If you want to build wealth over time and meet other financial goals, one of the best ways to do so is through investing. There are a number of brokers that offer you the chance to easily buy and sell various assets, including stocks and ETFs (exchange-traded funds).
Two of the more popular online brokers are E*TRADE and Robinhood. If you’re trying to decide between E*TRADE versus Robinhood, here’s what you need to know.
E*TRADE vs. Robinhood
E*TRADE and Robinhood both make it easy to trade and learn how to invest money — without paying commissions on regular trades. However, they offer different types of accounts, and you’ll find that E*TRADE has more choices and a wider variety of assets than Robinhood. Yet, Robinhood offers cryptocurrencies, while E*TRADE does not.
|Account types available||
|Distributions||Cash distributions or dividend reinvestment||Cash distributions or dividend reinvestment|
|Taxes||No tax-loss harvesting||No tax-loss harvesting|
|Best for...||Investors interested in the perks a traditional brokerage offers, including managed portfolios||Investors who want to manage their own portfolio|
*Note: Pricing varies based on total assets under management.
How does E*TRADE work?
E*TRADE, which was recently acquired by Morgan Stanley, was one of the first online stock brokers. In addition to being accessible online, E*TRADE also offers branches across the United States. E*TRADE offers two platforms: its traditional E*TRADE platform and Power E*TRADE. Both platforms are available as desktop platforms and via iOS and Android mobile apps. The company has no account minimums and no trading commissions. It also gives investors access to managed portfolios for a management fee.
In addition to its brokerage account and managed portfolios, E*TRADE also offers custodial accounts, giving you the option to invest on behalf of your children. You could also choose to save for college with a Coverdell ESA through E*TRADE, and choose from various tax-advantaged retirement accounts for individuals and businesses. Finally, E*TRADE offers FDIC-insured savings accounts and checking accounts.
There’s no minimum to open a basic account and begin trading with E*TRADE. Though it comes with an annual fee, its managed portfolios are a nice option for investors who prefer to be more hands-off with their investments.
Learn more in our E*TRADE review.
How does Robinhood work?
Robinhood’s stated mission is to democratize finance. The company was started by two former hedge fund traders who made it a point to offer commission-free trades and easy access to the markets. Robinhood makes ETF and stock trading relatively easy, as well as more complicated products, such as options contracts. Investors can choose online trading via a web platform or through the Robinhood trading app, which is available for iOS and Android.
While Robinhood doesn’t offer a wide variety of accounts (no custodial or retirement accounts), it does make it relatively simple to make trades — including its ease of use when trading options and cryptocurrencies.
In addition to its regular trading account, or Instant account, Robinhood offers its Gold account. Users who upgrade from Instant to Robinhood Gold get access to Morningstar research and margin at a higher level, as well as the ability to make larger deposits and gain quicker access to funds. Robinhood Gold costs $5/month.
Robinhood recently added a cash card that is linked to an FDIC-insured spending account. The card allows you to automatically invest your change in stocks or cryptocurrencies. When you opt in for this feature, Robinhood will round up your transactions to the nearest dollar and invest the difference in assets of your choice.
Learn more in our Robinhood review.
What both investment platforms excel at
When considering E*TRADE vs. Robinhood note that both make it fairly easy to trade. Both brokers have been pioneers in expanding stock market access to a larger swath of the population.
5 important differences between E*TRADE vs. Robinhood
While both E*TRADE and Robinhood make it easy to trade stocks and ETFs, there are some important differences between the two brokerages. Here’s what to consider as you decide between E*TRADE vs Robinhood.
1. Cryptocurrency trading
E*TRADE doesn’t offer cryptocurrency trading, while the Robinhood app does. If you are interested in how to buy cryptocurrency and want to trade cryptocurrency, Robinhood is the only option between the two. The cryptocurrencies Robinhood offers include:
- Bitcoin Cash
- Bitcoin SV
- Ethereum Classic
Robinhood makes it easy to buy fractions of cryptocurrencies, as well as whole coins.
2. Retirement account
E*TRADE offers a variety of retirement account choices. You can roll over a 401(k) from your work, or open a separate traditional or Roth IRA. On top of that, E*TRADE offers custodial IRAs for children, so if you want to give your child a headstart on saving for retirement, you have the option to do so. When you reach retirement age at 59 ½, E*TRADE could also help you by converting your IRA into an accessible account, complete with bill pay and checking.
Not only that, but E*TRADE offers tax-advantaged business retirement accounts. If you have a small business, you might choose to open a solo 401(k) or a SEP IRA. It’s even possible to set up a profit-sharing plan through E*TRADE.
Robinhood doesn’t currently offer any tax-advantaged retirement account choices.
3. Custodial accounts
Robinhood doesn’t offer accounts for minors at this time. However, E*TRADE does allow you to open an investment account on behalf of your kids. This includes a tax-advantaged retirement account as well as a taxable investment account.
While it’s not a custodial account, you can also choose to open a Coverdell ESA with E*TRADE to help save for your child’s college education.
4. Managed portfolios
E*TRADE offers something Robinhood doesn’t: managed portfolios. If you don’t want to engage in trading on your own, E*TRADE offers different managed portfolio options, with minimum investments starting at $500. However, some of their managed portfolios have a minimum of $250,000.
