Free ETF Trades: Always a Good Thing? | ETF Trends

Trading exchange traded funds(ETFs) without any commission, yes, for free, is the latest trend that providers are following. But does this mean that you are getting a good deal?

Charles Schwab started it all, with commission-free trades in its proprietary line of ETFs. Then other big-name providers followed suit by lowering prices and/or slashing commissions. Fidelity was among them, offering fee-free trades as long as your have your account in-house. But Arohan for Personal Dividends reports that while free trades are a wonderful thing for investors, it does not automatically equal a great deal. Here is what you need to factor in:

  • The greatness of it all depends on which ETFs you choose to construct your portfolio. If you are a Fidelity investor and use iShares ETFs, than yes, the ability to buy and sell without paying a commission is a great deal. Remember, though, that ETFs still have expense ratios that should be considered. You can sort ETFs by expense ratio in our ETF Analyzer to be sure you’re getting the best deal.
  • The ability to trade ETFs without a transaction cost might tempt you to increase your trading activity, but look out. Excessive trading, poor asset allocation and a tax-burdened portfolio can result. [How to Begin Buying and Trading ETFs.]
  • You should have a strategy and stick with it. Don’t let free trades steer you off course. If you are in a position to take advantage of these commission free ETFs while staying within your long- term strategy, do it. [Find Cheap ETF Trades Here.]

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.