Updated May 9, 2016

Study: Best Brokerage Accounts - Etrade vs Scottrade vs Ameritrade

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Finding the right online broker is a difficult task. Dozens of sites claim to offer the best solution for your investing needs, whatever they may be. These sites tempt you with the promise of having the lowest fees, the most intuitive interface, and more investment choices than the competition.

But the broker that works best for an active trader might not be the right choice for someone just getting started with investing.

Tip: New to investing? Scottrade has over 500 branch locations where you can seek help. Click here to visit Scottrade or read our in-depth review.

CreditDonkey.com considered several different investment strategies to help you decide where to put your money.

Roundup Methodology

Here are the main factors we considered in comparing online brokers:

  1. Costs (Fees and Commission)
  2. Investment Choices
  3. Research/Tools

Each time you make an online trade, a broker charges you a commission. The amount of the commission varies from broker to broker, averaging around $8 to $10 per trade. Some brokers offer trades at half that price, but those savings usually come with compromises, like no access to stock market research.

There are other costs to consider with an online broker, such as account minimums and fees. Many brokers let you start trading immediately while others require an initial deposit. This deposit can range from $500 to $2,500.

You should also familiarize yourself with a broker’s list of fees. These are the costs that the sites do not advertise as much as the “low” commission. Some brokers will charge you more if you trade by phone, others will charge you if you trade a “no fee” mutual fund within 30 days of purchase. Knowing each broker’s fee schedule is the only way to avoid extra costs.

Investment choices are similar across the board, but some brokers have advantages that set them apart. For example, while most brokers offer “no-fee” mutual funds and “no-fee” exchange-traded funds (ETFs), the amount offered can range from just 10 to more than 100. But don’t be swayed by a number. Also consider the performance of each broker’s funds, as there’s no point in having access to hundreds of “no-fee” ETFs that aren’t worth your investment.

Many investors – especially first-timers – want access to stock market research, and they want as much as they can get, any way they can get it. Things like real-time quotes, portfolio advice, and independent research from multiple stock firms can make all the difference when deciding which broker to choose. The brokers with the most research usually won’t be the cheapest, but for many, the costs are worth it.

We rated each factor on a 1-5 scale to come up with our best-of list.

Best Investment Broker: E*TRADE

  • Fees: $6.95 per online trade; $4.95 (w/ 30+ trades/quarter), 4/5
  • Investment Choices: Large selection of bond issues, commission-free ETFs, 5/5
  • Research/Tools: Comprehensive tools, streaming quotes, 4/5

Despite having one of the highest commission fees, E-Trade still makes a compelling case for investors thanks to its variety of investment choices. The company offers stocks, mutual funds, ETFs, and more than 50,000 bond issues, which, according to the website, is one of the largest bond selections available online.

Nellie S. Huang at Kiplinger put E*TRADE at the top of its most recent ranking of online brokers. E-Trade scored first place thanks to its “high scores in investment choices, user experience and research and tools.”

Why We Like It
As one of the original innovators of online trading, E-Trade continues to provide one of the best user interfaces. The company makes it easy to personalize your portfolio so you can keep track of your investments. The website is extremely user-friendly and has excellent tools and research for investment rookies.

The Downsides
E-Trade charges $6.95 per online trade. The company also offers $4.95 trades, but that’s only for investors who make at least 30 trades per quarter.

Who It Works Best For
The tiered pricing structure makes E-Trade a better option for active traders. Beginners will also find that it’s great for hand-holding you through your journey.

For long-term investors: E-Trade also has over 1,300 no-load, no-transaction fee mutual funds, which will save the long-term investor a fair amount of commission over time. And may make it less painful to sell and buy new funds if they’re not performing to your standards.

Best Brokerage Fees: Scottrade

  • Fees: $7 per online trade, 4/5
  • Investment Choices: Large selection of mutual funds, no futures trading, 3/5
  • Research/Tools: Basic but easy to use, 3/5

If you’re looking for an online broker with reasonable fees, then Scottrade could be your answer. Online stock and ETF trades are just $7 per trade. Trading outside the company’s no-fee mutual funds will cost you $17 per transaction, significantly lower than some of the competition.