Robinhood doesn’t offer managed portfolios or help from a robo-advisor. If you use Robinhood, you’re in charge of your own portfolio and do not have the option to have someone else manage your investments.
5. Traditional asset classes
While Robinhood offers access to cryptocurrencies, it has more limited access to traditional asset classes. You can trade stocks, ETFs, and options with Robinhood, but you don’t have access to mutual funds, bonds, CDs, or futures like you do with E*TRADE. If you’re looking for a wider range of investment choices, E*TRADE may be more likely to provide what you need.
Do understand that if you want access to some products, like CDs, you could add exposure to them in your portfolio through the use of ETFs. Investing in ETFs could allow you to gain exposure to those asset classes through Robinhood, even if you don’t invest in them directly as you could with E*TRADE.
However, Robinhood does offer you the ability to trade options without worrying about a contract fee. When you trade options with E*TRADE, you end up paying a per-contract trading fee, even though you don’t have to pay a commission.
Which investment platform should you choose?
Whether you choose E*TRADE vs. Robinhood, or any of the best brokerage accounts available, depends on your investment strategy and portfolio goals. As you’re researching brokers, it’s a good idea to ask the following questions:
- What accounts are available? Are you looking for a tax-advantaged retirement account, or do you just want an account to do some trading? Are you hoping to set something up for your kids, or just invest for yourself? Think about your goals and what types of accounts are likely to work best for you.
- What assets can you invest in? Figure out what assets you want to include in your portfolio to help you reach your goals. Depending on the situation, you might want to be able to diversify your portfolio with various assets, beyond just adding exposure through ETFs. If this is the case, look for a broker that allows you to do that.
- How much are the fees? Pay attention to costs. Fees can eat into your real returns. Look for commission fees, as well as per-contract transaction fees if you decide to trade options. Additionally, when it comes to managed portfolios, you want to look at the management fees.
- How easy is it to complete transactions? Don’t forget to factor in how easy it is to complete transactions, based on what you want to do. Find out if there’s an automatic investment plan you can sign up for to easily add money and invest each month, or pay attention to how easy it is to use the platform to place orders. Look for a platform that meets your needs.
For the most part, a Robinhood account could be an ideal option for someone who wants to trade fairly frequently. If you’re interested in easy access to trading, and you want to place frequent trades, Robinhood is easy to use and there are no fees to worry about as long as you aren’t using margin. Additionally, Robinhood could potentially be a good choice for someone who wants to easily trade cryptocurrency and those who want to trade options without worrying about per-contract fees.
On the other hand, E*TRADE might work well for someone who wants access to more traditional brokerage services, including managed portfolios. While E*TRADE could work for someone who trades frequently, especially equities and ETFs, it’s better suited for those who are looking to make long-term investment options. Because E*TRADE offers retirement and custodial accounts, it could be a good choice for investors looking for tax-advantaged accounts and to help their kids start building wealth.
Which is better, E*TRADE or Robinhood?
The better brokerage depends on your goals and strategy. Robinhood could be a better choice if you’re more interested in trading, especially if you want to add cryptocurrencies or options to your portfolio. On the other hand, E*TRADE could be a good choice for those who want to invest for the long-term, using a tax-advantaged retirement account. You can choose to trade options with E*TRADE, but you’ll pay a per-contract fee, where Robinhood doesn’t charge a per-contract fee for options trading.
Is it safe to invest with Robinhood?
Robinhood carries SIPC insurance for its brokerage assets, so you’re protected if something happens to Robinhood. However, it’s important to note that cryptocurrencies aren’t protected by SIPC insurance and Robinhood Crypto, which is separate from the brokerage, isn’t a member of FINRA. SIPC insurance does not protect investors against potential losses due to market fluctuations.
Is it safe to invest with E*TRADE?
E*TRADE carries SIPC insurance, so you’re protected if the brokerage goes out of business. However, it’s important to understand that this insurance doesn’t protect against market risk or your own trading losses. All investment carries risk, and you could lose money when you invest.
What’s the difference between E*TRADE and Robinhood?
E*TRADE functions more like a traditional full-service brokerage firm. It offers tax-advantaged retirement accounts and custodial accounts. You have access to more investments and asset classes, and it’s possible to get managed portfolios. Robinhood, on the other hand, is built more for trading, so active traders may prefer it. It’s relatively easy to place trades, including options trades, and you have access to less traditional asset classes, like digital currencies.
When choosing a broker, it’s important to consider your own personal finance goals and your portfolio strategy. Robinhood is well-suited for active mobile trading, although you could use a buy-and-hold strategy with Robinhood. However, E*TRADE is likely a better fit for those looking for long-term investing goals. You don’t have to worry about trading commissions on stocks, ETFs, and options with either of these trading platforms.
It’s also possible to use both brokers, depending on your goals. You might consider using E*TRADE for your retirement account and to help your kids learn how to invest money, while using Robinhood for more of your “play” investment money to trade cryptocurrencies and options.
Carefully think through your strategy and figure out which of these brokers is likely to help you reach your goals. If you are interested in learning more, check out our picks for the best investment apps.
*Disclosure: The author has positions in cryptocurrencies mentioned in this piece: Bitcoin, litecoin, and ethereum.