You've paid your bills, established some savings, and maxed out your employer match on your 401(k). You might be ready to open a brokerage account and start stocking away some extra investments in a new account.
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Two well-known brokerages, E*TRADE and OptionsHouse, can both help you buy the investments you want to make. But which is the better choice for you? Follow along as we compare each broker on several important factors that are important for long-term investors.
Trading costs and commissions
Price differences between brokerages may be small, but it's important to know how much you'll pay for each type of trade before you open an account. Below, we've compiled the ordinary commission prices that both brokers charge their clients to buy or sell many of the most popular investments.
Source: Company websites.
On mutual funds, just $0.01 separates the two discount brokers. Cost differences are larger for stocks, options and ETFs, though investors might not pay the stated rate. In fact, special offers and commission-free investments can reduce the average commission per trade considerably.
Commission-free ETFs and NTF Funds
There can be real differences in commission costs when it comes to funds. Commission-free ETFs and no-transaction-fee (NTF) mutual funds can be bought and sold without paying your broker. Here's how the brokerages stack up in this category.
Source: Company websites.
E*TRADE takes the advantage here, as it offers more fee-free ETFs and no-transaction-fee mutual funds. However, note the differences in their standard commissions. ETFs that aren't commission free at E*TRADE would be less expensive to purchase through OptionsHouse, for example.
It takes money to make money, but it doesn't take a lot of money to open a brokerage account. OptionsHouse is a no-minimum broker, meaning you can make an initial deposit of just $1.00 to open an account. E*TRADE requires a little more -- $500, to be exact -- but it doesn't set a particularly high hurdle for investors who are serious about investing.
For practical purposes, you may want to deposit more than the bare minimum. Not only do you want to be able to have enough money to make your first trade (and cover the commission), but you might qualify for bonuses for meeting certain deposit requirements. You can learn more about special offers for IRAs and traditional brokerage accounts on Fool.com's IRA Center and Broker Center, respectively.
We at The Motley Fool favor long-term investing in companies we like for fundamental reasons. Therefore, we don't really care about candlestick charts, whether we can outline cup-and-handle patterns on a chart, or flashing numbers to tell us the latest price down to the half-cent. We just want to make a trade when we need to, and virtually all brokers fit that basic requirement.
As we tend to think that a preference for a platform is generally rooted in personal opinion, we'll leave this one up to you. Truthfully, if a trading platform is an important part of your decision, it's worth trying out a broker's platform before signing up for an account.
We tend to think that trading platforms do more to promote trading than sound, long-term investing. Image source: Getty Images.
International stocks and ADRs
If the ability to invest in foreign companies is important to you, you'll want to carefully consider your options at E*TRADE and OptionsHouse. The table below summarizes the ways you can invest in foreign companies as a client of either brokerage.
Source: Company websites.
If you simply want to invest in "household name" companies listed overseas, then you can probably find an ADR to trade. Generally speaking, smaller companies are less likely to have an ADR. Finally, if you prefer to invest internationally by way of funds, you'll have access to thousands of ETFs and mutual funds that hold shares of foreign companies.
Research quality and tools
Individual investors can benefit from the ability to research stocks through services provided by their brokers. Free screening and scanning tools are plentiful at either brokerage. E*TRADE tacks on reports from Thomson Reuters, S&P Capital IQ, and Morningstar. OptionsHouse provides a wealth of proprietary reports on a daily basis, in addition to reports on popular stocks from ResearchLAB, and webcasts with guest analysts. Depending on your needs, either brokerage has a variety of free tools and research available to its customers.
As long as you can connect to the internet with your phone or tablet, you can make a trade through mobile trading apps provided by E*TRADE and OptionsHouse. Here's how each broker's users and clients rated their iOS and Android apps (as of 12/14/2016).
Source: Relevant app stores.
Which wins for you: E*TRADE or OptionsHouse?
Both brokerages have a lot to offer the individual investor. New investors and bargain hunters might prefer OptionsHouse for its lower commissions and no-minimum account requirements. Fund investors may prefer E*TRADE, given its vast list of commission-free ETFs and no-transaction-fee mutual funds. The fact is that the "best" broker depends greatly on how you personally invest.
To be clear: The Motley Fool does not endorse any particular broker, but we do want you to be informed before opening an account. Check out the Fool.com Broker Center to compare several popular brokerage accounts and current special offers all on one page. If a retirement account is what you're looking for, Fool.com's IRA Center is the place to go for relevant information on IRA accounts at many of the biggest discount brokers.
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