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Written by Matthew Cerminaro on October 20, 2020
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Robinhood vs E*TRADE 2021: Best Brokerage Account?

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 and intimidating experience, especially when you find out that there are dozens to choose from.

Robinhood and E*TRADE 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, there are some big differences between the two platforms.

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.

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Robinhood Review 2021: Best Investing App?

  • Trading Fees
  • Ease Of Use
  • Account Types
  • Research/Data
  • Securities Offered
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E*TRADE Review 2021: Best Investing Platform?

  • Pricing
  • Assets
  • User Friendly
  • Retirement Accounts
  • Sign Up Incentive
  • Research Tools
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Summary: Robinhood vs E*TRADE

  • Both offer $0 commissions on stocks and ETFs
  • Robinhood offers free options trading while E*TRADE 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 E*TRADE's application slightly 
  • Robinhood offers fractional shares 
  • Both offer a high yielding savings account
  • E*TRADE offers a tactical trading platform 
  • More access to different kinds of securities such as bonds and CDs through E*TRADE 
  • Access to retirement accounts through E*TRADE 
  • E*TRADE 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 E*TRADE does not
FeatureRobinhoodE*TRADE
Minimum Account Balance$0$0
Commissions$0 (All)$0 (Stocks & ETFs)
Options Commissions$0$0.50 To $0.65 Per Contract
AssetsStocks, ETFs, Options, CryptoStocks, ETFs, Options, Bonds, Mutual Fund, Fixed Income, Futures
Customer ServiceLimited24/7 Phone Support
Free StockYesNo
Research ToolsBasicAdvanced
Beginner FriendlyYesNo
Online Savings AccountYesYes
Retirement AccountsNoYes
Fractional SharesYesNo
Dividend ReinvestmentYesYes
Best ForComplete BeginnersIntermediate/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 Features

When it comes to choosing an online broker, making sure the features align with your financial goals is crucial. Let's break down some of Robinhood's most notable features and what makes them so great.

Zero-Commissions

Robinhood offers zero-commission on all stocks, ETF, option, and cryptocurrency transactions. Commissions are the payment that is required to make a trade. Now while this is the expectation now, in the days of old, brokerages were charging $10+ in some cases just to buy or sell a stock!

Lucky for you, Robinhood came along and did away with commissions! After their rapid success, other older brokers like E*TRADE were pressured to follow suit and soon virtually all brokerages had dropped their commissions.

Fractional Shares

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 fractional share initiative. By allowing users 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 also encourages diversification as you no longer need to buy full shares which often decreases diversification potential in smaller accounts. You can now invest in dozens of companies with as little as $1!

With this feature, you will be able to buy shares of stocks and ETFs in $1 increments. This is going to allow you to get much more granular with designing your portfolio to match your objectives and investing style.

robinhood website image

Dividend Reinvestment

Along with the ability to buy fractional shares, Robinhood also allows investors to automatically reinvest their dividends if they choose to do so. By opting into the DRIP or "dividend reinvestment plan", you'll be able to automatically reinvest all of the dividends you receive back into fractional shares of the company.

By doing this, you'll be able to earn compound interest and reduce the cash drag of your portfolio by putting your money back to work right away.

Recurring Investments

For investors that believe in a dollar-cost-averaging strategy, this feature should be particularly interesting. By offering recurring investments to their users, Robinhood allows you to automatically invest a set amount of money into a certain investment on a periodic basis.

For example, if you wanted to invest $500 per month into VOO (an ETF that tracks the S&P 500), you can set up your Robinhood account to automatically pull $500 from your checking account on the first of the month and invest it fully in VOO. This can be a great way to further automate your investing if you follow more of a passive investing strategy.

Additionally, Warren Buffet is a proponent of dollar-cost-averaging, so if you are looking to learn from the best, embracing this strategy may be a good option.

Cash Management

Robinhood also offers a cash management account where investors can hold extra cash that they aren't ready to invest while earning an above-average APY. This account also comes with a debit card that users can use to spend cash directly from their Robinhood account and access over 75,000 fee-free ATMs.

YieldAs Of
0.30% APY11/17/20

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. You can signup for this feature on Robinhood's website here, and join the waitlist. 

This feature demonstrates Robinhood's desire to expand their offerings beyond just a brokerage account and become a more integrated part of the financial lives of young people. Depending on the success of this feature, this may spur Robinhood into launching more related financial products for millennials and Gen Z.

Robinhood Gold

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. 

In addition, you'll receive additional market data and research from Morningstar to help you plan your trades and investments, as well as access to larger instant deposits ranging up to $50,000.

Documents & Taxes

Important documents and tax forms associated with Robinhood accounts can be found directly on their website and app. As many of their investors are newer to the stock market and might not be as familiar with the rules and regulations when it comes to taxes, this feature is particularly useful.

