Investors that are interested in indexing may want to consider an exchange traded fund. Commission-free trades, diversified portfolios and total transparency make ETF investing simple and low maintenance.

“Exchange traded funds are one option for newbies attracted to indexing: Many brokerage firms now offer commission-free trades, thereby removing what until recently had  been  one of the big drawback for investors to get started in ETFs,” Chrsitine Benz, Morningstar director of personal finance, says. [Charting S&P 500 ETF’s Next Moves]

ETFs can offer investors the attributes of an index fund which can be appealing, minus the initial minimum investment amount. Many investors that are just starting out may not have that lump of capital to invest, so an ETF makes sense. Commission-free trades are beneficial because they reduce overall costs, according to Benz. [ETF Usage Will Double by 2012: Survey]

Charles Schwab was the first ETF provider to offer commission-free trades for in-house brokerage accounts, and now several providers have followed suit. TD Ameritrade, Fidelity and Vanguard all offer commission-free trades on various funds.  [Schwab Competes for More ETF Market Share]

Core, broad-based ETF options include:

  • iShares S&P 500 Index Fund (NYSEArca: IVV)
  • Vanguard FTSE All-World ex-US ETF (NYSEArca: VEU)
  • Vanguard Total Stock Market ETF (NYSEArca: VTI)

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.