For the past three years, The American Association of Individual Investors has picked Scottrade as the most used online broker. And based on a recent study from J.D. Power and Associates, Scottrade leads the pack in customer satisfaction. Customers gave the broker high scores for interaction, account information, and trading charges and fees.

Why We Like It
Scottrade provides a solid budget option for traders looking for reasonable fees and commissions. The company also has more than 500 office locations in the U.S. for investors who like that in-person approach. Scottrade also has special offers including free trade promotions for new customers.

The Downsides
Scottrade lags in terms of total number of investment options and research tools.

Who It Works Best For
Scottrade is a solid choice for cost-conscious traders who are familiar with online investing.

Best Investment Research: TD Ameritrade

  • Fees: $6.95 per online trade, 4/5
  • Investment Choices: Offers more than 100 commission-free ETFs, 4/5
  • Research/Tools: Stock research from 12 firms, 5/5

TD Ameritrade won’t give you the lowest costs for your investment, but it will provide you with one of the best selections of research tools in the market. The company’s website gives investors access to third-party research from a dozen firms, including Standard & Poor’s, Research Team, and Market Edge. And the company’s “thinkorswim” trading platform offers one of the most intuitive online and mobile experiences for investing.

In its best online broker ratings for 2013, Barron’s named TD Ameritrade “Best for Long Term Investing” and “Best for Novices.”

Why We Like It
TD Ameritrade presents an attractive value proposition for investors who are willing to spend more to get more. The company is also one of the few online brokers to have office locations across the country.

You don’t need any cash to get started. Virtual trading is also offered, letting you test out the platform and investments with virtual money before committing real money.

The Downsides
TD Ameritrade’s $6.95 per online trade is higher than some discount brokers. And, unlike E*TRADE, there are no discounts for active traders. Transaction-fee mutual funds will cost you a hefty $49.99 to trade.

Who It Works Best For
With their gold-standard Thinkorswim platform or the beginner-friendly Trade Architect platform (both available to every user), TD Ameritrade is great for novices and experienced traders alike.

Other Brokers to Consider

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While these brokers are some of the more popular, there are a number of other online brokers you should also consider. For lower fees, look at Capital One Sharebuilder ($6.95 per trade) and TradeKing ($4.95 per online trade). If you want to trade options, then add OptionsHouse and optionsXpress to your list of candidates.

Best Brokerage for Beginners: Fidelity

  • Fees: $4.95 per online trade, 5/5
  • Investment Choices: Selection of no-fee mutual funds and commission-free ETFs, 4/5
  • Research/Tools: Several investment calculators, stock research from 12 firms, 4/5

Investors looking for a broker with a wealth of stock market research and a low commission fee should consider Fidelity. The broker offers research from a dozen independent firms, as well as 36 savings, tax, and retirement calculators.

From 2010 to 2012, Fidelity was a three-time consecutive winner in SmartMoney’s annual broker survey. Each year, SmartMoney gave Fidelity high marks for its mix of investment options and low cost.

Why We Like It
Fidelity has great research tools and a large selection of no-fee investment choices, all at a competitive trading commission.

The Downsides
Costs can start to add up if you buy outside of the company’s no-fee selections, especially with mutual funds. For example, while “Fidelity Funds” have no transaction fee, other transaction fee non-Fidelity mutual funds will cost $49.95 per purchase.

Who It Works Best For
Fidelity works best for traders who are planning to invest long-term in the Fidelity family of funds. While the commission is competitive, the additional fees and costs might not be ideal for new investors.


A Multi-Broker Approach
Many investors find that a combination of online brokers is the best strategy for building wealth. Diversity is a key component to any successful financial plan, so you might want to consider choosing two or three brokers based on your individual investment goals.

Ross Frasier is a research analyst at CreditDonkey, a stock broker comparison and financial education website. Write to Ross Frasier at ross@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped families make savvy financial and lifestyle decisions. (read more)

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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