eTrade or Fidelity?

I currently own no stocks, nor do I have a 401(k). If the market drops significantly, I may be interested in buying into a few stocks/mutual funds. Let’s assume I have $10-20K available to invest.

Can someone suggest/comment on eTrade vs Fidelity?

I would like to be able to transfer cash into a trading account electronically (ACH) from a US-based checking/savings account, and be able to pull funds out the same way. I would also like a decent return on non-invested cash which is held at the trading account.

With both of these, who actually owns the stock? Does Fidelity (for example) own it and I just have an account with them? I think this would affect the situation is Fidelity were to go out of business.

Thoughts?

If you purchase actual shares of stock, Fidelity holds it for you, but you are the stockholder and owner of those shares, with all voting rights, etc.

If you buy shares in a fund, it is a little different, in that you don’t directly own the stocks in the fund and have no voting rights, etc. Instead, the fund company holds the stock portfolio, and you simply buy “shares” in the portfolio. It’s a great way to diversify risk and reduce tax implications if you select your funds properly.

If you’re buying individual shares, using eTrade or Fidelity as your broker, then you own the shares. As already stated, a mutual fund, ETF, etc. is a different type of shareholding (basically anything with “fund” in its name is different). I have both, and I find Fidelity easier to use, i.e., it is more intuitive to me. My eTrade account was from back when I was working at a firm, and they bought out my previous 401(k) holder (or whatever it’s called). So, I have to jump through multiple screens just to access my account, so maybe my experience is not the best comparison. (I probably should roll over).

If you have that much to invest, I suggest you talk to an investment professional.

As for non-invested money in the trading account, you will be able to choose among a couple of options, but typically it gets automatically swept into a money market fund, where it would earn a certain rate of interest. Money markets were briefly the focus of the current panic, but now appear to be safe. Those funds are also separate entities from Fidelity (or eTrade) itself, and would survive a failure by the brokerage.

Confirming what the other posters have said re ownership of stock. We have a few shares of a railroad stock in Dweezil’s name, and he gets the annual report from the company, mailed to him. He loves it, as it has pictures of trains.

Re transfers: Any of the big brokerages should be able to do electronic transfers to/from your bank accounts - we do that with our Fidelity accounts. Takes 24-48 hours to be accomplished, I think.

Etrade was kinda expensive for a discount brokerage when I looked into it a few years ago. I remember they charged a $40 inactivity fee which was a big red flag to me. Their commissions were ok but nothing special (~$10 IIRC).

Fidelity I couldn’t tell you that much about. At the time I thought they were a full service brokerage so didn’t look to closely at them. Take a look at their site and especially pay attention to the list of fees. If they have maintenance fees or transfer fees or costs more then $15 per trade then you’ll be better off looking elsewhere.

I was gonna recommend Scottrade (which was my first online brokerage) but they don’t allow withdraws electronically (ACH). All online brokerages allow depositing but some don’t allow withdrawing for whatever stupid reason. They are still a good company if you’re willing to overlook that.

I’m trying to remember my 2nd and 3rd choice but I’m drawing a blank here. I remember Sharebuilder would let you buy fractions of a share so that you could build your portfolio slowly. If you plan to be a buy and hold investor you can consider them.

All of this assumes you’re looking for a discount brokerage. I can’t recommend any full service brokerages since I never had a use for them. I prefer doing this stuff on my own.

Brokerages usually pay you .1% on your cash balance. These aren’t places for parking large sums of money. If you sign up with a brokerage that allows ACH withdraws then this shouldn’t be a problem. You can always call them and ask to have your cash swept into a money market fund too.

When you buy stocks it is held ‘in street name’. Basically, you don’t get a certificate or anything but you are still the owner of the shares. If the brokerage should go out of business those shares will still belong to you.

BTW brokerage accounts are safeguarded by the SIPC (up to $500,000 and up to $100,000 for the cash portion) in much the same way as bank accounts and the FDIC. They of course don’t insure against a decline in the value of your stocks. :wink:

Fidelity’s fees are based on your total account balances, and/or your number of transactions. https://scs.fidelity.com/products/trading/Commissions_Margin_Rates/Commissions_Margin_Rates.shtml.cvsr. You can have the balance in a number of accounts, e.g. 30K in your IRA and 30K in your regular brokerage, rather than having to have all the money in one account; all household accounts then qualify for the same level. The fees range from 8.95 to 19.95.

Your “core” account is where all cash that isn’t in securities lives. By default that’s a tiny rate as noted above, but you can change it to a money market account if you have enough cash for the minimum deposit for the money market. I think Roth IRAs’ cash is automatically put into the money market account without the minimum balance requirement, but I could be wrong.

Dunno if Fidelity does an inactivity fee, I haven’t been charged one yet but none of our accounts have ever gone inactive for more than a year (well, one fund for my son hasn’t had new deposits in 12 years but it does get periodic reinvestments of income).

Fidelity does allow you to invest in other companies’ mutual funds - I looked into purchasing a Vanguard fund through my Fidelity account once. However they do charge a steep fee for doing so (75 bucks, IIRC), which makes it not worth it.

Not to freak any one out or anything but there are differences between ‘street name’ and ‘customer name’. If your shares are held in customer name they’re yours. If they are held in street name they are not yours but you have a claim against the brokerage for those shares. This enables the brokerage to loan them out so some other guy can sell them. The ownership then changes and you ain’t the owner.

If a broker goes bankrupt and your shares are in customer name you’ll get your shares. They’re yours. If in street name you are one of the creditors and a number of different things can happen.

