Vanguard vs. E*Trade Introduction
Because E*Trade and Vanguard are currently advertising quite heavily, you can be sure each one wants
your business. But which brokerage firm provides the better investment experience? We’ve done the
research and we have an answer for you.
Cost
| Broker Fees |
Stock/ETF
Commission |
Mutual Fund
Commission |
Options
Commission |
Maintenance
Fee |
Annual IRA
Fee |
|
Etrade
|
$0
|
$0
|
$0.65 per contract
|
$0
|
$0
|
|
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 up to $4,000 cash bonus + $200 in ACAT rebate!
Self-Directed Investing
E*Trade customers can buy and sell the following products:
- Stocks (including penny and OTC stocks)
- Bonds and other fixed-income vehicles
- Mutual funds
- ETF’s
- Closed-end funds
- Options
- Futures
- Options on futures
Although E*Trade does have $0 commissions on equity trades, this great deal only applies to the big exchanges. Trades of over-the-counter stocks are $6.95 each.
But that’s better than Vanguard’s policy. Vanguard has shut down most of its OTC stock trading service, and only large over-the-counter ADR’s can be traded. Vanguard also doesn’t offer futures or options on futures, although it does have everything else E*Trade delivers.
Winner: E*Trade
Investment Management
So far, we have looked only at self-directed trading. Both brokerage houses in this contest offer portfolio management (at a cost, of course).
E*Trade’s robo account costs 30 basis points per year and trades low-cost ETF’s from a variety of fund families. And then there’s old-school, traditional management. These packages replace the digital advisor with a human one but require a larger deposit. The cost ranges from 35 to 90 basis points annually.
Like E*Trade, Vanguard has both robo and traditional services. Vanguard’s automated service costs 0.20% (could be less in some cases) and trades only Vanguard ETF’s. Traditional management comes in a variety of packages and charges annual fees on tiered schedules. The most expensive tier is just 0.30%, and the cheapest is 0.05%.
Winner: Vanguard
Website Trading
E*Trade’s website has been modified somewhat since its acquisition by Morgan Stanley. Nevertheless, it maintains a user-friendly trading experience. Watchlists and security alerts are standard fare. Several option spreads are pre-installed, and it’s possible to add an additional leg to an order. A chart can be detached, and there are lots of graphing tools.
Just in case the website isn’t enough, there is Power. This is a browser platform that can be launched from the website’s dashboard. It has a very advanced order ticket plus full-screen charting that we really liked during our test drive of the platform.
The Vanguard site has no web browser platform. To make matters even worse, the site itself is rather humdrum with only chains for calls and puts (no spreads) and very elementary charting. The order ticket has just 4 trade types.
Winner: E*Trade by a mile
Mobile Apps
Vanguard and E*Trade have apps for tablets and phones, but the similarities stop there. Vanguard’s app is super simple, to the point that there’s just not much on it. For example, charts for funds have no tools, and there’s no horizontal mode, either. Stocks have no charts. In fact, stocks have no profiles at all.
Over at E*Trade, everything is different. Right off the bat, we get two apps: a main app and an app modeled after Power. This latter one can trade futures contracts. Together, these two apps deliver tons of trading tools. Examples include Level II quotes, horizontal charting with tools, advanced order types, and live streaming of Bloomberg Business News.
Winner: E*Trade by another mile
Other Software
E*Trade customers can use an app for Apple Watch. The software shows market indexes, quotes on securities, and the day’s gain or loss on an account’s positions. Vanguard does not have a smartwatch app.
And then there’s desktop software. Vanguard doesn’t have any, but E*Trade does. Called Pro, E*Trade’s program really lives up to its name. There are many useful tools on Pro. During our investigation, we found the following features to be especially valuable:
- Full-screen charting with many tools
- Direct access to ECN’s and market centers
- Advanced option tools
- Multiple order tickets
- Level 2 quotes
- Economic calendar
Winner: E*Trade
Margin Services
Cash and margin trading are both available at Vanguard and E*Trade. Only E*Trade displays margin details for specific securities on its website (look on the Portfolios page, which can be found under the Accounts tab). There’s also a margin calculator on Pro.
