Ally Invest Vs. E*TRADE: Which Is Right For You?

If you want to get started investing but don’t want to pick and manage your own investments, you’ll be happy to know that there are plenty of companies that can help. In fact, there are so many options that when I started searching for managed portfolio options, I was overwhelmed by the choices.

E*TRADE – Invest in your future with $0 commissions

While there are many options out there, it’s easy to start narrowing down the choices to a couple of firms you’re interested in. I decided to compare Ally Invest and E*TRADE to help you figure out which of these two services might be better for you.

As always, make sure to consider the companies you invest with carefully. Look at how they meet your specific needs for your financial situation. What may be a good fit for one person may be a terrible fit for you.

Here’s what you need to know to start figuring out if Ally Invest or E*TRADE is a better fit for you.

Ally Invest vs. E*TRADE summary

This table quickly summarizes some of the essential factors to consider about investing with Ally Invest or E*TRADE’s managed portfolio and self-directed or brokerage account services.

Managed portfolios

Self-directed accounts

About Ally Invest

Ally Invest came into existence in 2017 when they acquired TradeKing. They rebranded the TradeKing platform to launch Ally Invest. Ally Invest offers both self-directed trading and robo portfolios. 

Robo portfolios

Ally Invest’s robo portfolios are essentially a robo-advisory service. You don’t interact with humans, but their technology manages your investments on your behalf. Ally does have humans working behind the scenes to come up with overall portfolios, but software helps select which of the portfolios is the best fit for you based on the responses you give them. 

The robo-advisor aspect of robo portfolios is nice because it has features to help your investment returns such as rebalancing and dividend reinvestment. It also means lower fees than if a human managed your portfolio for you. 

In fact, Ally Invest offers a no-fee robo portfolio if you’re okay with keeping 30% of your investments in cash. Personally, I think that’s a bit high for my particular needs. You can keep less than 30% of your investments in cash with Ally Invest’s robo portfolios if you’re willing to pay a 0.30% fee.

Ally’s self-directed trading options may be a great service to use if you decide to take control of your investments after you gain more knowledge about investing. Self-directed trading is essentially a brokerage account that allows you to purchase individual stocks, bonds, ETFs, mutual funds or options contracts based on your own strategy rather than using Ally’s robo portfolio strategies. That said, some people prefer to continue using simple strategies such as Ally’s robo portfolios even after learning more about investing.

Self-directed trading

Ally Invest offers quite a few useful tools you can use to make the most of their self-directed trading platform. You get access to:

• Streaming charts to show you the performance of investments.
• Watchlists to track particular investments you may want to invest in.
• Profit/loss graphs to help you understand a trade’s potential before you place the trade.
• A probability calculator that uses implied volatility to help you figure out how likely it is you will hit your investing targets.
• Research and market data to help you do due diligence on potential investments.
• An ETF screener to help you comb through thousands of ETFs available to trade.
• Options chains for options traders to help them see what’s available and place the trades you desire.
• A mobile app to allow you to trade on your phone.

Ally Invest’s fees for self-directed trading are competitive but may be higher or lower than E*TRADE, depending on the specific type of investment you plan to invest in. Cost can be a huge factor in determining returns when you first get started, so compare both services costs with the chart at the beginning of this article.

You can learn more about Ally Invest in Money Under 30’s complete review here.

About E*TRADE

E*TRADE has been around since 1982 which feels like forever in terms of the internet. They made their first online trade in 1983.

E*TRADE offers quite a few investing options which have typically been for investors that want to buy and sell their own positions. However, E*TRADE has gotten into the managed portfolios space, as well.

Managed portfolios

Their core portfolios managed investing option only requires $500 to get started and charges a 0.30% advisory fee. Features offered by the core portfolios product include smart beta investments, socially responsible investments, as well as tax-sensitive portfolios.

E*TRADE also offers blend portfolios, dedicated portfolios and fixed income portfolios in their managed portfolio products. These other options require initial investments of $25,000 to $250,000 and have higher advisory fees, as well. Once you’re further along in your investing journey, they may be worth considering.