Securities Investor Protection Act
http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/sipa.html#versus
15 U.S.C. § 78fff-1(a)

Here’s an article by Herb Greenberg and some guy explaining it much better.
http://blogs.marketwatch.com/greenberg/2008/03/how-to-keep-your-investments-safe/#commentslanding

By the way I like Think or Swim but there are lots of niche brokerages out there now. Use the one with the interface that fits you best.

Ouch. That is pretty steep especially considering Vanguard doesn’t charge you a penny to buy funds directly from them. I had my money invested with Vanguard for 3 years before I bought my first stock. I still have some of my portfolio with them and their great index funds.

Your post reminded me of something I forgot to mention to the OP. Desert Nomad: all stockbrokers will have different fees and rates based on how much money you have with them and how much you borrow (margin). You really have to dig through the fine print and read everything before making a decision. You can change brokerages later of course but they usually charge a fee to do the transfer. Good luck.

I work for a discount brokerage firm.

Every discount brokerage will allow you to ACH funds in and out. With a small balance, you probably won’t get a decent return on your cash since interest rates are so low.

All major firms keep their stock at the depository trust corporation.

E-trade has been on the merger rumor mill for over a year. TD Ameritrade has been rumored to want to buy their brokerage accounts once the mortgage assets of E-trade are gone.

Most brokerage firms have no transaction fee mutual funds which don’t charge anything to buy in or sell out of. However, these often don’t include some of the large fund families.

Feel free to email or PM me and I’ll happily answer questions in detail for you.

Brokerages are required by the SEC to retain in their control all fully paid for securities. Only securities bought on margin would be at risk in case of liquidation. Even then there are different rules for bankruptcy liquidation vs SIPA Liquidation. If you don’t buy on margin then you wouldn’t have to lose any sleep over this. You are right about customer name vs street name (which I had completely forgot about) but I think we are splitting hairs here. The end result would still be the OP doesn’t have to worry about losing his shares.

Think or Swim isn’t really for the beginner stock investor. They mostly cater to the retail options trader which is why I didn’t list them in my earlier post. They are who I have an account with and I love their platform.

Sorry Desert Nomad I was trying not to throw out to many details at you. It can be confusing enough as it is getting started.

Just to clarify the above, it wouldn’t matter if the shares were bought on margin or cash, the shares at every major firm at not held in a vault at the brokerage firm. They’re held at the DTC. So, if the brokerage firm goes bankrupt, the shares are safe.

I have an account with ETrade, and I don’t know anything about Fidelity, but I can maybe give a little advice.

I find that while it has improved over time, the ETrade interface is a bit clunky. Information is often a bit tough to find.
An example: Recently I wanted to look up when one of my orders expired[sup]*[/sup], and I was able to find the order number in the expire notice. It told me to look through my list of orders, but not where to go exactly. I had to make my way through a few screens to locate it.
One thing that I think eTrade seems to push is having it be your regular bank, with features beyond just a brokerage. I wouldn’t really trust it for that now (and it is not FDIC insured either), but they do refund ATM fees and provide checks, making it fairly easy to move money in and out with them.
If you have more than $50k, I think the fees are reduced, although I’m not sure what it all works out to exactly, or in comparison to anyone else’s.
*Smack me or pity me - I had a stop order to sell AAPL that expired, and I forgot to submit a new one before Monday’s colossal drop. Note that this is my fault; nothing to do with ETrade. :smack:

The funds at the E-trade bank are FDIC insured.

Cite

Brokerage products are not FDIC insured. Cash in the E-trade bank is.

I would hope to God that they’ve fixed things by now, given that they’re probably several generations removed from the systems they had in place in 2001, but…

I had an ETrade account. I made good money in 2000 and 2001. Then for no apparent reason I could discern, a single digit in my SSN on their system was changed and my account frozen with a letter saying that my SSN didn’t match the real number for me. Took me quite a while to sort out because NO ONE at ETrade, not even the supervisors, knew how to correct the problem or what kind of flaming barbed wire hoops I needed to jump through to do it.

About a year later, it happened again. By then I’d completely forgotten what I’d had to do to get it fixed, and it took me SEVERAL MONTHS to get the fuckers to correct the problem. Several months that I COULD have been making more money. I got so disgusted that the moment I got it fixed, I immediately sold all my stocks, withdrew my money and closed the account.

When it came time to make my final withdraw, via the computerized phone system, I found that they’d reverted my SSN to the incorrect one AGAIN. Fortunately, all I had to do was punch in the incorrect one to complete the transaction.

Seven years later and I still get account summaries from them over some damned $0.17 that somehow got into my account after I closed it. I take pleasure in the fact that I’ve cost them many times that amount to process, print and send me those damned letters, because they’ll never see another dime of my money.

On more up-to-date issues: With all the bank failures and sales, take a hard look at just who owns the trading company you chose to go with.

With either of these, when I decide to buy or sell a stock, fund etc, do I get a locked in price?

For example, I use fxtrade to send money from the US to overseas and when I am using USD to buy EUR and send it to Europe, They show me a rate (say 1.4265722) and I have 60 seconds to confirm or request a new rate.

So lets say I ask to buy 100 shares of AAPL, do I know exactly what it is going to cost me when I do it? Same for selling… do I get to see the amount I’ll receive before confirming… or do they just take action within a few hours and I roll the dice?

You can use a limit order with any brokerage firm. If you want to buy 100 shares of AAPL you can specify a maximum price at which you’re willing to pay. You would only pay that amount or a lower price. Of course, there are no guarantees of execution at that price. Same thing with a sell. You can specify a minimum price which you would be willing to accept for your shares and you’ll receive that price or a higher one.

Just to throw it in the mix, have you also considered Sharebuilder? It’s more geared toward personal investors and long-term investments and as a result, many of their fees are considerably lower (but they still offer all the features and live trading if you want).