Amid intensifying competition for ETF assets, fund providers have shown a willingness to cut costs. Several major ETF issuers now offer an array of funds with annual expense ratios of 0.1% or less.
Truly frugal investors can double their pleasure by not only purchasing low expense ratio ETFs, but also by buying those funds commission-free from several of the most prominent online brokerage firms. Still, there are issues associated with commission-free ETF trading investors should be aware of.
“Investors must be aware that many ETFs available for free trading are thinly traded and have wide bid-ask spreads, which can add to trading costs. Also, some brokers charge fees for short-term trade,” reports Trang Ho for Investor’s Business Daily.
IBD’s 2013 Best Online Brokers survey evaluated some of commission-free ETF platforms with the best customer ratings.
One of those platforms was Charles Schwab’s (NYSE: SCHW) OneSource. That platform now offers 121 ETFs on a commission-free basis after adding 16 funds to its stable in October. In addition to being able to trade all Schwab ETFs sans commission, Schwab clients can trade select funds from State Street Global Advisors, Guggenheim, PowerShares, ETF Securities and U.S. Commodity Funds commission-free. [Schwab Adds ETFs to Commission-Free Lineup]
“A $1,000 account minimum is waived if you automatically deposit $100 every month or open a checking account. An added bonus is that Schwab ETFs carry the lowest expense ratios in the industry,” according to IBD.
TD Ameritrade also offers one of the larger lineups of commission-free ETFs at 101, though a combined 79 of those ETFs are iShares (47) and Vanguard (32) funds. Customers of TD Ameritrade can also access some PowerShares, State Street and Market Vectors ETFs on a commission-free basis and one each from iPath, Pimco and WisdomTree, IBD reported. [Advisors Embrace Commission-Free ETFs]
Speaking of accessing iShares ETFs on a commission-free basis, Fidelity clients can trade 65 iShares funds without commissions. Fidelity clients can also trade the firm’s 10 recently introduced sector ETFs without commissions. [Fidelity’s New ETFs Put Vanguard on Notice]
Interactive Brokers offers 29 Global X ETFs on a commission-free basis while Vanguard clients can trade all 67 of the firm’s ETFs with no commissions. Vanguard clients should be aware “if you buy and sell the same ETF more than 25 times in a 12-month period, you may be barred from trading that ETF for 60 days. Accounts with less than $50,000 are charged a $20 annual service fee,” IBD reported.
E-Trade also offers an expansive lineup of Deutsche Bank, Global X and WisdomTree ETFs commission-free.
ETF Trends editorial team contributed to this post.
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.