When it comes to investing in the stock market, one of the very first steps is deciding on a brokerage. This is the firm that you will work with in order to place trades. It is often a frustrating experience, especially when you find out that there are dozens to choose from.
Robinhood and eTrade are two of the most popular online brokerage services available today. While both offer high-quality, cost-effective ways for investors to access the public markets, they do have some big differences.
In this article, we are going to break down the important features, fees, pros, and cons of both platforms to help you decide which brokerage service is the perfect fit.
Summary: Robinhood vs eTrade
- Both offer $0 commissions on stocks and ETFs
- Robinhood offers free options trading while eTrade charges $0.50 per contract or more
- No minimum account value for individual brokerage accounts for both brokers
- Robinhood’s widely recognized and awarded mobile application outpaces eTrade’s application slightly
- Robinhood offers fractional shares
- Both offer a high yielding savings account
- eTrade offers a tactical trading platform
- More access to different kinds of securities such as bonds and CDs through eTrade
- Access to retirement accounts through eTrade
- eTrade has an automated investing robo-advisor in its Core Portfolios feature
- New Robinhood users get a free stock worth up to $200
- Robinhood offers crypto trading while eTrade does not
|Minimum Account Balance||$0||$0|
|Commissions||$0 (All)||$0 (Stocks & ETFs)|
|Options Commissions||$0||$0.50 To $0.65 Per Contract|
|Assets||Stocks, ETFs, Options, Crypto||Stocks, ETFs, Options, Bonds, Mutual Fund, Fixed Income, Futures|
|Customer Service||Limited||24/7 Phone Support|
|Online Savings Account||Yes||Yes|
|Best For||Complete Beginners||Intermediate/Advanced Traders|
What Is Robinhood?
By breaking down the barriers to entry for investors big and small, Robinhood’s mission is to revolutionize the way the world invests. By making their IOS app beginner-friendly, understandable, and digestible all in a low-cost way, Robinhood is striving to achieve the most efficient way for its clients to access the public market.
Robinhood allows its clients to invest in stocks, ETFs, options, and cryptocurrency through its trading platform. It is designed from the ground up to be the most beginner friendly app available.
Robinhood offers zero-commission on all stocks, ETF, option, and cryptocurrency transactions. This makes it a great choice for investors looking to invest in a low-cost way.
Have you ever wanted to buy a share of a company but did not have the required capital to do so? Robinhood solves this problem with its new fractional share initiative. By allowing clients to buy partial shares of companies, even the companies with high share prices (i.e. Google and Amazon) become a reasonable option to invest in.
This feature is being rolled out to a few users at a time. Right now, there is a long wait list of over 100,000. With this feature, you will be able to buy shares of stocks and ETFs in $1 increments. This will also allow you to automatically reinvest your dividends to earn compound interest.
Robinhood is also rolling out an online savings account for your uninvested cash. Just like with fractional shares, there is a long waiting list for this feature.
As a result, investors may not feel as rushed to jump in on an opportunity knowing that their uninvested cash is still accruing interest payments. “Patience is a virtue” holds especially when investing.
Robinhood Gold members receive the same benefits as a normal Robinhood account with the addition of high-quality research reports and margin trading. This comes with a monthly subscription starting at $5. The more money you borrow, the more you pay in interest.
Documents & Taxes
Important documents and tax forms associated with Robinhood accounts can be found directly on their website and app. This easily accessible way of accessing important files continues to demonstrate Robinhood’s ability to make things easy for their clients.
Robinhood’s referral program works like this!
If you sign up with a friend’s referral code you both receive a stock worth anywhere from $2.50 to $200.
Receiving a free stock is a great way to get your feet wet in the world of investments and start learning about the company that Robinhood grants you!
You can also refer friends with a provided referral code, so you and your friends continue to receive free stocks. The limit is $500 annually for an individual brokerage account’s referral code.
Deposits And Withdrawal Policies
Robinhood allows its clients to link their bank account apps to their mobile application and transfer money directly from a bank account. The same goes for withdrawals back into the bank account.
The maximum withdrawal into a brokerage account is $50,000 per business day, just something to keep in mind if you are interested in depositing $50,000 + in a single day into the account.
They also give you free instant access up to $1,000 so you can begin investing before your deposit settles!
Robinhood’s Mobile Application
Robinhood’s application has received several awards, the most notable being the Google Play’s Best App of 2015.
The easy-to-use, beginner-friendly, sleek and clean application allows clients to navigate easily through different facets of the app and execute on the trades they want to take with ease.
If Robinhood was to lack in any specific category compared to its competitors, it is this one. Most questions are answered through its extensive FAQ page, but the customer support line operates mostly through message interactions.
