Online Brokers with Commission-Free ETF Trades




In you are interested in passive investing, you’re probably aware of ETF’s and their benefits.

If you’re not, ETF’s have a legion of supporters due to their extremely low management expense ratios. In comparison to similar mutual funds, ETF’s 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 ETF’s

ETF’s, unlike mutual funds, are traded on the stock market. This means that any time you add or subtract from your position in an ETF, you have to pay your broker’s trading fee.

This isn’t the case with mutual funds. With mutual funds, you pay a one-time charge to buy in to the fund. Any subsequent addition or subtraction of shares does not result in trading costs.

The downside to ETF’s 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.




Free ETF Trading

commission free ETFsFortunately, there are a number of investment brokers that offer free ETF trading.

Why would they do this, you may ask?

  1. To attract new customers who are interested in ETF’s 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.
  2. To encourage purchase of their own branded ETF’s (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 ETF’s?

Online Brokers with Commission-Free ETF Trades

I found 6 online brokers at the moment that offer a selection of commission-free ETF’s. Free ETF trading has become a very competitive offering as only a few of these brokers were offering this a year ago. Here is a list of the discount brokers that includes how many commission free ETF’s they offer, which company they offer them from, and normal trading costs.

Vanguard

  • # of commission-free ETF’s provided: ~1,800 (Vanguard through a recent commission-free ETF expansion) in August, 2018). All online trades for ETF’s are free. Phone trades vary by account asset level. All Vanguard ETF’s are all free by phone and online.
  • ETF providers: almost all
  • Normal trading costs (outside of commission-free ETF’s): varies by balance

Schwab

  • # of commission-free ETF’s provided: 500+
  • ETF providers: Invesco, SSGA, iShares, Schwab, WisdomTree, DWX, IndexIQ, JPMorgan, John Hancock, Oppenheimer, PIMCO, USCF, Aberdeen Standard, ALPS, Global X, Direxion
  • Normal trading costs (outside of commission-free ETF’s): $4.95

TD Ameritrade

  • # of commission-free ETF’s provided: 300+
  • ETF providers: iShares, AGFiQ, First Trust, Invesco, JPMorgan, ProShares, SPDR, USAA, WisdomTree
  • Normal trading costs (outside of commission-free ETF’s): $6.95

Fidelity

  • # of commission-free ETF’s provided: 500+ (after a recent commission-free ETF expansion)
  • ETF providers: Fidelity, iShares, American Century, First Trust, Franklin Templeton, Goldman Sachs Asset Management, Invesco, Janus Henderson, John Hancock Investments, J.P. Morgan Asset Management, Legg Mason Global Asset Management, PIMCO, State Street Global Advisors SPDR ETFs
  • Normal trading costs (outside of commission-free ETF’s): $4.95

Firstrade

  • # of commission-free ETF’s provided: all available ETF’s
  • ETF providers: over 40 providers, including Vanguard, ProShares, and WisdomTree
  • Normal trading costs (outside of commission-free ETF’s): $0

ETrade

  • # of commission-free ETF’s provided: 250+
  • ETF providers: 19 providers, including Vanguard, iShares, and WisdomTree
  • Normal trading costs (outside of commission-free ETF’s): $6.95

Vanguard typically offers the lowest management fees on their ETF’s (not always, but quite often). Looking at this list, Vanguard and Firstrade would seemingly be the two best brokers to house your ETF trading with.

ETF Investing Discussion:

  • Where do you trade ETF’s and why?
  • Have you created an account with a broker just for the benefit of commission-free ETF investing?

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