We all try to find ways of making an extra buck now and then. Even the elite and rich in society are constantly looking for opportunities that they can invest their money in and build wealth. However, if you are a middle-class person, you might not have the financial muscle to invest in huge assets such as houses and malls. But should you give up on your investment dreams? I do not think so.
Today, online brokerage platforms allow everyone to invest passively or actively without many constraints. With a mobile device or computer, you can easily deposit money and invest in a wide variety of markets offered by the specific online investment platform.
These platforms have become popular in recent years, and it is no surprise seeing finance companies launching more and more of them. For anyone looking for a suitable platform to invest, it can be overwhelming trying to choose between the plethora of options available.
In this piece, we will look at two popular options in the market; Fidelity and E*TRADE. We will explain what each of them has to offer and see how they face off on some of the notable features people look out for when shopping for a reliable online brokerage platform. At the end of it, you should make an informed decision and pick one that suits your investment goals.
The Main Differences Between Fidelity and E*TRADE
- Fidelity charges a fixed amount of $0.65 per option trade contract, whereas E*TRADE charges the same but reduces the amount to $0.50 per trade if you hit 30 trades per quarter.
- Fidelity has no minimum account balance, whereas E*TRADE has a $500 minimum balance for brokerage accounts.
- Fidelity offers virtual trading, whereas E*TRADE does not.
Fidelity is a popular online brokerage platform that offers a wide variety of research tools and reports to back up your investment decisions. It keeps on evolving as a force in the online brokerage niche. It has claimed the top spot in various online brokerage platform rankings over the years.
Still, as the competition keeps on improving, it has also added a few additional pieces to its platform to enhance the investors’ experience. It is largely committed to reducing the cost of investing for investors. Back in October 2019, Fidelity joined in the race to reduce equity and base option commissions to zero.
This company is dedicated to making it easy for you to get interest by keeping uninvested money into a money market fund. These are some of the perks you get by investing with Fidelity, and more will be discussed further below.
E*TRADE is an online brokerage pioneer that set the pace for most of the platforms available today. However, it was held back by high commissions in the past decade, but this changed in October 2019 when it joined Fidelity and several other platforms in cutting commissions to $0.
It offers three computer-based platforms and two mobile apps that give it an appeal to a wider range of investors. The flagship platform is constantly being remodeled and is now easy to navigate through. They purchased a former rival OptionsHouse and integrated their features into a powerful mobile app.
Who Is It For?
Being one of the largest online brokerage platforms in the U.S, Fidelity is designed to meet the needs of a wide variety of investors at both ends of the investment spectrum. The rates are favorable for seasoned long-term investors who want to buy and hold different stocks and mutual funds.
These investors will also like the ability to access, monitor, and track their investments easily. At the lower end of the investment spectrum, active traders will find the wealth of research reports extremely useful. They can also discover some of the platform’s advanced investment tools and use them to improve their trading decisions. Active traders can download Fidelity’s program called the Active Trader Pro. Here, they will access real-time data and customizable trading interface for better trading.
For the investors who do not belong to either side of the spectrum, Fidelity might not be the best option for them. Examples are those that plan to make two or three trades every month. In such a case, you would be better off with a broker that gives you access to a wide variety of tools without hitting the high activity threshold set by Fidelity.
For a long time, E*TRADE has branded itself as the go-to platform for active and high net worth investors. It is a useful platform for investors along all experience levels and offers a stable platform for anyone seeking to open a reliable and long-term investment account.
If you are a buy and hold investor looking to buy a few ETF, stocks, or mutual funds, then E*TRADE is your go-to tool as it offers an easy platform to do this and lots of resources needed to make intelligent investments. Beginners will particularly be impressed by E*TRADE’s Investor Education Center that explains how to find stocks to buy and offers proper marketplace data that can help you make the right decisions and manage risks.
Ease of Use
Generally speaking, Fidelity is quite user friendly. The company has addressed the challenge of availing most of the tools for traders while still making the user experience pleasant and easy for investors who are starting. It offers an option of two platforms.
Opening an account with them is easy, especially if you are adding it to an existing Fidelity account. However, adding extra features such as options trading requires that you fill out an application form, but most of your data will be imported from your original profile.
Passive investors who buy and hold assets are better suited to the web-based platform. It has charts, quotes, and watchlists plus a friendly interface that suits anyone that needs to study the market before investing.
Active Trader Pro is a Fidelity trading interface that can be downloaded, and it gives traders and active investors more data than what is available on the main site. It has additional charting functions and trade tools, and you can customize it to suit your investment needs. It helps in monitoring news, alerts, and technical signals that influence your investment decisions.
E*TRADE is a seasoned online broker, and this experience has been manifested in their intuitive platforms. You can quickly open an account or fund an account on a computer or mobile device. The company offers two web-based platforms that have dedicated mobile platforms that mirror what they offer.
