Ally Invest: Fee-Free Etfs And Their Benefits

Ally Invest offers commission-free trades on eligible U.S. stocks, options and exchange-traded funds (ETFs). There are a few instances where a fee may be charged, for example, a $4.95 base commission is charged for stocks and ETFs priced under $2. There is also a minimum holding period of 30 calendar days for commission-free ETFs, otherwise, a short-term trading fee of $9.90 will be charged.

Ally Invest also offers a wide selection of commission-free ETFs from market leaders such as Vanguard, GlobalX, and iShares.

Commission-free ETFs

Ally Invest offers commission-free trading on eligible U.S. stocks and ETFs. This includes a wide selection of commission-free ETFs from market leaders such as Vanguard, GlobalX, iShares, and more.

There are a few conditions to be aware of, however. Firstly, Ally Invest does not offer commission-free trades on stocks and ETFs priced under $2. For these, a $4.95 base commission plus $0.01 per share is charged. Secondly, there is a minimum holding period of 30 calendar days for commission-free ETFs. If you sell before this period is up, you will be charged a short-term trading fee of $9.90 (equivalent to their normal trade commissions of $4.95 to buy and $4.95 to sell). Finally, commission-free ETFs will not be margin-eligible for 30 days from the purchase date.

Ally Invest's commission-free ETFs include a range of popular low-cost iShares Core ETFs, several iShares Sector/ESG ETFs, and every single WisdomTree ETF ("Smart Beta"). This makes it a good choice for investors looking to build a simple, low-cost portfolio without paying commission fees.

In addition to its commission-free ETFs, Ally Invest also offers thousands of funds with expense ratios under 0.50%.

Low-cost ETFs

Exchange-traded funds (ETFs) are a great way to diversify your portfolio and invest in your interests in a cost-effective manner.

Ally Invest offers a wide range of investment options with no commission fees on most U.S.-listed stocks, ETFs, and options. They have hundreds of high-quality, commission-free ETFs from market leaders such as Vanguard, GlobalX, and iShares, including a selection of socially responsible funds.

• IShares Core S&P Total U.S. Stock Market ETF (ITOT) with a 0.03% expense ratio (ER)
• IShares Core MSCI International Developed Markets ETF (IDEV) with a 0.05% ER
• IShares MSCI EM ESG Optimized (ESGE) with a 0.25% ER
• IShares Core U.S. REIT ETF (USRT) with a 0.08% ER
• IShares Core 1-5 Year USD Bond ETF (ISTB) with a 0.06% ER
• IShares Core 10+ Year USD Bond ETF (ILTB) with a 0.06% ER
• IShares Core 5-10 Year USD Bond ETF (IMTB) with a 0.06% ER
• IShares National Muni Bond ETF (MUB) with a 0.07% ER

These ETFs cover a range of asset classes, including stocks, international developed markets, emerging markets, real estate investment trusts (REITs), and bonds of various maturities.

In addition to the commission-free ETFs, Ally Invest also offers thousands of funds with expense ratios under 0.50%, making it an attractive option for cost-conscious investors.

ETF trading rules

Exchange-traded funds (ETFs) are a type of investment vehicle that pools a group of securities into a fund, which can be traded like an individual stock on an exchange. ETFs are typically bought and sold in the same way as stocks.

• Taxation of Capital Gains: The tax rate applied to capital gains depends on the holding period and any special rules. If you hold ETF shares for one year or less, the gain is considered short-term capital gain and taxed as ordinary income. If you hold ETF shares for more than a year, the gain is long-term capital gain and generally taxed at a maximum of 15%. It's important to note that only net capital gains are taxed, and capital gains can be offset by capital losses before applying tax rates.
• Impact of Taxation on Share Sales: Investors aiming to profit from ETFs should consider the tax implications when selling their shares. Gains from the sale of ETF shares are reported on Form 1099-B. Consult a financial advisor to understand the tax impact on share sales.
• Diversification: ETFs offer diversification benefits by allowing investors to buy shares of a fund that targets a cross-section of the market. However, some ETFs are highly concentrated in specific industries or sectors, which may limit diversification.
• Fees and Expenses: While ETFs generally have lower fees than mutual funds, there are still various fees and expenses associated with ETF trading. These include trading commissions, internal expense ratios, and management fees. It's important to carefully review the prospectus and related documents to understand all the costs involved.
• Liquidity: ETFs offer two layers of liquidity, allowing transactions directly with issuers in the primary market or more commonly, through the secondary market where existing securities are bought and sold. However, it's important to note that not all ETFs have the same level of liquidity, and trading volume can impact their liquidity.
• Risk Management: ETFs provide risk management through diversification. By investing in a basket of securities rather than individual stocks, investors can reduce the concentration of risk. However, it's important to note that single-industry-focused ETFs may limit diversification.
• Trading Hours: ETFs are traded during regular market hours, similar to stocks. This allows investors to monitor intraday pricing and make trading decisions accordingly.
• Commission-Free Trading: Many platforms offer commission-free trading for ETFs, making them accessible to investors without incurring platform provider fees. However, it's important to read the fine print to understand any potential associated costs beyond brokerage commissions.
• Suitability for Different Investor Profiles: ETFs can be suitable for various investor profiles, from beginners to advanced investors. They offer a cost-effective way to gain exposure to a broad range of securities and are ideal for young investors. However, it's important to consider your financial objectives and understand the risks associated with any investment product before trading ETFs.

