How to Start Buying and Trading ETFs

July 23rd at 1:00pm by Tom Lydon

One downside of investing in exchange traded funds (ETFs) is that commissions can quickly rack up if you’re trading frequently. Several brokerages have addressed this by slashing fees. Here’s how to get set up to start trading, wherever you choose to go.

Fidelity, Vanguard and Charles Schwab all offer free ETF trades with a number of ETFs, as long as you keep your account in-house. For instance, Matt Krantz for USA Today reports that Fidelity offers free trading in many iShares ETFs and Vanguard and Schwab offer free trading in their proprietary ETFs. [Factoring in the Hidden Costs for ETF Ownership.]

Other brokerages provide free trades in all ETFs if you meet certain requirements. Zecco, for exaple, gives you 10 free trades a month, including ETFs, if you have an account balance of $25,000 or more. Junior Boomer for Consumer Boomer reports that an added bonus in the age of technology is if you are interested in investing regularly, you can set up an automatic withdrawal from your bank account so that your discount brokerage account is regularly funded. Also, be careful, as you may also engage in real-time trading. This can cost more, and frequent trades can mean transaction fees cut into your earnings. [Where to Go for Cheap Trades.]

You can monitor fund expense ratios easily on our ETF Analyzer, and sort for funds this way:

Here is a rundown of the free or cheap trade movement:

  • Vanguard. You can now buy Vanguard ETFs without a commission if you open a Vanguard brokerage account. Although the trades will be commission-free, if your account has less than $50,000 in it then you will be charged a $20 yearly account fee. Commissions on all other ETFs traded with Vanguard range from $2 to $7. [The Total Cost of ETFs.]
  • Schwab. Schwab offers its own ETFs commission-free, while trades on all other ETFs are $8.95. To get their ETFs without a commission, you would need to open a Schwab brokerage account. A great thing about the new Schwab One accounts is that there are no annual fees, even if your account balance is small. [Schwab Lowers Its ETF Expense Ratios.]
  • Fidelity. Fidelity is offering 25 core ETFs from the iShares family without a commission. iShares ETFs are also very popular and they are administrated by Barclays. To get these ETFs commission-free, you would need to open a Fidelity trading account. All other ETFs traded on Fidelity’s platform have a $7.95 commission. [Fidelity Takes the Next Step.]
  • TD Ameritrade. The online brokerage charges $9.99 to trade ETFs.
  • E*Trade. Charges $7.99 for 150 trades in a quarter; otherwise, each trade is $9.99.
  • Scottrade. Charges $7 per trade.

For more stories about ETFs, visit our ETF 101 category.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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