E*TRADE Financial Review
E-Trades recent acquisition, $0 commissions and outstanding educational resources, not-to-mention their innovative trading platform and choice of mutual funds, secures a bright future for the broker.
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E-Trade - Reviews & Ratings
• Account Minimum: $0
• Fees: Commission free for ETF and stock trades. Options are around $0.50-$0.65 p/contract, depending on trading volume.
• Best for: Active traders and beginners
• Highlight: Power E*Trade Platform
Investor Warning: Futures and options transactions are intended for sophisticated investors and are complex, carry a high degree of risk, and are not suitable for all investors. For more information, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure Statement for Futures and Options prior to applying for an account. You can also view the E*TRADE Futures LLC Financial Information and Disclosure Documents. An Exchange-Traded Fund’s (“ETF”) prospectus contains its investment objectives, risks, charges, expenses, and other important information, and should be read and carefully considered before investing. For a current prospectus, visit the Exchange-Traded Funds Center at www.etrade.com/etf. Investing in securities involves risk, including possible loss of principal.
E*Trade was founded in 1982 and are a popular online discount broker. E*Trade are a good option for active traders and beginners with their range of insights and research. They offer $0 commission fees and an intuitive trading platform, as well as a long list of no-transaction fee mutual funds.
In the midst of the war on fees, E*Trade surprised the broker world and acquired student loan provider Gradifi in a $30 million deal.
Overview and Summary
- E*Trade has grown from a discount broker into a full-service investment broker with a full range of tools no matter what level you’re on.
- E*Trade are best for active traders and the mass affluent ie. investors with more than $100,000 in tradable assets.
- E*Trade has three innovative trading platforms, E*Trade Web, Power E-Trade and E*Trade Pro
- E*Trade believe in giving you the opportunity to explore, with a complete range of investment choices.
- E-Trade offer two free innovative and intuitive mobile apps, and they’re arguably the best available out of all the online brokers.
- E*Trade want their educational section to help beginners and more experienced traders.
- E*Trades website isn’t very transparent and can make it difficult to find the information you’re looking for, such as how to close an existing account.
What is E*Trade?
E*Trade has grown from a discount broker into a full-service investment broker with a full range of tools, no matter what level you’re on.
E*Trade offer no minimum account balances, zero transaction fees on more than 1,300 no-load mutual funds, and an integrated checking account.
E*Trade buys student loan provider Gradifi for $30 million
In Early December 2019, discount brokerage E*Trade announced that it acquired a student loan provider known as Gradifi, in a deal worth $30 million.
The recent market transition towards lower fees left some brokers under pressure to follow suit, and in doing so, it left them vulnerable to potential acquisitions by larger companies.
Due to this, rumours spread of the possibility of online broker, Charles Schwab acquiring E*Trade. However, in Late November 2019, in what was a shock move to the industry, Charles Schwab announced their plans to acquire TD Ameritrade in a $26 billion deal. This merger would result in a brokerage giant.
This deal resulted in a 9% fall in E*Trade shares, and left investors worried about the company’s future. David Ryan, Managing Director at JMP securities said,
The market wasn’t anticipating the Schwab-Ameritrade combination, I think people were more looking at who would be buying E*Trade.
Shares of Schwab increased by 7.3%, while shares of TD Ameritrade soared 16.92% in late November.
How E*Trade’s acquisition will improve their company
E*Trade has a powerful business managing finances and stock plan accounts for corporate clients, and this acquisition will create more financial security and student loan tools to the range of products that E*Trade can now offer their corporate clients, the firms stated.
The merger was agreed on Monday, December 9th in a deal worth $30 million cash, according to the statement. Gradifi’s company, First Republic, will continue to act as a provider in its student loan refinance business, the company concluded.
Why market pressure will benefit the customer
On October 7th 2019, E*Trade eliminated commission fees for customers. E*Trade CEO Mike Pizi said in a statement,
With this new commission schedule we are further raising the bar, delivering an unrivaled experience at price points that cannot be beat—main street investors will now trade the stocks and ETFs of their choice for $0.
