Advantages and disadvantages of Etrade. What are the good and bad things/features of the brokerage company? What are Etrade benefits?


Overview of Etrade’s Strengths and Weaknesses

Etrade is a popular brokerage firm with a lot of different services that will appeal to a variety of traders. While it has advantages in some areas, the broker does have some weaknesses, too. Here’s a rundown on Etrade cons and pros.

Etrade Pros

Customer Service

Etrade has representatives on the phone 24 hours a day, 7 days a week. Not all brokerage houses offer round-the-clock service. Vanguard, for example, is closed on the weekend. The Etrade website also has an on-line chat feature, another service not found at all firms. Etrade’s associates do a consistent job of handling issues and answering questions.

Branch Locations

If you like in-person service, Etrade has you covered here as well. Like some of the other customer service features, not all brokers operate brick-and-mortar locations. Etrade has 30 of them, and they’re located in 17 states.

Portfolio Management

Etrade has some excellent portfolio management services in case you would rather let a professional handle your account. The broker’s robo-advisory service costs 30 basis points, which is 5 basis points lower than Fidelity’s program. Human advisors at Etrade cost between 0.65% and 1.25% and require at least $25,000 to invest. Firstrade, by comparison, offers no account management services.

Discounts for Active Traders

Frequent traders receive a $2 discount on stock and ETF trades and 25¢ off on option trades. The broker defines frequent as ten trades per month, which a lot of traders could probably do.

Research and Education

The Etrade website has a lot of learning materials for do-it-yourself investors. These resources include articles, videos, and webinars. There are also in-person events at some of the company’s branch locations. Topics that are available include how to trade options, retirement planning, how to build a diversified portfolio, and an introductory course on fixed-income products.

Mutual Funds

Etrade has a large selection of funds (more than 8,400 in total), and more than 4,100 are no-load, no-transaction-fee products. This second list is larger than that offered by Schwab, Fidelity, Merrill Edge, and TD Ameritrade. Besides the funds themselves, the broker’s website offers a lot of great mutual fund resources. These include a fund comparison tool, a robust screener, and a list of all-star funds. The all-star funds are securities selected by Etrade investment professionals that are expected to outperform their peers.

Exchange-Traded Funds

The broker hits another home run here. There are 231 ETF’s that are available with zero commissions. This list is larger than Fidelity’s and Vanguard’s. Merrill Edge and WellsTrade offer zero.

Trading Tools

There is a good supply of trading technology at Etrade, not least of which is the website. Orders for all securities offered can be bought and sold using the broker’s site, which is easy to navigate. A free browser-based platform from OptionsHouse is available for all users. A more advanced desktop software called Etrade Pro can be used by active traders. The broker’s mobile app is able to trade options, mutual funds, stocks, and ETF’s. Bloomberg News is available free of charge in HD. There is also a platform for Apple Watch.

Option Tools

Etrade offers really good derivative trading tools that aren’t available at brokers like WellsTrade. For example, on the Etrade website there is a probability calculator that will tell you the likelihood of a certain stock or ETF reaching a certain price within a specified time frame. There is also an income backtester and an options analyzer. During our testing of the analyzer, we were impressed with the tool’s ability to quickly generate a profit-loss diagram based on any number of legs.

Futures Trading

Futures contracts are available at Etrade, one of the few securities brokers to offer them. There is a collection of videos on the broker’s website that addresses many important issues in futures trading, such as leverage and liquidity. There is also a heatmap of futures price movements and a quote board, which shows open, high, and last prices along with % change and volume.

Etrade Cons

Etrade doesn’t have many weaknesses, but let’s take a look at the few that exist.

Pricing

Etrade is a little more expensive than some of the cheaper brokers like Firstrade (see review) and Ally Invest (see review). In fact, it’s more expensive than Fidelity and Schwab. Equity transactions cost $6.95. As we have already seen, active traders receive a discount, but with this price cut, it is no cheaper than Schwab and Fidelity. Options at Etrade are 75¢, which is more expensive than TradeStation. Etrade requires a $500 deposit to open an investment account, whereas TD Ameritrade requires no deposit.

Brokerage Rating Pricing Offer Min
Firstrade Firstrade rating $0

$0 commissions + up to $200 in transfer fee rebates.

$0+
Ally Invest Ally Invest rating $4.95

Up to $3,500 cash bonus + commission free trades for new accounts.

$0+
TD Ameritrade 4.5-star brokerage firm rating $6.95

Trade free for 60 days + get up to $600.

$0
Etrade Etrade brokerage firm rating $6.95

At E*TRADE, get $6.95 trades + 65₵ per options contract.

$500


Restrictions on the Desktop Platform

It’s disappointing that Etrade requires active trader status to use its desktop software. Although it’s only ten trades per month, other brokers maintain no such requirements. TD Ameritrade has no requirement at all to use its very advanced software thinkorswim. StreetSmart Edge from Schwab is also free of charge.

Stock Reports

The highest number of equity reports we found for any stock at Etrade was four. This number is lower than the highest number we found at Fidelity, which was fifteen. Having a larger number of analyst opinions would of course be advantageous.

IRA Fees

While Etrade doesn’t charge any annual fees for its retirement accounts, it does have a list of $25 fees that other brokers don’t impose. For example, there is a $25 assessment for making a withdrawal before age 59½, even when the withdrawal meets IRS guidelines. Recharacterizations also cost $25. This is when you change a Roth IRA conversion back to a Traditional account.

Broker Promotions

Top Brokerage Incentives »

Etrade Pros and Cons Judgment

Etrade’s advantages outweigh its disadvantages. Nevertheless, you should be aware of specific issues at the brokerage house before opening an account.

Continue Reading


Etrade reviewed by TopRatedFirms.com Rating: 4