Robinhood vs. E*TRADE

Robinhood and E*TRADE may be the two most important names in online trading. In many ways E*TRADE introduced the world to online investments, taking equities trading from the world of corner offices to kitchen tables. A couple decades later, Robinhood lapped its predecessor and took trading from laptop screens to smartphones. In other words, E*TRADE invented website-based trading as we think of it today, while Robinhood may have moved that revolution to investment apps.

A financial advisor can help you analyze the services and strategies that best suit your investment goals.

Overview of Robinhood vs. E*TRADE

In many ways these are two very different products. While Robinhood is a low-friction, easy-to-use, no-commission platform, E*TRADE offers free stock and ETF trades but not free mutual fund or options trades and specializes in a suite of analytical tools that operate to a nearly professional degree of sophistication.

E*TRADE allows investors to trade a wide range of securities, including non-U.S. securities, options, futures and cryptocurrencies. Using Robinhood gives you access to a somewhat more limited range of securities, U.S. stocks, ETFs, options, crypto and American Depositary Receipts (ADR).

Robinhood vs. E*TRADE: Fees

Generally, traders have Robinhood to thank for the era of free stock trading services. While the explosion of online trading options has been making trading cheaper over the past 20 years, Robinhood was the first commission-free trading platform. Once that genie was out of the bottle the other companies quickly followed.

From the user end side of things, there are largely four types of fees to look out for:

Trading fees. Any form of fee attached to each trade that you make. This can (relatively rarely) come in the form of a flat fee, or more often the broker will charge you what’s known as the spread. This is the difference, if any, between the buying and the selling price of an asset.
Trading commissions. This is when a broker will charge you a percentage based on the volume or value of each trade.
Inactivity fees. Any fees that the broker charges you for not trading, such as if it charges you for keeping money in a brokerage account.
Non-trading/Other fees. Any form of fee for trading on this platform not covered above. For example, a brokerage might charge you for making deposits into your brokerage account or taking money out.

Robinhood does not charge commissions on trade. It does not charge you for inactivity, nor does it charge fees for adding or withdrawing money to or from your account. The company generates revenue each time you make a trade, roughly $0.01 or less per share traded, by profiting off of what’s known as the bid-ask spread. Robinhood also incurs certain regulatory fees on a per-trade basis, which it passes on to customers.

Robinhood offers margin trading at an 4.7-5.75% interest rate. Users can also upgrade to Robinhood Gold for $5 per month and get $1,000 worth of interest-free margin loans and a 4% APY for idle cash.

E*TRADE charges no fees or commissions on a per-trade basis for stocks, mutual funds and exchange-traded funds. It does charge you a contract fee for options contracts, which typically cost $0.65 per contract and $0.50 with 30+ trades per quarter. (This may seem small, but for active traders it can add up fast.) It usually costs $1.50 for a futures contract and $1 per bond for online secondary trades (with a minimum of $10 and a maximum of $250). Margin rates start at 13.20% for small loans under $10,000 and decrease as the debt goes up.

Robinhood vs. E*TRADE: Services and Features

It’s almost easier to compare where these two services do overlap than to discuss the ways in which they don’t. E*TRADE is a full-service trading platform through which investors can buy virtually any publicly traded U.S. security, and some foreign products as well. This includes stocks, bonds, ETFs, mutual funds, futures and options.

E*TRADE also offers indirect ways to invest in cryptocurrencies through stocks, ETFs and coin trusts. It offers a full suite of tools for technical analysis and supports data sets going back to the full lifetime of an asset. While it is not at the caliber of an investment bank, it is more than enough for individual investors at almost any level of sophistication.

Traders can access E*TRADE through both its websites and its apps. The company offers two desktop options: its core brand, E*TRADE and the more sophisticated Power E*TRADE. It offers two corresponding apps, one tied to E*TRADE core and the other to Power E*TRADE.

Robinhood is a feature-limited trading platform that emphasizes ease of access and low-complexity. Users can trade U.S. stocks, ETFs, options, American Depositary Receipts (ADR), and cryptocurrencies.

Robinhood offers fewer tools for investment analysis. It is designed to make trading accessible and easy and its app does that job well. Traders on Robinhood will find an easy to understand screen for each asset they would like to trade, with information such as pricing history, basic statistics and purchasing information.