The news was announced after competitors, TD Ameritrade and Charles Schwab cut their commission fees. The previous week, Interactive Brokers Group (IBKR), a smaller competitor, started a new IBKR Lite service, which zeroed commissions stocks and ETFs trading in the United States.
This industry change has been welcomed by retail investors, but stocks in the companies have been severely impacted as shareholders struggle to adapt. Commission fees have traditionally driven online trading firms. Now, firms are being forced to think of new and more innovative ways to make money.
In a statement from E*Trade, the company said it anticipated a revenue hit in that quarter, of around $75 million, due to the move towards no commissions.
After Charles Schwab’s and TD Ameritrade’s zero-fee commission announcement, E*Trade’s commission elimination was inevitable. Twitter was awash with customers venting over E*Trades hesitance to follow suit and threatened to move to another broker.
This industry change has been prompted by upstarts including Robinhood, who are fighting to create a more accessible industry for young investors. Robinhood are now almost as big as E*Trade, with a value of $7.6 billion, in comparison to E*Trades market value of $8.4 billion.
A Robinhood spokesperson, Jack Randall said,
The changes taking place across the brokerage industry reflect a focus on the customer that’s been inherent to Robinhood since the beginning.
We remain focused on offering intuitively designed products that reduce barriers to our financial system, including account minimums and commission fees,” he concluded.
Reduced commission fees will potentially result in more mergers, but all of which will be a positive for the customer.
Who E*Trade is best for
E*Trade is best for you if you consider yourself one of the following:
- Active traders
- Beginner investors
- Low minimums
- Options traders
- Retirement planning assistance
Where E*Trade Shines
3 Intuitive Trading Platforms
E*Trade has three innovative trading platforms; E*Trade Web, Power E-Trade and E*Trade Pro. Let’s go through them one-by-one and discuss the features and capabilities of each.
All 3 are free for all customers, with no minimum balance or trade activity required.
Power E*Trade is E*Trades innovative and detailed platform, and is a result of the brokers acquisition of OptionsHouse a few years ago. E*Trade power allows you to create trading strategies and implement them with over 100 technical studies, 30 drawing tools, and streamlined trade-tickets.
You can also avail of the intuitive Power E*Trade app suited to all kinds of traders. It compliments the Power E*Trade platform and is full of easy-to-use tools and features you can use on the go.
E*Trade Web: One of the Best
E*Trade is the brokers original platform and they state, still one of the best. This platform offers all the tools you’ll need to help you succeed, from researching investments and placing trades to tracking the markets and refining your skills.
- Independent analyst research, charts, news and quotes
- Learning and planning resources for retirement
- Tools and screeners to spot emerging investing opportunities.
E-Trade Pro: Desktop Platform
E*Trade Pro is the brokers desktop platform and it’s equally as innovative, with tools like Strategy Scanner and back-testing capabilities to help you devise a creative portfolio.
As of October 2019, in line with competitor discount brokers including TD Ameritrade and Charles Schwab, E*Trade eliminated its $6.95 commission fee for online options, stock and ETF trades. The company’s options still come with a reduced contract charge of $.65. This fee is discounted for active traders, to $.50.
Interested in seeing how E*Trade compares to its competitors on this front? Take a look at our Charles Schwab vs E*Trade comparison where the two go head-to-head.
E-Trade offer two free innovative and intuitive mobile apps, and they’re arguably the best available out of all the online brokers. Impressively, you can get the app on both Android and iOS phones.
With this, you can easily place trades and manage your account, get up-to-date quotes and news, including from Bloomberg TV. The app also has some cool advanced features like ETF and stock screens, and multi-leg trade options.
Investment Choices: You Shouldn’t Feel Like You’re Ordering Off a Children’s Menu
E*Trade believe that building your portfolio shouldn’t feel like you’re ordering off the kids menu. They want to give the opportunity to explore, with a complete range of investment choices.
