A Closer Look at Commission-Free ETF Trading

May 8th at 9:09am by Tom Lydon

Spreading the word on exchange traded funds, money managers have been partnering with online brokerages to offer commission-free ETF trades to attract a wider following among retail investors.

Currently, 25% of ETFs, holding over half of the industry’s overall assets, can be traded commission-free on either Fidelity, Vanguard, E*Trade, TD Ameritrade or Charles Schwab platforms, reports Ari I. Weinberg for the Wall Street Journal.

In February, Charles Schwab expanded its line of commission-free ETF trades to 105 funds provided by multiple providers from its original 15 broad-based index ETFs. [Schwab Unveils Game-Changing Commission-Free ETF Platform]

A few weeks later, Fidelity Investments renewed its partnership with BlackRock to offer 65 iShares ETFs commission-free from its prior 30. [Fidelity, iShares Expand ETF Partnership: What Does it Mean?]

Previously, investors found large commission-free ETF selections from TD Ameritrade’s 101 funds selected by researcher Morningstar, 65 Vanguard ETFs on the company’s own platform and a menu of 89 narrowly targeted funds on E*Trade Financial.

Nevertheless, commission-free trades should not be the sole indicator for trading an ETF. Mitchell Reiner of Capital Investment Advisors recommends that investors should consider other factors like overall costs, exposure offered and how well the ETFs track their benchmarks.

Moreover, looking at overall costs, investors should also monitor expense ratios, along with wide spreads between bid and ask prices.

Traders should also be aware that Fidelity, E*Trade and Ameritrade charge a short-term trading fee on commission-free ETFs. Vanguard cna restrict purchases if a trader buys and sells the same commission-free ETF over 25 times within a 12-month period.

For more information on the ETF industry, visit our current affairs 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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