If you look at the Power E*TRADE app, you will notice that it offers everything available on the Power E*TRADE web platform. The standard site and app are designed for investors who are starting. It has two level menus that lead to various screening tools, education resources, and portfolio analysis.
For the more seasoned investors, the Power E*TRADE app offers them a perfect platform owing to the increased variety of alerts, carting tools, and trading focused features. This platform is designed to bring all the tools you frequently use on top so that you do not have to keep on looking for them every time. This advanced platform is the one-stop-shop for complex analysis as it has all the powerful features acquired from previous rival OptionsHouse technology.
Variety of Offerings
Investors on this platform can leverage the wide range of assets on the site and Active Trader Pro. Shares, options, and mutual funds can be traded on the mobile application. One downside with this platform is that it does not have futures, crypto, and future options. Notwithstanding that, here are some of the things you can invest and trade in;
• Single and multi-leg options
• Short and long stocks
• Penny stocks
• Robo advisory services
• Forex trading
• Fractional shares on mobile apps
• Foreign ORDs and ADRs
• Treasury Inflation-Protected Securities
• High Yield Corporate Bonds
This brokerage firm offers a wide range of assets that can be traded on both the web and mobile-based platforms. They include
• Long and short stocks
• Penny stocks
• Mutual funds
• Single and multi-leg options
• Robo advisor services
Note that while E*TRADE does not offer crypto trading, you can trade with CME Bitcoin futures. International trading is permitted to ETFs, mutual funds, and currency trading.
Most of the fees charged by Fidelity are consistent with what other industry players charge. Here are some of the notable ones;
• Zero charges for online equity, penny stocks, and ETF trades
• An order for 50 options contracts goes for $32.50
• Broker assisted trades fee is $32.95
• The mutual fund trade fee is $49.95
• No charges for inactivity, closure of the account, sending checks and trade confirmations
• Majority of the orders incur some exchange fees
• International trades incur a wide variety of fees
You have access to over 3,500 no transaction fee mutual funds and 265 ETFs commission-free on the Fidelity platform.
Here are some important fees for investors on E*TRADE;
• For stocks, options, and ETFs, the charges are $0 per trade, but you incur $0.65 per options contract. If you make more than 30 trades per quarter, you pay 0$ per trade plus $0.50 per options contract.
• $25 added to the fee for broker-assisted trades.
• For mutual funds, you pay $19.99 per trade.
• An annual advisory fee plus a minimum investment of $25,000 for professionally managed investments.
How Do the Platforms Make Money from You?
Owing to the zero fees pressure that has forced most online brokerage firms to eliminate their fees, it is easy to wonder where these entities make their money from. They have to do it to sustain their businesses. Here are the ways these firms make money from you and for you;
• Interest on cash deposits
• Payment for order flow
• Stock loan programs
• Portfolio margining
The Good and Bad
Advantages of Fidelity
Fantastic Trade Executions
In the past few years, Fidelity has invested a lot in the trading experience in a bid to make it easier and enjoyable for customers. Its trade execution algorithms have been improved to focus on price improvement and reduce payment for order flow. As a result of this, over 90% of orders made by Fidelity customers are executed at a price that is better than the conventional best bid. These savings are outlined in the confirmation report for you to see.
Vast Research Resources
Fidelity offers customers extensive research and asset screeners to help them make the best investment decisions. There are various preset screens available for stocks, ETFs, and fixed income assets that clients can tweak to suit their investment goals. Specifically, research on ETFs is very comprehensive and has analysis ratings, themes, and the ability to peruse through funds by a specific stock.
Investment on Cash That Is Lying Idle
If you have uninvested cash on your account, it is automatically swept into a money market account and made available for trading when you need it. This way, no money is left to lie idle in your Fidelity account, and you can make some little profit without investing, as long as you have some funds in your account.
Global News Feed
Fidelity has a customizable global news feed that you can always tweak to show you news on topics that interest you. You can sort them out by holdings or watchlist and get updates in real-time.
Wide variety of Services
As an investor, you want a platform that offers you all the investment options you need. Fidelity is a one-stop-shop for all your investment as it provides a broad range of investment products. You can trade in stocks, mutual funds, ETFs, bonds, and CDs, among others. It also has IRA accounts, 529 college savings, and cash management accounts.
Cons of Fidelity
Restrictions on Trading Platform Features
Most of the features on Fidelity’s trading platform require you to hit certain thresholds before you gain access. The lowest limit is 36 trades per year that should be maintained on a rolling basis. The advanced features require you to hit a minimum of 120 deals per year. This is a huge downside for buy and hold investors who might not hit these numbers, even if they invest huge sums of money in a single trade. They will be locked out of these platforms and might be interested in other platforms.
No Community Forums
Community forums are an essential part of an investor’s journey. This is particularly applicable to newbies who need a place to raise their concerns and get more clarifications on investment aspects as they go along. Fidelity has no community forums, unlike most of the competition.
