One of the big concerns about exchange traded funds (ETFs) has been the fact that trading commissions can add up. With intensifying competition for your investor dollars, those concerns are quickly becoming moot.
Xin Lu for Wisebread.com says that ETFs have several advantages over mutual funds, one being that the expense ratio is generally lower for funds of the same type. A big reason so many investors have found ETFs appealing has to do with that very issue. And it’s a win-win when already cheap ETFs cost even less thanks to slashed commissions. [7 Factors in the Cost of ETF Ownership.]
Before price wars began, it didn’t make sense to periodically deposit small amounts of money into ETFs. Fast forward to today: brokerages are offering free commissions on some ETFs and drastically reduced pricing on others. Here’s a rundown on who’s doing what and what it costs:
- 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.