E*Trades breadth of investment choices will make traders and investors feel content with advanced options strategies and futures, investments in bonds, stocks and over 8,000 mutual funds, 4,400 of which have no transaction fees. These choices easily stand up to E*Trades competitors.
However, any mutual funds not on the brokers list of fee-free funds will incur a $20 charge per transaction.
- Rollover IRA or ROTH IRA: Customers can also avail of a traditional, rollover IRA or Roth IRA, in addition to regular taxable accounts.
- Business investment account: You can get an investment account for businesses or an investment club.
- Custodial account: You can open a custodial account for a minor, and a Coverdell Education Savings Account (ESA).
E*Trade’s Knowledge: Don’t Put All Your Eggs Into One Basket
E*Trade’s educational section is outstanding and will assist everyone from beginners to more experienced traders get where they need to go. Knowledge, they believe, is the key to confident decision making.
E*Trade will help you learn the trade with a guided overview on major topics, and detailed articles, videos and a comprehensive educational library. You can also watch webinars on a collection of topics including technical analysis, options trading, how to diversify your portfolio and asset allocation.
If you’re interested in learning more, the broker offers online investing courses that cover every topic you need, including Stocks 101 and How to Build an Emergency fund.
E*Trade experts will offer you advice on how to make the best decisions when investing in companies, if you’re ever unsure, or simply want to create a winning plan from the start.
E*Trade also have a robo-advisor service to manage your portfolio for you if you don’t have the time or energy to invest in learning how to do it best yourself right now. This will cost you an annual advisory fee of .30%, but you willneed a minimum investment of $5,000.
What is Diversification and Asset Allocation?
E*Trade believe that every investor should start with two key ideas.
They define diversification as not putting all your eggs into one basket. This includes making sure that your portfolio has various investment types to help reduce losses of one type. For example, stocks plunge when other investments like commodities stay even, or increase.
You can achieve diversification through asset allocation. This means that you need to figure out how your funds will be shared across different investment types, such as bonds, stocks, and cash. This may reduce risk, but to earn a return you’ll need to find a balance. The key to increased returns, they advise, is to take on greater risk
Where E*Trade Fall Short
E*Trade’s features are innovative and comprehensive, they cater to both beginners and the more experienced investors, however, they fall short on transparency.
It can be difficult to locate certain information on E*Trades website. Finding information including the company’s required account minimum or guidance closing an account can be tricky.
That said, E*Trade do provide a 24/7 customer support team that are easily contacted with an average waiting time of about 1 minute.
Comparison of Brokerages
Comparison of E*Trade, Charles Schwab, and Merrill Edge:
- Overall rating: E*TRADE: 9/10, Charles Schwab 9.5/10, Merrill Edge 9/10
- Account min: Merrill Edge $0, Charles Schwab: $0, E*TRADE, $0
- Fees: Merrill Edge $2.95, Charles Schwab $0 , E*TRADE Commission free for ETF and stock trades. Options are around $0.50-$0.65 p/contract, depending on trading volume.
- Highlight: Merrill Edge Award-winning research, Charles Schwab Best online broker for stock traders, E*TRADE Power E*TRADE platform
What Does This All Mean?
E*Trade come out on top when it comes to their innovative and intuitive trading platforms and mobile app. Their features, tools and education are outstanding and suited to both beginners and more experienced levels.
The company’s recent acquisition of Gaddafi will help add more financial security and student loan tools to their lists of products, widening their customer base and potentially securing their future as a competitive online broker.
E*trade has a powerful business managing finances and stock plan accounts for corporate clients, and their move will create more financial security and student loan tools to the range of products that E*Trade can now offer their corporate clients.
That said, if you’re looking for education and insights, then Merrill Edge and Fidelity also offer outstanding resources. If you’re interested in mobile-trading, then take a look at upstart and industry influencer, Robinhood.