just one app, and there’s no video news. Moreover, option contracts cannot be traded on it. Nevertheless, there are some good features (that are also available on the standard E*Trade app), such as mobile check deposit and funds transfer. One nice feature we like on the Vanguard app is the ability to download account statements in pdf format.


Vanguard mobile


Customer Service

We shouldn’t fail to include customer service because you’ll eventually need it. E*Trade has representatives on the phone all hours of the night and day, a pretty nice service. While it hasn’t launched a robo chat service on its website, it does have good ol’ 20th-century human chat. As we already mentioned, the broker-deal has several branch locations for in-person service.

Shifting to Vanguard, we lose 24/7 customer support, and in fact, the broker has no Saturday or Sunday hours at all. Moreover, the Vanguard website has no chat of any kind, and there are no physical locations.


Recommendation

If you plan to buy and sell exchange-traded funds fairly frequently, then go with Vanguard. Its commission-free list is fantastic. For mutual fund investors, we recommend E*Trade instead.

Traders who need the best software should definitely go with E*Trade.

If customer service is important to you, then we recommend E*Trade as well.

Retirement savers will do well with either firm.

For option and futures traders, we suggest E*Trade over its rival.

Investors with at least $500,000 to invest in funds will get Vanguard’s best rate.

Active traders who place at least 10 equity trades per month will get E*Trade’s best rate.

Bargain seekers should take a look at Firstrade Review.


Vanguard vs E*Trade Summary

Vanguard and E*Trade offer a lot of different services that vary in quality and price. With this article, you should now be able to make an informed decision.


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