Pros of E*TRADE
Robust Mobile Applications
One of the reasons why E*TRADE stands out is the way its two mobile applications are easy to use, well laid out, and among the most comprehensive and best apps in the online brokerage market. The differentiation of the two apps gives traders an option to go for depending on their specific investment style and goals.
Excellent Paper Trading Capabilities
These capabilities are becoming rare in the online brokerage niche, but E*TRADE Pro trading platform can be used to test investment strategies before investing with real money. The paper trading site used relayed data and serves as a perfect platform for new investors looking to learn more about trading before; they commit their money.
Good for Beginners
E*TRADE’s website is straightforward to navigate and has a useful investor education resource center. You can also contact a broker or financial advisor to guide you through the investment journey if you do not have enough expertise to do it on your own. Overall, it is an easy to use online trading platform that will suit even the most amateur investors.
Cons of E*TRADE
Tiered Commission and Account Minimum
E*TRADE has stuck on their tiered commission system when trading options. They charge $0.65 per contract for the sporadic traders and $0.50 for those more than 30 options trades per quarter. This is a huge disadvantage for people who buy and hold as they might not hit the threshold and will thus be subjected to higher commissions.
You need to have a minimum of $500 to open an E*TRADE account. The competition is moving to do away with minimum balances that case investors away, and it is surprising to see E*TRADE still hold on to their policy on this.
Frequently Asked Questions
When determining the best platform for retirement, it helps to look into a couple of specific things. E*TRADE offers low rates for active traders, but passive investors looking to save for retirement can still leverage some of the useful features on offer. E*TRADE offers more than 2,600 mutual funds and over 100 commission-free ETFs.
Some of these mutual funds have minimum balances, and it helps to check them out to know what you are investing in. E*TRADE has the edge over Fidelity in the retirement savings space due to the plethora of retirement planning tools available. The My Virtual Advisor tool allows you to come up with a hypothetical retirement portfolio and see how much you can save within a few minutes before you commit your money.
Fidelity equally has fantastic investment options for those looking to save up for retirement. You get access to over 3,5000 funds that you can transact in without paying anything. This platform was the first one to bring market index funds with a zero expense ratio.
Customer support is becoming a vital part of online brokerage, and both these platforms offer 24/7 live chat, email, and phone support. E*TRADE has an advantage with its physical branches in 30 areas that diversify the support options for those who prefer one v. one meetings.
Security is a huge concern for those trading monies online, and this is one of the many things that stamp authority on a good brokerage firm. Malicious people try to get into these systems, but the developers are always ahead of the game by implementing the most secure systems. This way, you should have no worries about getting your money stolen from your account but always take precautions by using strong passwords and enabling additional features such as multi factor authentication.
People who are investing for the first-time will like what Fidelity has to offer. Its zero minimum balance is a plus for those who do not want to risk a lot of money before they can learn more about making intelligent and profitable investments. Fidelity offers plenty of resources that new investors can use to learn and conduct market research before committing their money.
Fidelity does not require you to hold a particular amount in your account. You can open an account for free and deposit as much as you want.
Merrill Lynch is a notable option in the online brokerage firm, but it does not quite measure up to Fidelity due to a couple of reasons. First, it is an equally impressive platform with no account minimums, seamless integration to existing Bank of America customers, and a myriad of research opportunities.
However, it is not suitable for frequent traders who desire to make several quick trades. It has no commission-free ETFs, and the market research reports can be difficult for beginners to understand. This way, Fidelity still has the edge of Merrill Lynch, but it stands out as an excellent option for many.
Fidelity offers attractive rates for options trading, but the caveat is with access to this feature. How this brokerage platform is structured is that you cannot get full access from the go, and if you desire to start trading options, you have to apply for it. This involves filling out a form, an unnecessary bottleneck that other brokerage platforms do not have. Once you gain access, trading options on Fidelity is easy, and it is one of the best out there in this regard.
There is a lot to like in both E*TRADE and Fidelity. They are low-cost investment platforms and offer amazing features for both beginners and expert traders. Their customer service is great, and overall, they stand out as a close tie.
However, it helps to point out where each might stand out as the preferred option for traders looking to land a suitable one. Active traders are more suited to E*TRADE. Their tiered commissioning system might come out as a downside, but this is only for the buy and hold investors. Active traders can leverage the lower commissions enjoyed by hitting a higher number of trades. Aside from that, E*TRADE stands out as a better platform due to its top asset allocation capability.
On the other side, Fidelity is best for active traders but offers a great opportunity for many due to its low barrier to entry. You are not required to hold any minimum balance in the account, and their platforms have a great sense of automation. This makes it easier for a trader to get around complex decisions as the platform will help with it, especially with the asset allocation.
In a nutshell, E*TRADE and Fidelity have a lot in common, but Fidelity just has the edge over E*TRADE as it suits the budget investor.