E*TRADE

★ ★ ★ ★ ★
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Headquartered in Arlington, Virginia, E*TRADE offers electronic trading platforms for investing in stocks, exchange traded funds, futures, options, bonds, certificates of deposit, and the choice of more than 4,000 mutual funds. The company also offers retirement planning, wealth management, and financial advisory services.

E*TRADE offers no-commission trading on stocks and ETFs, and options trades cost 65 cents per contract. There are no minimum deposit requirements to open an account and no inactivity or annual fees. E*TRADE also offers futures and futures options trading for $1.50 per contract.

Morgan Stanley announced its intention to acquire E*TRADE on Feb. 20, 2020 in a $13 billion deal. “E*TRADE’s products, innovation in technology, and established brand will help position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace,” according to James Gorman, Chairman and CEO of Morgan Stanley.

Best For…

E*TRADE has been a top choice among self-directed investors and active traders for nearly three decades. The company saw rapid growth in accounts and daily trades during the mid and late 1990s. In 2001, the E*TRADE baby made his first appearance in an advertisement during Super Bowl XLII. The message behind the campaign, which featured a talking baby who trades online from his crib, was that E*TRADE is so easy to use that anyone (even those in diapers) can leverage the broker’s capabilities.

While the E*TRADE baby ad campaign was retired in 2014, and the company is now becoming part of Morgan Stanley, the essence of the online broker has not changed: the low costs and slick trading platforms make the company an ideal choice for cost-conscious investors interested in learning how to navigate financial markets.

In addition, options traders who have not visited E*TRADE recently will be surprised to find vastly improved capabilities thanks to the Sept. 2016 acquisition of Chicago-based online broker OptionsHouse. Features include customizable options chains, profit and loss (risk graphs) charts, the ability to trade simple or advanced strategies with one order entry tool, real-time data, and a wide array of charts and indicators.

Traders can use choose from one of three platforms after opening an account with E*TRADE:

  • E*TRADE Web: a web-based trading portal that provides updated account information, free market data and quotes, market commentary, stock screeners, customizable watch lists, and the ability to trade simple and complex options strategies.
  • Power E*TRADE: designed for active traders, and leveraging the OptionsHouse technology, Power E*TRADE is the most advanced of the three trading platforms and includes more than 100 technical studies, customizable charts, watch lists, and chains, as well as advanced options analytics.·   E*TRADE Pro: a desktop trading platform that includes account information, strategy screeners, charts, news, quotes, and the ability to backtest trading ideas.

E*TRADE offers two mobile apps as well. Clients can access account information, place trades, transfer money, as well as fetch quotes, research, and news with the E*TRADE Mobile. Meanwhile, the Power E*TRADE mobile app is designed for active traders on the move, with charts, quotes, news, options chains, and the ability to place simple or complex options trades, as well as trade futures, directly from smartphones or tablets.

While individuals can easily open traditional or Roth Individual Retirement Accounts (IRAs) from etrade.com, the broker also offers retirement planning options for small businesses, such as individual 401(k)s, profit-sharing plans, and SEP-IRAs. Lastly, the FDIC-insured E*TRADE bank provides customers with checking accounts, savings accounts, and lines of credit.

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Unique Distinction…

E*TRADE stands out from other online brokers because the firm wants to make the investment process as easy as possible. For example, new visitors to the etrade.com website are greeted with messages like “Where do I start? Four steps to getting into the market,” and “How do I invest? Tools to help you become inspired,” or “How do I place a trade? Step-by-Step guide to trading at E*TRADE.”

Digging deeper, investors will find a series of online investing courses from Morningstar, with topics covering basic personal finance decisions as well as investment themes like how to buy stocks or bonds. Customers can also watch webinars that answer asset allocation questions, teach technical analysis, or explain different types of options strategies.

Rather than buy and sell individual stocks or options, some long-term investors might prefer E*TRADE’s prebuilt portfolios. For a minimum investment of $500 for mutual funds (or $2,500 for exchange traded funds), the customers can get professionally built portfolios with conservative, moderate, or aggressive strategies, depending on the individual’s risk tolerance.

Lastly, E*TRADE’s robo-advisor service called Core Portfolios gives investors actionable advice about building portfolios and financial planning. For an annual advisory fee of .30% per month, computer-based advisors work to create, manage, and adjust portfolios that match the individual’s personal financial goals and risk tolerance.

When in doubt, customers can turn to E*TRADE’s 24/7 customer service. The company also has 30 branch offices staffed by financial consultants in major metropolitan areas.

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E*TRADE Fact Sheet

  • Founded: 1982
  • First Online Trade: 1983
  • Initial Public Offering:  Aug. 16, 1996
  • CEO: Mike Pizzi
  • Employees: 4000
  • Headquarters: Arlington, Virginia
  • Retail Branches: 30

Founded by Bernard Newcomb and William Porter, E*TRADE began as a small startup called TradePlus in 1982. One year later, the company was the first to develop a process for individual investors to place a trade online, without the help of a human broker.

By 1991, as the broker started offering trading services on the America Online and Compuserve electronic networks, the company name was changed to E*TRADE Securities. By 1996, client accounts had increased to 73,000 and the broker processed 8,000 trades per day; E*TRADE became a public company, continuing to grow organically and through acquisitions, until being acquired by Morgan Stanley in early 2020.

At the time of the acquisition, E*TRADE had more than 5 million customer accounts, $360 billion in assets, and processed 280,000 trades daily.

In terms of rankings, E*TRADE was voted No. 1 for mobile traders and was named best for mobile traders in the Barron’s 2020 review of online brokers. Investopedia listed the company as the best broker for ease of trading and best for beginning options traders in 2020. Finally, stockbrokers.com recognized E*TRADE as No. 1 for mobile trading, web-based trading, and options trading in 2020 as well.

Explore Further

References:
https://www.morganstanley.com/press-releases/morgan-stanley-to-acquire-e-trade
https://en.wikipedia.org/wiki/E-Trade

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