The Robinhood Gold tier can be purchased for a fee of $5 per month. If you are interested in accessing research and margin, it may be a great option for you. The more you borrow, the higher the monthly fee.
Margin is available only with Robinhood Gold and can be accessed with a 5% annualized interest fee. Interest expenses are billed at the end of every month and found in the Gold Billing section of the Account Overview section
- Zero-Commission execution fees on stocks, ETFs, options, and crypto
- Cash management allows for high-yield capabilities on idle money in accounts
- Easy to find important documents including those regarding taxes
- Stock referral program (earn up to $200 in free stock)
- Access to trading cryptocurrency including Ethereum and Bitcoin
- Award-winning application that is easy to use and beginner-friendly
- No account minimums or deposit/withdrawal fees
- Get a free stock when you sign up here
- Research tools and data are quite limited
- No retirement accounts
- No bonds or mutual funds, fixed income investments
- Limited access to educational materials
- Poor customer service
What Is eTrade?
eTrade’s mission is simple. To increase and enhance the financial independence of traders and investors through their highly technical and powerful digital services and personal guidance.
eTrade offers its clients the ability to trade in the public market, investment research, trading strategies, and several other important features all while keeping costs low.
This is one of the longest standing and most trusted brokerage accounts out there.
eTrade offers no commission for the trading of stocks, options, and ETFs. For options contracts and futures contracts, small fees will apply. These will be covered later.
Mutual funds are baskets of investments chosen and managed by professionals in the investment management industry.
eTrade offers access to 9,000+ mutual funds and 4,400 of them offer no-transaction-fees. A mutual fund is a great way to have a professionally managed, diversified, and flexible security in your portfolio.
A bond is essentially a loan to a legal entity or to the government that bears interest (income). eTrade offers commission-free purchases of US-Treasury debt and new issue bond trades.
Like mutual funds, bonds can be a great way to diversify your portfolio if you are interested in a lower beta (lower risk) more income generative security to invest in, and eTrade offers many with zero-commission.
eTrade also offers CDs (certificate of deposit) and other fixed income investments.
Premium Savings Account
No monthly fees or minimum balances. Just a high-yielding savings account. Note that this yield is substantially lower than Robinhood’s.
eTrade’s Core Portfolios allows clients to access a diversified portfolio monitored and managed for a 0.30% advisory fee.
The portfolio is constructed based on the individual investor’s risk tolerance, time horizon, and investment goals.
eTrade offers this tax-deductible retirement account for clients to increase the potential for income longevity and help clients retain their principal income levels.
The Roth IRA retirement account that eTrade offers allows clients to have tax-free growth potential by setting up annual contributions that can be withdrawn at age 59 ½.
24/7 customer support through 800 number that can be found on its website.
This innovative platform is full of technical trading indicators and easy-to-use tools to increase a trader’s ability to effectively execute orders and profit.
While contract pricing is low, a 65-cent fee still applies if a client decides to buy an options contract. If you meet a certain volume, that fee is dropped to $0.50 per contract.
A $1.50 futures contract fee applies for clients wishing to get involved in the futures markets.
Core Portfolios Management Fee
In this automated portfolio for clients, a 0.30% annual fee will apply for the robo-advising aspect of the portfolio. There is also a $500 account minimum on this type of eTrade portfolio.
- Zero commissions on stocks, ETFs
- Many different types of accounts offered to clients
- Bonds and CDs as well as other fixed income investments available
- Ability to access the futures market
- Power eTrade tactical trading platform for technical analysis
- More geared toward traders
- Offers 24/7 customer support
- Robo advisor comes with an annual fee
- Small fees associated with options and futures contracts
- Savings account yield is not great
- High commissions on some mutual funds, but many are commission and load free
Robinhood vs eTrade: Final Summary
Both Robinhood and eTrade offer high-quality, low-cost services to their clients. If you are a complete beginner, Robinhood may be a better option due to the simplicity of its app and the services offered. Robinhood is designed from the ground up to be the simplest trading app out there.
In terms of the investments that are available, eTrade has a wider variety including bonds, fixed income assets, futures and mutual funds. With Robinhood, you will only find stocks, ETFs, options and crypto.
Options traders may lean towards Robinhood since they do not charge any trading commissions. eTrade charges $0.50 to $0.65 per options contract. That being said, you will find more in depth trading tools and research tools with eTrade. They also offer a wider variety of account types. With Robinhood, they only offer a taxable account and a margin account. There are no retirement accounts.
In terms of the online savings account, Robinhood has a significantly better yield. Lastly, Robinhood offers a free stock to all new users worth up to $200 and eTrade does not offer this. They may offer a deposit bonus, but this is often for those who transfer or deposit thousands of dollars.