Betterment vs E-Trade

Those looking to break into the market might be weighing their options across multiple applications and brokerages. Potential investors could end their search by deciding between Betterment vs. E-Trade.

While both are publicly traded companies and are considered reliable brokers, there is a range of differences that investors should consider before siding with one over the other. This article will give you an overview of the benefits that each application provides before you ultimately decide which entity you’d like to invest with.

E-Trade Overview

E-Trade is a subsidiary of Morgan Stanley, founded by its parent company in 2012. It offers exchange in a variety of assets including common stocks, futures, options, and mutual funds.

It boasts the ability to help beginning investors learn about markets with some automatic portfolio tools, but it also offers enough sophisticated data that experienced investors might not find in other applications. A constant in the platform’s reviews is the E-Trade customer service department. It is always the subject of praise, as the platform offers 24/7 support via both phone and email.

E-Trade Fees

Like most brokers, E-Trade does not have any minimum account balance. This has become typical of robo-retailers. This is the main draw as traditional firms have historically required high minimums to break into the market. While a general account with E-Trade does not have a minimum balance, there can be fees associated with mutual funds that aren’t on E-trade’s “no-fee” list. Many of these mutual funds will also require a minimum investment based on the security’s terms.

E-trade has also had to keep up with its competitors by eliminating its trade commissions as most robo-retailers do not charge when trading stocks, options, or exchange-traded funds (ETFs).

Option trading does not involve a commission, but investors can expect a 65-cent contract charge. More active traders can have this contract fee discounted to 50 cents when trading options. At the time of this publication, investors will have to trade 30 times or more per financial quarter, but this policy is subject to change by E-trade.

Cryptocurrencies and Fractional Shares

While E-trade offers access to plenty of investment opportunities, there are a few key pitfalls that may have potential users reconsidering. For better or worse, cryptocurrencies are becoming more prominent with retail investors. E-trade offers crypto-related assets (such as Bitcoin futures), but true cryptocurrency trading is not available on the platform currently.

Furthermore, E-trade does not offer fractional shares, where an investor does not have to purchase an entire share at a time. This can limit choices to those without a great deal of capital as they cannot purchase entire shares of very expensive stocks such as Google or Disney.

E-Trade Pros

• Large selection of investments
• Extensive research
• Great customer support

E-Trade Cons

• Fractional shares only available through a dividend reinvestment plan or robo-advisor
• Options trading can be expensive

Betterment Overview

Betterment has been around since 2008, giving it an even longer tenure than E-Trade’s already well-established reputation. When comparing Betterment vs. E-Trade, Betterment offers similar benefits along with extra services that could prove very useful for the average retail investor.

Automation

Betterment’s greatest strengths are quite possibly its sheer accessibility and automation capabilities. Investors who don’t know where to start can answer a series of questions about basic goals, current income, and risk tolerance. Betterment will then establish a basic portfolio built around these answers (which require little technical knowledge). More experienced investors are still able to customize their portfolios if they so desire.

Betterment Fees

Much like E-Trade, Betterment does not require any minimum account balance. There is a 0.25% managerial fee, but this is historically low compared to the traditional brick-and-mortar brokerages of the past.

This fee can even be offset by the fact that Betterment offers automatic tax-loss harvesting on assets that are sinking in value as well as calculating how much users stand to lose in taxes upon withdrawing from certain accounts.

Cryptocurrencies and Fractional Trading

Betterment is looking into trading cryptocurrencies but does not currently offer it. In the discussion of Betterment vs. E-Trade, however, a major difference is that Betterment offers fractional shares.

This means that users trading limited funds may still invest in blue-chip stocks. Plus, recurring deposits make things even easier. For instance, they allow users to set up automatic investments in big-name assets such as Tesla and Amazon over time.

Betterment Pros

• Low management fees
• Tax-loss harvesting
• Automated investing

Betterment Cons

• No real estate
• Limited portfolio customization
• Limited compatibility with external accounts

Deciding Between Betterment and E-Trade

Both platforms offer very similar services and charge nominal but different fees. E-Trade receives constant positive reviews regarding its 24/7 customer support both online and over the phone and a few tools to help with market analysis and automate a portfolio.

Betterment’s greatest strength is its simplicity and ability to automate, making it ideal for a beginning investor who wants to slowly put money away for a long time without the stress or frustration of constantly monitoring their account.

While neither platform offers direct cryptocurrency trading, Betterment may prove to be the superior choice as the ability to purchase fractional shares can be a huge advantage to retail investors looking to grow their assets over time.

Regardless of which company wins out in the decision of Betterment vs. E-Trade, you can get started with either platform by visiting the relevant link.