Overview of E*Trade and Vanguard
Vanguard has many more client assets than E*Trade. Does that mean Vanguard is the better brokerage
firm? Take a look at our research:
Cost
| Broker Fees |
Stock/ETF
Commission |
Mutual Fund
Commission |
Options
Commission |
Maintenance
Fee |
Annual IRA
Fee |
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Etrade
|
$0
|
$19.95
|
$0.65 per contract
|
$0
|
$0
|
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Vanguard
|
$0
|
$20
|
$1.00 per contract
|
$20*
|
$20*
|
|
Firstrade
|
$0
|
$0
|
$0 per contract
|
$0
|
$0
|
Services
| Broker Review |
Cost |
Investment Products |
Trading Tools |
Customer Service |
Research |
Overall Rating |
|
Etrade
|
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Vanguard
|
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Firstrade
|
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Promotions
Etrade:
Get zero commission on stock and ETF trades.
Vanguard: none.
Firstrade: Get 2 FREE stocks and $0 commission in ALL trades!
Category #1: Tradable Assets
Vanguard very famously offers its own in-house mutual funds and ETFs. And of course, it offers mutual funds and ETFs from other fund families. Vanguard customers also get to trade stocks, option contracts, closed-end funds, and fixed-income securities.
E*Trade customers have access to every asset class that Vanguard offers (including every Vanguard ETF and 123 Vanguard mutual funds with no transaction fee) plus futures contracts and options on futures.
Winner: E*Trade
Category #2: Mutual Fund Resources
Because Vanguard is mostly known for its mutual and exchange-traded funds, you may think it will outperform E*Trade in the second category by an easy mile. But our research paints a different picture.
Using Vanguard’s mutual fund screener, we found 307 mutual funds from Vanguard itself. By comparison, E*Trade has 127 mutual funds from Vanguard (4 of them apparently have a transaction fee). So clearly Vanguard has more Vanguard funds.
But when comparing total funds from all fund families, E*Trade has more (7,055 versus 6,564 at Vanguard). Plus, E*Trade has more no-load, no-transaction-fee funds (4,302 versus less than 3,400).
The screeners themselves differ quite a bit, too. E*Trade’s is easier to find and easier to use. It offers many more search criteria than Vanguard’s screener, including exotics like:
- 3-Year R-squared
- Downside capture ratio
- Moving average crosses
Winner: E*Trade
Category #3: Stock Research
If you have your eye on stocks instead of mutual funds, both broker-dealers do a decent job of providing equity research tools. On E*Trade’s website, we found very extensive equity profiles with blogger sentiment scores, pdf reports, news articles, insider trading activity, earnings histories, and more. For Mastercard, we found seven reports with trade recommendations. TipRanks provides a price target over the next 12 months ($377 for Mastercard on the day we did our research).
On Vanguard’s site, we found far less data. For Mastercard, Vanguard provides two reports. The one from Argus has a price target ($350 for Mastercard), while MarketGrader provides just a trade recommendation (buy).
Over at Vanguard, we found 2 downloadable reports for Alcoa (from MarketGrader and Argus). Other helpful information on stock profiles includes a list of related companies, price history, and financial statements. Although Vanguard does provide news articles, we found far more articles for Mastercard on E*Trade’s website.
Winner: E*Trade
Category #4: Websites
Eventually, you’ll want to place an order. And when you do, you’ll get good websites at both firms. During our research, we found E*Trade’s a tad bit easier to navigate. But that doesn’t mean it’s less powerful. On the contrary, charting comes in full-screen mode with many tools. By comparison, Vanguard’s charting software provides fewer tools with no full-screen mode.
E*Trade goes a step further with a browser platform. It delivers even more impressive charting with an order ticket that even professionals would be impressed with. There are 11 advanced trade types on it (including trailing, OCO, 3 leg bracket stop, and hidden). Time & sales data and Level II quotes make an appearance, too.
Vanguard’s site does not have a browser platform, and its web-based order ticket is rather simple (market, limit, stop, and stop limit). Advanced trading features like time & sales data are completely absent.
Winner: E*Trade
Category #5: Desktop Software
E*Trade clients who don’t find what they’re looking for on the company’s website or browser platform can opt for Pro. This is the broker’s advanced desktop program, and when we say advanced, we really mean it.