Self-directed trading

If you feel like you’d prefer to manage your investments yourself, E*TRADE has you covered with their brokerage account investing options. In these accounts, you can buy individual stocks, bonds, ETFs, mutual funds, options, and futures contracts. You’ll get to select exactly which investment choices you want instead of sticking with a predetermined basket of investments like their managed portfolio service offers.

Those looking to use E*TRADE’s brokerage account will likely be happy with their wide range of tools to help you trade which include:

• A deep knowledge library with articles to help you learn about investing.
• Independent analyst research to help you analyze potential investments.
• Interactive charts to help come up with trading strategies.
• The ability to add technical patterns to charts to help determine trading opportunities.
• A snapshot analysis to help you understand what rewards and risks exist as well as probabilities of an options trade.
• Spectral analysis to help you understand risks and rewards on options trades as well as the ability to explore what-if scenarios.
• Live-action details to help you spot unusual activity and investing opportunities.
• Paper trading to allow you to pretend to trade stocks, options and more without committing your real money to the trades (and without the returns or losses, as well).

Find out more about E*TRADE by reading Money Under 30’s detailed review.

Ally Invest vs. E*TRADE: Investment performance

This section focuses on both companies’ managed portfolio offerings. Self-directed and brokerage account options allow you to choose precisely what you want to invest in, so results will vary based on your investment choices. Managed portfolios, on the other hand, only have a relatively small number of investment options so it’s easier to compare investment returns on these services if the data is available.

Ideally, I’d want to pick the managed portfolio service that gives me the best shot at the highest investment returns if everything else is equal. After all, higher returns mean more money toward my goals. Unfortunately, no one can predict the future. 

Instead, you may consider historical returns as a way to tell how a strategy has worked in the past. Some managed portfolios provide this information so you can analyze it. But note that while it may be helpful to look at this information, past performance doesn’t predict future performance, either. 

Here is some information to give you an idea of how Ally Invest and E*TRADE perform.

Ally Invest

Ally Invest does provide historical performance data on its website. Their core aggressive growth portfolio had an annualized return of 5.36% from 2011 to 2018. 

Due to Ally Invest’s portfolio structure, this aggressive portfolio has 30% in cash, which is not usual for an aggressive portfolio. The core aggressive growth portfolio also consisted of 66% stocks and 4% bonds.

It’s important to note, this portfolio did not exist during this entire time. Instead, the return is based on backtested data that shows how the investment would have performed.

E*TRADE

I reached out to E*TRADE using their customer support chat feature and the E*TRADE representative stated they do not offer historical performance data for their core portfolios strategies as Ally Invest does.

Once you sign up for an account, you can see your real historical performance within your account.

Ally Invest and E*TRADE pros

Ally Invest:

• You only have to have $100 to get started investing with Ally Invest’s robo portfolios.
• You can avoid paying robo portfolios’ advisory fees as long as you’re willing to hold 30% of your investments in cash.
• Ally Invest offers more account types than E*TRADE which may be important if you have specific account type needs that E*TRADE doesn’t offer.
• Socially responsible investing available in robo portfolios.
• More than 12,000 mutual funds available in their self-directed account.
• Several research tools to help you pick investments in your self-directed trading account.
• 24/7 customer support available.

E*TRADE:

• Access to a dedicated team of specialists who can answer your questions.
• Over 30 brick-and-mortar locations exist.
• E*TRADE’s technology monitors performance and makes adjustments as necessary for managed portfolios.
• The company has been around 1982, unlike Ally Invest which started in 2017.
• Socially responsible and smart beta investments available in managed portfolios.
• You can customize the five model portfolios E*TRADE offers in managed portfolios.
• Offers some no-load and no-transaction-fee mutual funds, unlike Ally Invest.
• Detailed research and analysis tools to help you get the most from your brokerage account.
• Paper trading tool allows you to get comfortable with investing without risking real money but you won’t get any returns, either.

