Low-Cost Online Brokers for ETFs

January 31st at 12:51pm by Tom Lydon

When it comes to investing fees, exchange traded funds come with some of the cheapest expense ratios on the market. However, there other costs associated with trades, such as commissions.

According to the Investor’s Business Daily, investors favored online brokerages that offered free ETF trades or dirt-cheap rates.

Fund providers are helping to cover cost of trades as a way to entice investors to their ETF products rather than competing funds, which often track the same underlying index. [Commission-Free ETF Trades]

IBD’s top five online brokers include:

  • Thinkorswim. The TD Ameritrade platform offers 37 commission-free ETF from iShares, 32 from Vanguard, 12 from State Street and one each from Barclays, Deutsche Bank, PIMCO, PowerShares, Market Vectors and WisdomTree. The brokerage charges $19.99 on short-term ETF trades that are sold within 30 days of buying, but all other trades cost $9.99. The firm does not have minimums on regular accounts but requires $2,000 for margin accounts.
  • Interactive Brokers. This brokerage offers commission-free trades on 31 Global X Funds and five FactorShares ETFs. However, it requires a $10,000 account minimum. Investors require $5,000 to open an IRA. Accounts come with a $10 minimum monthly activity fee, but trades cost half a cent per share per trade, or a minimum of $1, with a maximum of 0.5% of the trade.
  • Fidelity Investments. Fidelity provides free trades on 30 iShares ETFs and its own Fidelity Nasdaq Composite Index Tracking Stock Fund (NYSEArca: ONEQ). However, the iShares ETFs can only be used toward margin buying after 30 days. All other trades cost $7.95 and the minimum account requirement is $2,500.
  • Charles Schwab. The brokerage allows free trades on its 15 Schwab ETFs as often as investors want, with no penalties on short-term trades. Normal commission is $8.95 and the account minimum is $1,000.
  • TradeStation. While this firm does not offer free ETF trades, it only charges 1 cent per share for up to 500 shares and a 0.6 cent a share beyond that for all trades. Regular commissions may run $6.99 to $9.99 on the order size and type. Regular accounts need $5,000 and day-trading accounts require $30,000 minimums.

Still, investors should be aware of the fine print as some brokers charge fees for frequent trades, have account minimums or only offer a short list of commission-free ETFs. [Investing on a Shoestring with ETFs]

For more information on ETFs, visit our ETF 101 category.

Max Chen 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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