Personal Finance
K

TradeStation vs. E*Trade: Better Broker to Open an IRA

Person trading on smartphone.

There might not be a better way to save for retirement than by opening an IRA . Roth and traditional IRAs offer all the advantages of other retirement accounts like 401(K)s, with more freedom to pick the investments you want to own in your portfolio. But where you open an account affects everything, from what you can invest in, and how much you pay in fees and commissions. Let's take a look at how two popular brokers, TradeStation and E*Trade , compare for IRA accounts.

Commission prices by investment

Prices matter, but how much they matter depends on how frequently you trade. Both TradeStation and E*Trade allow their clients to trade popular securities for less than $10 per transaction, and offer ample ways to save.

Brokerage Stocks and ETFs Stock Options Mutual Funds
TradeStation $8.99 per trade (or $0.01 per share, $1 minimum) $8.99 + $0.70 per contract (or flat rate of $1.00 per contract) $14.95 per purchase
E*Trade $9.99 per trade $9.99 + $0.75 per contract $19.99 per purchase

Data source: Company websites.

Both brokers offer volume-based discounts, with E*Trade slashing commissions to $7.99 for investors who make more than 150 trades per quarter. TradeStation's discounts begin at 50 trades per month under its fixed-commission schedule and can go as low as $4.99 per trade for traders in its most active tier.

We'd caution that standard prices aren't everything, however. Some trades qualify for commission-free pricing, and many brokers offer free trades and extra cash just for opening a new account. Learn more about special offers for IRAs to see if you qualify for any extras, bonuses, or freebies.

Fee-free mutual funds and commission-free ETFs

One way brokers differ is in mutual fund selection. Notably, TradeStation and E*Trade have a huge selection of mutual funds, but when it comes to fee-free mutual funds and commission-free exchange-traded funds (ETFs), E*Trade has the clear edge.

Brokerage Total Mutual Funds No-Load, No-Transaction-Fee Funds (NTF) Commission-Free ETFs
TradeStation More than 12,100 None None
E*Trade More than 8,000 More than 2,600 More than 100 (WisdomTree, Global X, and more)

Data source: Barron's , company websites and representatives.

Realistically, selection isn't everything. Having 10,000 bad mutual funds isn't as good as having just 10 "good" mutual funds. With that in mind, investors should see if their favorite funds make a broker's list, and if there's an option to invest without paying a transaction fee, load, or commission.

Notably, although TradeStation doesn't have any commission-free choices, its mutual fund transaction fees are about $5.00 lower under its standard pricing structure. Thus, if it isn't available for free at E*Trade, TradeStation would be the lower-priced broker through which to buy a fund.

Minimum deposit requirement for IRA accounts

When it comes to account minimums, these brokers couldn't be more different. TradeStation actually increases its standard $5,000 minimum deposit requirement to $5,500 for IRA accounts. E*Trade waives its $500 minimum for standard accounts to offer no-minimum IRAs.

Person trading on smartphone.

TradeStation and E*Trade both offer the ability to trade on the go with mobile applications. Image Source: Getty Images.

International stocks and ADRs

If you like investing all around the world, the brokerage you choose could ultimately have a big impact on how you can invest. TradeStation and E*Trade customers are limited to mutual funds, ETFs, and individual stocks that have a ticker you can trade domestically. Neither company currently offers the ability to send a trade to the London or Tokyo exchanges, for example.

Type of Investment TradeStation E*Trade
American depositary receipts (ADRs) Yes Yes
Stocks traded on international stock markets No No
Mutual funds and ETFs of foreign stocks Yes Yes

Data source: company websites and representatives.

Mobile app reviews

Virtually every broker now offers a mobile app that enables their clients to check their accounts and place trades from anywhere around the world. Here's how each broker's users and customers rated their mobile trading apps, as of Feb. 9, 2017.

Brokerage Apple App Store Google Play
TradeStation 4.0 stars 4.3 stars
E*Trade 1.7 stars 3.9 stars

Data source: relevant app stores.

Fees on IRA accounts

Keep on the lookout for common fees before you open an account. Some brokers charge annual maintenance fees just for having an IRA account, while others have inactivity fees that are assessed when clients fail to meet certain trading minimums over a specified period.

TradeStation charges an annual IRA account fee of $35. In addition, it charges a monthly minimum activity fee of $99.95 if you do not maintain a balance of at least $100,000, or do not meet minimum trading requirements. Minimum monthly trading requirements include meeting one of the following: 10 round-turn futures and/or futures options contracts, 50 options contracts traded, or 5,000 shares traded.

E*Trade doesn't charge a maintenance or inactivity fee.

TradeStation vs. E*Trade for traditional or Roth IRAs

Depending on how you invest, either broker could be the better place for your IRA. On one hand, TradeStation has two commission structures with deep discounts for high-volume traders, but it doesn't offer as many fee-free funds, and its inactivity fees may turn off savers with smaller IRA accounts. E*Trade offers a laundry list of commission-free funds and doesn't charge maintenance or inactivity fees on Roth and traditional IRAs, but rapid traders may pay more in commissions with its fixed-rate commission prices.

The truth is that every broker caters to a particular subset of the market, and for that reason, there isn't a perfect brokerage for every type of investor. It's all about how a broker's pricing and capabilities fit within the specific needs of your portfolio.

To be clear, The Motley Fool does not endorse any particular brokerage, but we can help you find one that's a good fit for you. Visit Fool.com's IRA Center to compare several brokers all on one page, and see if you qualify for any special offers for opening a new account.

10 stocks we like better than Wal-Mart

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Wal-Mart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as ofDecember 12 , 2016

The author(s) may have a position in any stocks mentioned.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

K

Other Topics

Stocks

Latest Personal Finance Videos

    #TradeTalks: A Holistic Financial Picture to Give a True Indicator of your Financial Health

    Harvest Founder Nami Baral joins Jill Malandrino on Nasdaq #TradeTalks to discuss the Harvest PRO Index, holistic financial picture to give a true indicator of your financial health, not just a credit score.

    Oct 9, 2020

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More