Ally Invest and E*TRADE cons

Ally Invest:

• If you choose to hold less than 30% of your robo portfolio in cash, you have to pay a 0.30% advisory fee.
• Tax-loss harvesting and smart beta investing are not an option at this time in robo portfolios.
• $4.95 + $0.01 per share fee for purchasing stocks priced below $2 in self-directed accounts.
• $9.95 per trade fee for trading no-load mutual funds.

E*TRADE:

• A higher $500 minimum is required to get started in managed portfolios.
• There is no advisory-free managed portfolio investing option available.
• No educational investing accounts such as Coverdell Education Savings accounts are available in managed portfolios.
• Tax-loss harvesting is not available at this time in managed portfolios.
• Fewer mutual funds available (over 9,000) than Ally Invest offers in self-directed trading (over 12,000).
• Options contracts cost more unless you make 30+ trades per quarter.
• $49.99 early redemption fee for no-load, no transaction fee funds held less than 90 days.

Why choose Ally Invest

Advisory-fee free investing option available

If you prefer to avoid paying an advisory fee for your investments, Ally Invest offers that option (for manage accounts and self-directed trading).

You have to hold 30% of your portfolio in cash to avoid the 0.30% advisory fee, but the cash does pay interest at a reasonable rate compared to most bank accounts. 

Low initial investment required to get started

If you want to get started investing in a managed portfolio but don’t have much money to get started, Ally Invest’s $100 minimum is one of the lowest options available. In fact, it is 1/5th of E*TRADE’s minimum initial investment required.

Wide variety of account types to choose from

Ally Invest gives you plenty of account types to choose from which can be useful when you’re further along in your investing journey. You have several IRA types and even an educational savings account option to choose from.

More mutual funds to choose from when self-directed trading (at a cost)

If you plan to invest in mutual funds, Ally Invest has a more extensive selection to choose from. Ally Invest offers over 12,000 mutual funds while E*TRADE offers over 9,000. 

The downside to choosing Ally Invest if you plan to invest in mutual funds is that they cost $9.95 per trade while E*TRADE offers some no-load, no-transaction-fee mutual funds. If you don’t trade often, this won’t be a big deal.

Why choose E*TRADE

Can customize a portion of your portfolio

E*TRADE allows you to customize a portion of your portfolio with either a socially responsible or smart beta ETF.

Other robo-advisors may require a certain minimum investment amount to access these features or may not allow you to customize the portfolios you invest in at all.

Company has deep investing roots

E*TRADE may have recently started offering managed portfolios, but they’ve been focused on investing since being founded in 1982. Ally Invest is a relatively new product line launched by Ally in 2017 when they purchased TradeKing.

Can visit a brick-and-mortar location

Unlike Ally Invest, E*TRADE offers over 30 brick-and-mortar locations in the United States. If you live near one of these locations, you can ask questions in person if you’d rather not deal with online customer service.

Paper trading helps you get comfortable with brokerage account trading

If you’re just dipping your feet into investing in a brokerage account, E*TRADE’s paper trading feature allows you to place fake trades without risking money. You won’t actually be investing in anything, but you can see how your trades would have performed if you actually put money behind them. 

That said, past performance doesn’t guarantee future results. Even if you’re successful when paper trading, it can lull you into a false sense of security when you’re first getting started.

Summary

Ally Invest and E*TRADE both offer managed portfolio and self-directed or brokerage account options that fit a wide variety of consumers depending on their needs. I personally wouldn’t want to keep 30% of my assets in cash, so Ally Invest and E*TRADE would need to compete for my business based on their advisory fee portfolios if I was choosing a managed portfolio provider. If I was picking a self-directed or brokerage account provider, I’d focus on the research tool and the trading costs for the investments I would be most likely to invest in.. 

Both companies offer decent options but you would ultimately have to choose which features are more important to you and go with the company that offers them.

Read more:

• E*TRADE Review
• Ally Invest Review
• Best Investment Accounts For Young Investors