Six Popular Commission-Free ETF Trading Platforms
June 6th at 8:59am by Tom Lydon
Originally, the commission-free ETF platform was restricted to Charles Schwab ETFs, but the program was expanded to include ETFs from States Street, PowerShares, Guggenheim, ETF Securities and U.S. Commodity Funds. Investors can browse through 105 commission-free options, which have an average asset-weighted expense ratio of 0.37%, and 33% of the ETFs have less than $100 million in assets. [Schwab Unveils Game-Changing Commission-Free ETF Platform]
Since there are no short-term trading restrictions placed on the ETFs, active traders may find the platform appealing as a cost-free way to move in and out of broad market segments. Typical commission fees are $8.95 per trade.
Unlike other platforms, E*Trade does not include products from the four largest ETF providers but provides access to WisdomTree, Deutsche Bank and Global X funds. Consequently, the online brokerage’s commission-free line up of 92 funds includes a lot of smaller ETFs. The average asset-weighted expense ratio of the ETFs is 0.53% and 63% of the ETFs have less than $100 million in assets.
If sales are executed within 30 days of purchase, investors will incur a short-term trading transactions of $19.99 – the regular commission on trades is $9.99.
The Vanguard platform includes access to its proprietary ETFs. It only offers commission-free trades on 67 of its own ETFs, with an average expense ratio of 0.12%, and 11% of the ETFs have less than $100 million in assets.
The firm also allows traders to buy and sell the same ETF 25 times over a 12-month period without restrictions. If a trader goes over its allotted quota, Vanguard will restrict trading on the ETF for 60 days. Regular commissions varies but starts at $7 on accounts with less than $500,000.
The relatively new Merrill Edge self-directed investing account provides investors, who maintain at least $25,000 in cash on the Merrill Lynch brokerage account or in a Bank of America bank account, with 30 commission-free trades per month on all available equities and ETFs.
However, Strauts warns that Wells Fargo offered a similar program but recently stopped providing the service to new customers. Consequently, potential investors should be aware that there is no guarantee that Merrill Edge would not stop its program in the future. The platform comes with regular commission fees of $6.95 per trade.
It is also important to note that along with explicit costs like a fund’s expense ratio and commission fees, trading in ETFs also comes with implicit costs. For instance, traders should consider bid/ask spreads, tracking error and share-lending revenue, among others.
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. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.