ETF trading platforms

Ally Invest is a good low-cost broker for beginner and intermediate investors. It offers commission-free trades on eligible U.S. stocks, options, and exchange-traded funds (ETFs). There is no account minimum, making it an attractive option for those new to investing.

Ally Invest provides instant money movement between Ally savings and brokerage accounts, allowing investors to take advantage of higher interest rates than the typical default sweep interest rates of most brokerages. However, this requires opening a separate Ally savings account.

Ally Invest's browser-based platform is basic but effective, offering quick trading capabilities, real-time streaming quotes and data, a customizable dashboard, and access to all the broker's tools. It also offers extended trading hours, which run from 8:00 am to 5:00 pm Eastern.

The mobile app is part of the larger Ally Bank app, allowing users to access holdings, the trading platform, research, screeners, and a stocks watchlist.

Ally Invest has a solid selection of bond products, including corporate, municipal, agency, treasuries, and bond ETFs.online brokerage platform that offers commission-free trades on eligible U.S. stocks, options, and exchange-traded funds (ETFs). This means that you can buy and sell ETFs on the platform without paying any brokerage fees.

ETFs, or exchange-traded funds, are a type of investment fund that holds a collection of securities such as stocks, commodities, bonds, and other investment types. They are typically bought and sold like stocks, and they offer a way to invest in a particular sector, industry, or region without having to purchase individual stocks.

Ally Invest provides access to a wide range of ETFs, including those from market leaders such as Vanguard, GlobalX, and iShares. The platform also offers a selection of socially responsible funds. In addition, Ally Invest has introduced an ETF screener tool that allows users to research, analyze, and compare different ETFs to make informed investment decisions.

One important thing to note is that while Ally Invest does offer commission-free ETF trades, there is a minimum holding period of 30 calendar days for these commission-free ETFs. If you sell an ETF before the 30-day period, you will be charged a short-term trading fee of $9.90, which is equivalent to their normal trade commissions ($4.95 buy + $4.95 sell).

Ally Invest also offers a "Select" tier, where you can get cheaper trades ($3.95 instead of $4.95) and lower options contracts ($0.50) if you maintain an average balance of $100,000 or average 30 trades per month over the past three months.

In terms of customer support, Ally Invest offers assistance via call, chat, and email, Monday to Friday from 7:00 am to 10:00 pm ET, and on Saturdays from 8:00 am to 8:00 pm ET.

Overall, Ally Invest is a good choice for those looking for a low-cost broker with a solid, basic trading platform and app. It is particularly attractive for beginners and intermediate investors due to its $0 account minimum and low trading costs. However, advanced investors seeking expert analysis, advanced charting tools, and access to crypto, futures, or forex may need to look elsewhere.

ETF investment selection

When selecting an ETF, there are a few key considerations to keep in mind. Firstly, determine your investment focus by choosing an asset class such as equities, bonds, or commodities, and deciding on its weighting in your portfolio. Diversification is an important aspect, so consider whether you want to spread your investments across an asset class or focus on specific market segments, industries, or regions.

Next, select the index you want your ETF to track. A good index covers a significant portion of the market you want to follow. Well-known indices like the FTSE All-World or MSCI World are offered by many major ETF providers and tend to be very inexpensive.

When evaluating specific ETFs, consider factors such as:

• Performance and tracking difference: Compare ETFs that follow the same index and assess their overall returns to identify those with minimal tracking errors.
• Ongoing charges (TER): Evaluate the Total Expense Ratio or Ongoing Charge Figure (OCF) to understand the administrative, legal, operational, and marketing costs deducted from your returns.
• Fund size and age: Larger and more established funds tend to be more profitable and safer from liquidation.
• Liquidity: Highly liquid ETFs can be traded efficiently and swiftly, minimising trading costs.
• Tax status: Ensure your ETFs have reporting fund status to avoid unexpected tax complications.
• Sustainability: If this is important to you, look for ETFs that meet specific sustainability, social, and governance (ESG) standards.
• Replication method: Consider whether the ETF uses full physical replication, sampling, or synthetic replication to track its index.
• Income treatment: Choose between distributing ETFs that pay income directly to you and accumulating ETFs that reinvest income to increase the ETF's value over time.
• ETF provider: Evaluate providers based on their transparency, accessibility of information, and clarity of important policies.
• Fund currency and domicile: While these may not significantly impact your selection, be aware of potential tax complications and ensure compliance with relevant regulations.

Additionally, when choosing an ETF, consider the level of assets, trading activity, underlying index or asset, tracking error, and market position. An ETF with a higher level of assets and trading activity tends to be more liquid, making it easier to buy and sell. Focus on ETFs with minimal tracking errors that closely follow their underlying indexes or assets. Finally, opt for ETFs from the first issuer for a particular sector rather than imitations of an original idea.

Frequently asked questions