They're the two monsters of the online-only brokerage business. Ameritrade, thanks in part to its TV ads featuring punk day trader Stewart, has 992,000 customers. The No. 1 player is E*Trade, which boasts 2.6 million customer accounts. As the dot-com shakeout continues, these two brokerages, thanks to their sheer mass, have the best chances for survival.
The difference between the two is very simple: money. E*Trade charges $14.95 for most trades, and Ameritrade charges $8 for market orders and an additional $5 for stop or limit orders. You get what you pay for when it comes to the slickness of design and depth of information. The key criterion, though, is ease of use. In that area, both sites perform favorably. It was never difficult to find information I needed, nor did I have to click through unnecessary interim pages to make a trade.
If cheap trades are what you're after, Ameritrade offers the basics, with no bells or blinking lights. For instance, the sum total of research that I could find that covered Microsoft was a news wire and a description page with the stock's basic statistics. Even the news wire wasn't monitored closely, since it took me two pages of clicking before I got to a Microsoft story.
TRADE-OFF.
When it comes to trading, however, Ameritrade doesn't disappoint. The company boasted in its second-quarter Securities & Exchange Commission filing that it has lowered its operating cost per trade to about $8.50. That means it's losing about 50 cents a trade, but it hopes to become profitable as its customer ranks grow. The skimpiness of the site's offerings seem like a fair exchange for the cheap trades.
By contrast, E*Trade has an impressive site. Graphics are plentiful and the company offers multiple sources of information -- free -- that would cost an investor at most other online brokers. You can get news stories from TheStreet.com and MotleyFool.com, and selected research reports from some brokerages. Most notable are the free reports from Eoffering, E*Trade's in-house investment bank. Although it isn't a white-shoe Wall Street firm, the research is first-rate.
When it comes to making a trade, E*Trade's site is simple and quick: I was able to do so within three clicks. In the end, that's all you need from a brokerage site, and in this E*Trade excels. With so many customers and a higher price per trade, it's a wonder this company is still losing money.
SUPERMARKET.
You can't ignore another aspect of E*Trade, even though it has nothing to do with stocks. Right on the main screen, you can click onto the E*Trade Bank (formerly called Telebank) and do all of your banking from home. While many financial-services firms mouth support for so-called financial supermarkets, E*Trade is probably the closest to such a thing on the Web. You can trade stocks, open a bank account, obtain a credit card, buy insurance, and get an auto loan, all without leaving the E*Trade mothership. It's all relatively low cost and simple to navigate.
And now that E*Trade has created the holy grail, it only has to attract enough customers to make the whole operation profitable.
Copyright 2000 , by The McGraw-Hill Companies Inc. All rights reserved.
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