A Beginner's Guide To Etf Investing With Td Ameritrade

TD Ameritrade offers commission-free exchange-traded funds (ETFs) from leading providers, with Morningstar research and ratings, and diverse investment strategies. ETFs are a powerful solution, combining the trading flexibility of stocks with the diversification of a managed investment. TD Ameritrade provides access to U.S. exchange-listed ETFs, along with industry expertise and ongoing support. Through TD Ameritrade, investors can access over 300 commission-free ETFs online, with lower expense ratios compared to actively managed investments. Before investing, it is important to carefully consider the investment objectives, risks, charges, and expenses associated with ETFs.

Commission-free ETFs

With over 300 commission-free ETFs from leading providers, TD Ameritrade's offering provides broad exposure to domestic and international indexes. This means that investors can gain access to a diverse range of investment strategies and asset allocations without incurring any additional costs.

The ETF Screener tool can be used to find suitable ETFs based on individual investment goals and risk tolerance. It is important to note that short-term trading fees may apply if eligible ETFs are traded within the 30-day hold period.

TD Ameritrade's commission-free ETFs include well-known names such as iShares Core S&P 500 ETF, Vanguard Total Stock Market ETF, and Vanguard FTSE Developed Markets ETF, among others. These ETFs cover a range of asset classes, including large-cap growth equities, foreign large-cap equities, and small-cap blend equities.

Additionally, TD Ameritrade provides access to Morningstar research and ratings, giving investors valuable insights into the performance and potential of different ETFs.

It is worth noting that while TD Ameritrade offers commission-free ETFs, other fees may apply for trade orders placed through a broker or by automated phone.

ETF Screener

TD Ameritrade offers a wide range of investment options, including Exchange-Traded Funds (ETFs). With over 300 commission-free ETFs from leading providers, investors can gain broad exposure to domestic and international indexes, as well as benefit from asset allocation and dollar-cost averaging.

To help investors navigate through the vast array of investment options, TD Ameritrade provides an ETF Screener tool. This tool allows investors to create and save custom screens based on their unique trade ideas and goals. For those who are unsure where to start, predefined screens are also available. The ETF Screener tool takes into account various criteria, such as investment goals and risk tolerance, to provide tailored recommendations. It is important to note that the results may include a broader category of investments known as Exchange-Traded Products (ETPs), which encompass typical stock and bond ETFs, Exchange-Traded Notes (ETNs), and funds that employ complex investment strategies.

The ETF Screener tool provides educational and informational guidance, but it should not be solely relied upon when making investment decisions. Investors are encouraged to carefully consider their investment objectives, risks, charges, and expenses before committing to any investment. TD Ameritrade also offers access to premium third-party analyst research and ratings to aid in the decision-making process.

By utilizing the ETF Screener tool and conducting thorough research, investors can make more informed decisions about which ETFs to invest in on TD Ameritrade's platform. It empowers investors to find securities that align with their specific trading goals and strategies.

Low expense ratios

When investing in ETFs on TD Ameritrade, it is important to consider the expense ratios of the funds. Expense ratios are the annual fees charged by the fund company, calculated as a percentage of the assets you have in the fund. These fees are taken daily and seamlessly deducted from your account.

While TD Ameritrade offers commission-free ETFs, it is important to note that they receive remuneration from certain ETFs for shareholder, administrative, and/or other services. This means that the list of commission-free ETFs may be limited to those ETFs that pay TD Ameritrade directly. As a result, you may find that some low-cost ETFs are not included in the commission-free program.

When considering ETFs with low expense ratios, here are some options to look out for:

• SPDR Portfolio S&P 500 High Dividend ETF: This ETF offers exposure to 80 of the highest-yielding stocks in the S&P 500. It has a low expense ratio of just 0.03%, making it a cost-effective option for investors.
• SPDR Portfolio Total Stock Market ETF: This ETF provides diversified exposure to most stocks on domestic exchanges, with holdings weighted by market cap. It has a low expense ratio of 0.03%.
• SPDR Portfolio Small Cap ETF: With nearly 2,100 holdings, this ETF offers exposure to small-cap stocks. It has a slightly higher expense ratio of 0.07%, but still falls within the range of low-cost funds.
• SPDR Portfolio Mid Cap ETF: While labelled as a mid-cap ETF, this fund also includes small-cap stocks. It has an expense ratio of 0.07%.
• SPDR Portfolio World ex-US ETF: This ETF offers international stock exposure, with major country exposures including Japan, the United Kingdom, and France. It has an expense ratio of 0.11%.
• SPDR Portfolio Emerging Markets ETF: This ETF provides exposure to over 1,200 stocks in emerging markets, with the largest country exposures being China, Taiwan, and India. It has a low expense ratio of 0.13%.

