This article on commission free ETF trades has been updated for 2024. In you are interested in passive investing, you’re probably aware of ETFs and their benefits. If you’re not, ETFs have a legion of supporters due to their extremely low management expense ratios. In comparison to similar mutual funds, ETFs often have significantly lower management fees. This means that you get to keep more of your investment, vs. giving it away to an investment house. These savings can really add up over time.
The Downside to ETFs
ETFs, unlike mutual funds, are traded on the stock market. This means that any time you add or subtract from your position in an ETF, it’s possible that you’d have to pay your broker’s trading fee. This isn’t the case with most mutual funds, and index funds in particular.
The downside to ETFs vs. mutual funds is that if you want to start small and add to your position over time as your savings grow, you will incur trading costs EVERY time you purchase additional shares. Those fees can quickly add up over time, offsetting the savings you enjoyed from the lower expense ratios. Bummer!
There is, however, a way to avoid these fees.
Commission-Free ETF Trading
Fortunately, there are a number of investment brokers that offer free ETF trading.
Why would investment brokers even offer this, you may ask?
- To attract new customers who are interested in ETFs who don’t want to pay lofty trading fees every time they move in or out of an ETF or simply increase or lower their position in that ETF.
- To encourage purchase of their own branded ETFs (if they create and manage them) so that they can profit from the management fees.
Brilliant strategy, no?
Which online brokers offer free trading in and out of ETFs?
Online Brokers with Commission-Free ETF Trades
There are a number of online brokers at the moment that offer a selection of commission-free ETFs. Free stock, ETF, & options trades has become a very common offering. Here is a list of the discount brokers that includes how many commission free ETFs they offer, which company they offer them from, and normal trading costs.
- Vanguard: 84 Vanguard ETFs, plus 3,000+ ETFs from other fund families.
- Schwab: 30 Schwab ETFs, plus 3,000+ ETFs from other fund families.
- Fidelity: 64 Fidelity ETFs, plus 3,000+ ETFs from other fund families.
- ETrade: no ETrade ETFs, but 3,000+ ETFs from other fund families.
ETF Investing Discussion:
- Where do you trade ETFs and why?
- Have you created an account with a broker just for the benefit of commission-free ETF investing?
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When I look at the list, I see Schwab appearing as the best to trade ETFs due to the sheer number of free trades, variety of providers and the normal trading cost is in the middle of the pack. For what reasons do say TD Ameritrade and Vanguard?
I agree Allyson – I think Schwab and Fidelity due to the core asset class ETFs they offer.
Plus Schwab and Fidelity have a considerably better brokerage trading platform, customer service, etc.
TD Ameritrade is formidable too because they offer a number of Vanguard ETFs on the commission-free list.