E*TRADE vs. Charles Schwab: A Brokerage Account Comparison for Long-Term Investors

By Jordan Wathen Markets Fool.com

Sometimes, it seems as if there are as many brokers as there are investments you can buy with a brokerage account. But rather than be dazed by the differences between them, we think that keeping a focus on a few of the differences can help you see how a broker can work for your portfolio.

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E*TRADE and Charles Schwab are used by millions of investors, but how do they compare on some of the most important considerations? Let's break it down, item by item.

Trading costs and commissions

Truthfully, all discount brokers have relatively low commissions, especially when compared to the prices of full-service brokerage firms. In the table below, we've broken down each broker's commissions by trade type.

Broker

Stocks/Options

ETFs

Mutual funds

E*TRADE

$9.99 per trade + $0.75 per options contract

$9.99 per trade

$19.99 per purchase

Charles Schwab

$8.95 per trade + $0.75 per options contract

$8.95 per trade

$76.00 per purchase

Source: Company websites.

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Keep in mind that published rates can be different than your effective rate. Both brokers waive commissions on certain ETFs and mutual funds. In addition, investors should see if they qualify for special offers to open a traditional brokerage account, or an IRA account, which can substantially reduce your true cost to make a trade.

Commission-free ETFs and NTF Funds

Not every trade incurs a commission cost. In fact, E*TRADE and Capital One both have long lists of ETFs and mutual funds that you can buy and sell for free.

Broker

Commission-free ETFs

NTF Mutual funds

E*TRADE

100+ (WisdomTree, Deutsche Bank, and Global X)

2,500+

Charles Schwab

200+ (Schwab, iShares, State Street, and more)

3,900+

Source: Company websites.

When combined, these brokers have nearly 7,000 investments that you can trade without paying a commission or transaction fee. If funds are your forte, either could be a good choice for you.

Account minimums

Minimum initial deposits vary by broker, but neither will require that you empty your bank account to open a brokerage account. Charles Schwab doesn't have a minimum requirement. E*TRADE requires only $500 to open an account.

Starting with a larger balance could be advantageous. Brokers frequently provide investors with cash bonuses and free trades for meeting certain deposit requirements. Learn more about special offers for brokerage accounts, as well as IRA accounts.

Trading platform

The Motley Fool always invests with a long-term view. We aren't traders, and therefore, we probably aren't the best people to ask when it comes to trading platforms. To us, a platform is just a means to an end -- a way to make a trade when we need to.

As with anything, personal opinion plays a big part in whether a platform is "good" or "bad." We suggest trying a platform for yourself, as different needs require different features. For the long-term investor, however, both E*TRADE and Charles Schwab make placing the occasional trade a matter of just a few clicks. Active traders may demand more from a platform, and should give a trading platform a test run to see if it fits their own trading style.

We prefer investing to trading, so we don't have a particularly strong opinion on the quality of any given trading platform. Image source: Getty Images.

International stocks and ADRs

You can buy ETFs and mutual funds that own foreign stocks at either broker. In addition, E*TRADE and Charles Schwab enable their account holders to buy and sell American Depositary Receipts (ADRs).

But as far as investing directly on foreign stock exchanges, only Schwab offers that capability. Schwab Global Accounts can trade electronically in 12 foreign markets, and its Global Services desk allows for trading in over 30 global markets. International stock trading frequently comes with higher commission prices that vary based on the particular market.

If foreign investments are an important part of your portfolio, the differences between brokers may be important to you.

Research quality and tools

Investors with a do-it-yourself mindset can generally benefit from the research tools and reports provided by online discount brokerages. E*TRADE provides analyst reports from S&P Capital IQ, Morningstar, Thomson Reuters, and others. Charles Schwab provides access to Schwab, S&P, and Morningstar reports. Both brokers also have a full line of stock and fund screeners to help you sort through potential investment ideas.

We've just skimmed the top of what both brokers have to offer in the research department. Frankly, it would be hard for any individual to run out of reports to read or screening tools to use at either broker, and depending on your needs, research provided by E*TRADE and Charles Schwab could be a big benefit to you.

Mobile app

Cell phones and tablets can be turned into trading stations just by downloading a brokerage app. Here's how each broker's users and clients rated their iOS and Android apps (as of 12/14/2016).

Broker

Apple App Store

Google Play

E*TRADE

2.0 stars

4.0 stars

Charles Schwab

3.5 stars

4.0 stars

Source: Relevant app stores.

E*TRADE or Charles Schwab: Picking a brokerage account for your needs

Both E*TRADE and Charles Schwab have a lot to offer. Fund investors could find plenty to like about E*TRADE's niche commission-free ETF assortment, while others might prefer the simple indexes that make up most of Schwab's commission-free ETFs. The stock investor who is concerned most about costs might prefer Schwab's slightly lower commissions, whereas the active trader might prefer the volume discounts available to E*TRADE investors.

The point is that the "best" broker varies based on your individual portfolio. To be clear: The Motley Fool doesn't endorse any particular broker. Learn more about the current special offers for opening a traditional brokerage account or an IRA account at Fool.com's Broker Center and IRA Center, respectively.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends WisdomTree Investments. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.