Last fall, Vanguard expanded its commission-free ETF lineup from 77 to 1,800+, which was very big news in the investing world, as it greatly expanded accessibility to the convenience and low-cost passive index investing that ETFs can offer.
In an effort to keep up, just this month, Fidelity has announced that they are expanding their commission-free ETF offering up to 500+.
New ETF providers that were added to the Fidelity commission-free ETF lineup include:
- American Century
- First Trust
- Franklin Templeton
- Goldman Sachs Asset Management
- Janus Henderson
- John Hancock Investments
- J.P. Morgan Asset Management
- Legg Mason Global Asset Management
- State Street Global Advisors SPDR ETFs
This boosts Fidelity’s ETF provider lineup to a robust 13 from just 2 previously (Fidelity and iShares).
500 is less than Vanguard’s 1,800, but in combination with Fidelity’s significant price cuts and launch of 4 zero-cost index funds, and then subsequently launching HSA accounts for individual investors that have no monthly maintenance or investing fees – both in the past year – Fidelity has positioned itself very well to compete with Vanguard to win over cost-conscious investors.
Why should amateur investors care about ETFs and Vanguard’s and Fidelity’s move to expand their commission-free ETF lineups?
Aside from the low costs of passively investing in index funds, commission-free ETFs give newer investors the ability to invest in small amounts without having to drop the $1,000’s of dollars required by minimum purchases that are typical when buying into an index fund for the 1st time. Historically, most investment brokers would only allow investors to buy and sell commission-free ETFs that they created and managed, while charging you commissions to buy and sell ETFs that they did not manage. Those costs would add up quickly with each trade, making it hard for independent ETF providers to compete with house ETF offerings, which greatly reduced competition (see: Fidelity only selling Fidelity and iShares ETFs commission-free previously).
Those days seem to now be behind us.
Note: even if an ETF is “commission-free”, that doesn’t mean that it’s entirely free to invest in. The very large majority of ETFs (and index funds) still have annual expense ratios associated with share ownership. Anything above 0.25% these days is too rich for my blood, personally.
Note #2: I have no financial or other connection to Fidelity (or Vanguard) – I just like seeing investment price war battles and sharing the news with my readers so they can make educated decisions about where to place their investments. Invest wisely, my friends.
Update: Schwab now offers free stock, ETF, & options trades to all accounts.