These two platforms are different specifically because their goals are different. E*TRADE offers a nearly full-service trading platform with only a few omissions (most notably currencies and most foreign assets). While well designed, it is built primarily for traders who want access to the data necessary to make complicated trades.

Robinhood, on the other hand, offers fewer options than E*TRADE. This is by design. Robinhood is a platform built around simplicity. It has a small number of assets and only as much information that can fit onto a cell phone screen. That means it avoids complicated technical analysis that a layperson might not understand in favor of straightforward pricing and trading statistics. It also offers some sophisticated trading options, such as limit and stop-limit orders, but not nearly to the degree that E*TRADE does.

Robinhood vs. E*TRADE: Online and Mobile Experience

Both E*TRADE and Robinhood offer well designed, but very different products.

E*TRADE’s four different platforms (two apps, two websites) lay out key information prominently, and provide the user with quick access to their trading tools. However, the depth of these platforms means that they have an unavoidable level of complexity. Users will need to learn how to navigate to their investments, a process that can take a bit of time. This complexity can also be daunting for beginner investors. Both E*TRADE and Power E*TRADE offer a wealth of data and market access that will be useless to the average retail investor.

Robinhood’s platform is also well designed for its intended purpose. Unlike E*TRADE, it does not support customization and requires relatively little navigation. Assets are listed on easy-to-access menus, and organized in quick categories for investors who would like to navigate to similar products. Trading screens are similarly stripped down, with little information beyond an asset’s basic statistics, pricing history, and trading options. This makes Robinhood extremely easy to use, but also more limited compared to its competitor.

E*TRADE vs. Robinhood: Account Types and Minimums

One of the most important differences between Robinhood and E*TRADE is the range of account types they support.

Robinhood keeps things simple. It offers individual taxable brokerage accounts and tax-advantaged retirement savings through either a Roth or Traditional IRA, which both include 1% contribution matching . Robinhood has no account minimums, making it accessible to new investors who want to start trading with as little as a few dollars.

E*TRADE, on the other hand, provides a much broader set of options. In addition to individual taxable accounts, investors can open joint accounts, custodial accounts for minors, traditional and Roth IRAs, rollover IRAs and even small-business retirement plans like SEP and SIMPLE IRAs. E*TRADE also has no minimum deposit requirement for brokerage accounts, but some managed portfolios may carry minimums (for example, its robo-advisor Core Portfolios requires a $500 minimum).

For readers who plan to use their brokerage account as a cornerstone of long-term financial planning, ETRADE’s flexibility is a clear advantage. Robinhood may suffice for casual traders or those just getting started, but investors with retirement or family goals will likely find ETRADE’s variety of account types more accommodating.

E*TRADE vs. Robinhood: Who Should Use It?

The central selling point of Robinhood is its ease of use. It makes investment quick, frictionless and even a little bit fun. This is on its face a worthwhile goal. However, the problem with this product is that it may make trading too easy. This appeals primarily to novice investors, but this is also the exact category of investors who should be slowing down and thinking about their risk tolerance a little bit more carefully.

E*TRADE’s platform is significantly more complex, which means it takes more time to learn how to use this toolkit. For experienced investors this means that E*TRADE will have the tools and data sets that they need to make more complicated trades. For novice investors this means that they will have to do more research before committing their money to a position. While contrary to Robinhood’s entire sales pitch, this will serve those investors well in the long run.

Bottom Line

An investor using her mobile phone to invest.

The advent of online and mobile investing has opened up a world of choices for retail investors. Ultimately, E*TRADE is the better platform for virtually any investment portfolio.If you’re looking to make a few easy trades, Robinhood is a good place to start but will only take you so far, and may expose you to big risks E*TRADE has more data, more details, and more flexibility in how you invest. The learning curve is a bit steeper, but when it comes to investing there’s no such thing as over-informed. And if you’re interested in professional advice from experienced investors, a financial advisor can help you, too.

Investing Tips

Whether you use an online brokerage platform or not, there can be a great deal of benefit in working with a financial advisor. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Whether you use E*TRADE or Robinhood or one of their rivals, a free, easy-to-use asset allocation calculator can be a valuable tool as you make investment decisions.