But Vanguard has the cheaper margin schedule:
|
Debit Balance
|
Margin Interest Rates
|
|
under $19,999
|
13.75%
|
|
$20,000 – $49,999
|
13.25%
|
|
$50,000 – $99,999
|
12.75%
|
|
$100,000–$249,999
|
12.25%
|
|
$250,000–$499,999
|
11.75%
|
|
$500,000–$999,999
|
10.5%
|
|
above $1,000,000
|
call
|
And here’s E*Trade’s rates:
|
Debit Balance
|
Margin Interest Rates
|
|
$250,000 - $499,999.99
|
12.2%
|
|
$100,000 - $249,999.99
|
12.7%
|
|
$50,000 - $99,999.99
|
13.2%
|
|
$25,000 - $49,999.99
|
13.7%
|
|
$10,000 - $24,999.99
|
13.95%
|
|
$0 - $9,999.99
|
14.2%
|
E*Trade, but not Vanguard, offers portfolio margin for customers with assets above $100,000.
Winner: Pretty even overall
Security Research
Vanguard clients can use screeners for bonds, stocks, and funds. There is no screener for option contracts, though. During our testing of Vanguard’s screeners, we found them difficult to use without a lot of search criteria.
Over at E*Trade, the situation improves dramatically. For example, not only is there a screener for options, there is a strategy optimizer, a probability calculator, an income backtester, and an options analyzer (with profit-loss diagrams).
E*Trade’s mutual and exchange-traded fund screeners also are much better than Vanguard’s. There are more search criteria, and the tools are more user-friendly.
Security profiles at the two brokerage firms are also on different levels. E*Trade’s stock profiles, for example, delivers analyst reports from four analysts with trade recommendations and price targets in graphical formats. Vanguard’s stock profiles, by comparison, provide analyst reports from just two companies and don’t deliver any price targets.
E*Trade’s stock profiles show insider trading activity, a great feature that Vanguard’s profiles lack. Option chains on stock and ETF profiles can also be set to multi-leg strategies. Vanguard’s software doesn’t have this capability.
Winner: E*Trade
Miscellaneous Services
Individual Retirement Accounts: Both Vanguard and E*Trade offer IRA’s. E*Trade has more IRA versions, including a Beneficiary IRA. Both firms have IRA fees in some situations.
Banking Tools: E*Trade has them. Vanguard does not.
Extended Hours Trading: E*Trade has more hours.
DRIP Service: Dividend reinvesting is possible at both firms.
Fractional Shares: Neither brokerage firm offers whole-dollar investing in stocks or ETF’s.
Initial Public Offerings: E*Trade offers access to forthcoming stock launches. Vanguard does not.
Periodic Mutual Fund Investing: It’s possible to establish recurring purchases of mutual fund shares at either broker-dealer in this survey. At Vanguard, the service is restricted to Vanguard funds.
Winner: E*Trade
Recommendations
ETF/Stock Trading: No doubt, it’s E*Trade with Power or Pro.
Long-Term Investors & Retirement Savers: Either brokerage house would be very good.
Mutual Fund Trading: Both broker-dealers have slightly less than 7,000 mutual funds open to new investors. E*Trade has much better fund tools, including a very user-friendly fund screener, so it gets our recommendation.
Small Accounts: E*Trade has a $500 minimum deposit requirement to begin its robo service. Vanguard requires $3,000. For old-school management, there are a variety of minimums. E*Trade’s smallest requirement is $25,000, while Vanguard’s smallest is $50,000. There are no account minimums for self-directed accounts.
Beginners: A robo account with either brokerage firm will suffice.
Best Brokers
Etrade vs Vanguard: Verdict
E*Trade clearly delivers the better overall experience. In the categories where it underperformed,
it didn’t do so by very much.
Anyone looking for the top-rated brokerage firm on the market
should go with Charles Schwab
or read Charles Schwab review.
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