It is important to note that the availability and expense ratios of ETFs on TD Ameritrade may change over time. Therefore, it is always recommended to review the most up-to-date information on their website or through your brokerage account.

Tax efficiency

ETFs are generally considered to be more tax-efficient than mutual funds. This is because ETFs are treated like stocks for tax purposes, meaning you're only required to pay taxes on closed positions that realise capital gains. Mutual funds, on the other hand, incur a potentially taxable event each time a security is sold, and these capital gains may be passed on to the investor level.

However, it's important to note that the tax implications of ETFs can be complicated and vary depending on the asset class and structure. Taxation can also depend on how long you hold an ETF.

• Low Portfolio Turnover: ETFs tend to have low turnover, which reduces the realised gains that need to be distributed. However, it's important to review a fund's prospectus as different ETFs have different levels of internal turnover.
• More Long-Term Capital Gains: The low turnover of ETFs often means a longer holding period for each of the underlying investments. This usually qualifies any gains that are realised for favourable long-term capital gains tax rates.
• Secondary Market Transactions: When an ETF investor sells their shares on the stock exchange to another investor, the ETF portfolio manager doesn't need to buy or sell any of the ETF's underlying investments. This means that one investor's sell decision doesn't impact others, helping to keep capital gains distributions low.
• Primary Market Transactions: ETFs have a unique creation and redemption mechanism that allows authorised participants to build or disassemble baskets of ETF shares based on demand. These transactions are typically conducted in-kind, meaning securities are exchanged for ETF shares rather than cash. These in-kind transactions don't trigger a taxable event for the fund, improving the tax efficiency of ETFs.

Additionally, ETFs that are backed by physical metals, such as gold and silver, may be treated as collectibles for tax purposes and carry a higher top federal long-term capital gains tax rate. Commodity ETFs using futures contracts may be subject to the "60/40" rule, where 60% of capital gains or losses are treated as long-term, and 40% as short-term, regardless of the actual holding period.

It's also worth noting that ETFs can be held in tax-advantaged accounts like an IRA or 401(k) to maximise their tax benefits.

Remember, always consult with a tax advisor or professional to understand the specific tax implications of your ETF investments.

Market exposure

Exchange-traded funds (ETFs) are a powerful investment solution that combines the trading flexibility of stocks with the diversification of a managed investment. ETFs provide an easy way to gain diversified exposure within a specific market without purchasing individual securities.

ETFs offer broad exposure to domestic and international indexes, allowing investors to access a wide range of markets and asset classes. This market exposure provides investors with the opportunity to diversify their portfolios and reduce the risk associated with investing in individual securities.

One of the key advantages of investing in ETFs is the transparency they offer. To provide timely clarity, most ETFs track publicly available indexes, and managers generally report their holdings daily. This transparency helps investors make informed decisions and understand the underlying investments in their ETF portfolios.

Through TD Ameritrade, investors can access a comprehensive list of U.S.-listed ETFs that are available for commission-free trading within TD Ameritrade trading accounts. These ETFs can be bought and sold without traditional brokerage commissions for investors with certain account types, although various restrictions may apply.

Additionally, TD Ameritrade offers a range of tools and resources to help investors research, compare, and select suitable ETFs. The ETF Screener, for example, allows investors to filter ETFs based on their investment goals and risk tolerance. This helps investors find ETFs that align with their specific objectives and risk profiles.

With over 300 commission-free ETFs from leading providers, along with Morningstar research and ratings, TD Ameritrade provides investors with a diverse range of investment strategies to build their ETF portfolios. By investing in ETFs through TD Ameritrade, investors can gain exposure to various markets while benefiting from the transparency, diversification, and low costs that ETFs offer.

Frequently asked questions