With their large advertising budget and amusing commercials featuring money-savvy babies, E*Trade has bought their way into the minds of investors. But are they actually a good place to invest? I recently opened an ETrade IRA to find out.
E*Trade Costs and Fees
E*Trade charges no annual fee for an IRA. They have a graduated cost structure for stock/ETF trades:
- A flat $9.99 commission per stock or ETF trade, or
- $7.99 per trade if you place 150 or more trades per quarter.
That’s a bit more expensive than some other discount brokerage firms, but it’s not entirely unreasonable.
E*Trade does not charge any commission on purchases of U.S. Treasury Bonds (including TIPS) when you buy them at auction. As far as I know, the only other brokerage firms that allow for commission-free Treasury purchases are Schwab and Fidelity. For investors with a sizable fixed-income portfolio, this can be a big money saver.
E*Trade Mutual Fund Marketplace
At E*Trade, you’ll also have access to a “no transaction fee” marketplace with over 1,000 no-load mutual funds. That said, many of the high profile fund families (Vanguard or Fidelity for instance) aren’t available without a transaction fee.
Free Trades for the First Month
If you open an IRA prior to 12/31/2010, E*Trade will give you free trades for the first 30 days (up to 100 trades). If you’re a buy & hold investor like myself (I place approximately 2 buy orders each month), this obviously isn’t that big of a deal. That said, free money is free money. No complaints here.
E*Trade Customer Service and Website
E*Trade’s email customer service isn’t the speediest. (You might not even get an answer back on the same day.) On the other hand, in my experience calling and asking the automated system for a customer service rep, I’m immediately connected to somebody who can answer my questions.
Perhaps my favorite thing about E*Trade is how fast and easy it is to fund my account. At Vanguard or Schwab, it takes a couple days for an online money transfer. At TradeKing, you have to write a paper check and mail it to them. At E*Trade, I can do an online transfer and have the cash available to invest on the same day.
Summary
Pros:
- Reasonably cheap trades,
- Easy-to-use website with same-day money transfers,
- Commission-free purchases of U.S. Treasury bonds,
- Free stock/ETF trades for first month,
- Quick response to customer service phone calls.
Cons:
- (Slightly) less expensive stock/ETF trades are available elsewhere,
- Slow response to customer service emails.
Open an E*Trade Account
If you think that E*Trade sounds like a good fit for you, here’s the page where you would open an account.
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