The software comes with the following features:
- Full-screen charting with over a hundred technical studies, thirty drawing tools, and six graph styles
- Live streaming of Bloomberg news
- Two order tickets
- Level II quotes
- Time & sales data
- Watchlists
- Market movers
Despite Pro’s sophistication, E*Trade doesn’t charge any monthly fees to use it, although there is a $1,000 account minimum.
Vanguard has never had desktop software and probably never will.
Winner: E*Trade
Category #6: Mobile Apps
Vanguard recently eliminated support for its Kindle Fire app, but it still offers a mobile platform for Apple and Android. Unfortunately, this app has no charting to speak of. The order ticket has the same order types as the website. The one thing that really bugs us about this app is that only Vanguard mutual funds can be traded on it. On E*Trade’s app, by comparison, it’s possible to trade mutual funds from all fund families.
On E*Trade’s regular app (there are two of them), we found simple charting, option chains, and Level II quotes. Vanguard’s app does not offer Level II data or options trading.
The second E*Trade app delivers a powerful charting and trading experience with more graphing tools and a more advanced order ticket.
Winner: E*Trade
Category #7: Margin Borrowing
With a margin account at either brokerage firm in this rivalry, you’ll be able to trade with borrowed
funds. This is a great way (albeit not without risk) to increase your percent-based returns. But of
course, the service isn’t free.
Vanguard customers have to pay between 4.75% and
8.5% annually for borrowed funds, while E*Trade charges between 5.45% and
8.95%.
We were disappointed not to find detailed margin info like leverage or maintenance requirements on security profiles at either broker-dealer.
Winner: Vanguard
Category #8: Option Tools
Although it’s not possible to trade options on Vanguard’s mobile app, derivatives can be traded on the broker’s website. Unfortunately, we only found calls and puts on the platform. There are no integrated multi-leg strategies. Even worse, it’s not possible to create your own spread. So it will just be calls and puts at Vanguard.
When trading these calls and puts, you won’t be using any advanced tools because Vanguard doesn’t offer them. You also won’t find Greek values.
E*Trade is a very different story. It does offer options trading on both its apps. The high performance app has several integrated spreads, like straddles and call diagonals. If you don’t find the strategy you want, you can simply create your own, up to 4 legs.
E*Trade’s website offers much more. During our investigation, we found an income backtester, Greek values, an income finder, profit-loss diagrams, and other high-performance tools.
Winner: E*Trade
Category #9: Miscellaneous Services
Dividend reinvestment program: If you want to automatically reinvest cash distributions, both brokers offer free DRIP service.
IRAs: Both Vanguard and E*Trade offer Individual Retirement Accounts. Both of them charge IRA fees in various situations as well. E*Trade has more IRA types, including a Beneficiary IRA, an IRA for Minors, and something called a Complete IRA. This last type is designed for withdrawals after age 59½.
Automatic mutual fund investing: This great service, too, is available at both firms. But Vanguard restricts its service to Vanguard funds.
Fractional-share trading: Not available at either broker.
IPO availability: Only E*Trade offers full IPO participation.
Extended hours: Vanguard customers can trade during the broker’s post-market session. E*Trade provides both post-market and pre-market sessions. Moreover, E*Trade offers overnight trading in some exchange-traded funds.
Winner: E*Trade
Now, Our Recommendations
Retirement savers and long-term investors: This one is a toss-up. Both companies offer portfolio management, financial advice, and a long list of retirement accounts.
Stock/ETF trading: This one is easy. With E*Trade’s desktop program, it is the obvious choice.
Beginners: Although both firms have educational materials, only E*Trade has 24/7 customer service with an online chat feature. Plus, we think the simulated trading mode on the browser platform is a big plus for newbies.
Small accounts: Either will work.
Promotions
Etrade:
Get zero commission on stock and ETF trades.
Vanguard: none.
Ally Invest:
Up to $3,000 cash bonus + $0 commission trades.
Etrade vs Vanguard: Which is Better?
As this study shows, among U.S. brokerage firms, bigger is not necessarily better.
Anyone looking for $0 commission trades not just on stocks but also on mutual funds and
options will find
a better deal at Firstrade.
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