This easily accessible way of accessing important files continues to demonstrate Robinhood’s ability to make things easy for their clients.  

robinhood referal

Free Stocks

When you sign up for Robinhood, you automatically get one free stock. Then, you can refer friends to earn more free stocks!

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 Google Play’s Best App of 2015. The easy-to-use, beginner-friendly, sleek, and clean application allows users to navigate easily through different facets of the app and execute on the trades they want to take with ease. 

Coming from personal experience I have tried multiple online brokers and their apps, and while some come close, none are quite as easy to traverse as Robinhood's. It is what has made the app so successful and another reason why newcomers to the financial markets may feel more comfortable with Robinhood due to its emphasis on keeping things basic.

Customer Support

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.  

Robinhood Fees

Robinhood Gold

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 Fees

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 of the app.

robinhood gold

Robinhood Pros 

  • 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

Robinhood Cons

  • 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 logo

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 Features

Zero-Commissions

eTrade offers no commission for the trading of stocks and ETFs. This means you can buy and sell the 1000's of securities that eTrade offers all with no extra cost! For options and futures contracts, however, small fees will apply. These will be covered later.

Mutual Funds

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. 

Mutual funds differ from ETFs in a few important ways though. A couple of important differences are that you're typically not able to trade mutual funds during the day, and the fees associated with mutual funds tend to be higher than those associated with ETFs.

Bonds

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.

Bonds are typically less volatile and not as highly correlated with the stock market, so buying binds can be a good way to protect your portfolio against the risk of a correction in the sock market.

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.

YieldAs Of
0.05% APY5/28/2020

ETrade graph

Automated Investing

eTrade’s Core Portfolios allows clients to access a diversified portfolio monitored and managed for a 0.30% advisory fee. This is eTrade's robo-advisor offering and appeals to individuals who are looking for a hands-off investing experience.

The portfolio is constructed based on the individual investor’s risk tolerance, time horizon, and investment goals. Simply fill out a questionnaire with important information regarding your goals and objectives and the platform's algorithms will get to work on building a portfolio suited to your situation. 

Retirement Accounts

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.

By taking advantage of retirement accounts with tax benefits, investors can secure their retirement more quickly by paying less in taxes.

Customer Support

24/7 customer support through the 800 number that can be found on eTrade's website.

Power eTrade

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. Power eTrade has 100+ technical indicators along with 30+ drawing tools that you can utilize to enhance your gain potentials.

Technical indicators are great at determining short term stock movements! You can learn more about technical analysis here

Paper Trading

One of the best ways of practicing trading and investing without taking the unnecessary risk of losing your hard earned money is through paper trading! And lucky for you, eTrade offers paper trading through its Power eTrade online platform.

Here, you can do your own technical analysis, test strategies, and ultimately learn how to enhance your gains without any risk. As the saying goes, practice does make perfect!

Obviously, the psychology of investing real money and fake money differed significantly, but getting your feet wet with fake money can be a good way to familiarize yourself with the platform before your hard-earned dollars are on the line.

eTrade Knowledge

Beyond learning from Paper Trading on eTrade's Power eTrade platform, the online broker also offers educational resources so you can become a better investor. Simply navigate to eTrade's website, find the "Knowledge" section, and start learning!

From portfolio allocation techniques, to trading strategies, to the golden rules of investing, eTrade's commitment to your financial success is only amplified given the fantastic educational resources the online broker offers. And to make it even better, all of this can be accessed free of cost with no eTrade account needed!

eTrade Fees

While eTrade does offer commission-free stock and ETF trades, there are still some fees for using the platform that are important to keep in mind.

Options Contracts

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. Options can be complicated, especially for newcomers to the financial markets, so here is a little about the complex derivative.

Options give you the right but not the obligation to buy or sell a security at a certain price. There are two types of options that you can trade, calls and puts. By buying a call, you are betting on the price of a security increasing in value. Therefore, people who are bullish on a certain stock and believe highly in its future prospects may find options to be a great choice. This is because the return potential for options is higher than outright buying a stock.

On the other hand, there is also the potential for greater losses if you don't have a deep understanding of what you are doing. So be sure to do your homework before you start investing in options or other high-risk investing strategies.

Futures Contracts

A $1.50 futures contract fee applies for those looking to get involved in the futures markets. $1.50 may not seem like a lot, but remember that small fees can add up. If your position size is small, this fee may have a large effect on your overall returns! This is where you need to keep everything in context and figure out if the fee is too much of a burden for your personal financial situation.

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.

ETrade zero commission

eTrade Pros

  • 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

eTrade Cons

  • Robo advisor comes with an annual fee
  • No access to cryptocurrency
  • No ability to purchase fractional shares
  • 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.

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robinhood vs eTrade
Article written by Matthew Cerminaro
Matt is currently attending Union College pursuing a Bachelor of Arts in Economics. He participates in the student investment fund and is a member of the Union College football team. Matt runs his own personal finance Instagram page and market-related blog where he writes about economics and general wealth accumulation tips.

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