Best Investment Firms For Trading Etfs Without Commission Fees

Exchange-traded funds (ETFs) are a popular investment option, offering diversification, attractive returns, and lower risk than individual stocks. ETFs are similar to mutual funds in that they hold a variety of securities, but they trade like individual stocks throughout the day when the market is open.

Many investment firms and online brokers offer commission-free ETF trading, including E*TRADE, TD Ameritrade, Charles Schwab, Fidelity, Vanguard, Firstrade, and Merrill Edge. These firms provide a range of ETFs from different providers, giving investors a wide selection of options to choose from.

When choosing an investment firm for ETF trading, it is important to consider factors such as the selection of ETFs available, research and screening tools, mobile apps, customer service, and additional services offered. It is also worth noting that some firms may have minimum investment requirements or early redemption fees for certain ETFs.

Best online brokers for ETF investing

Exchange-traded funds (ETFs) are a popular investment option, offering diversification, attractive returns, and lower risk than individual stocks. Here are some of the best online brokers for ETF investing:

Charles Schwab

Charles Schwab is a well-known investment firm offering a wide range of financial services, including ETF investing. They provide a user-friendly platform, low fees, and a wide selection of commission-free ETFs, making it easier for investors to diversify their portfolios. Schwab also offers extensive educational resources and tools, including market research and analysis, to help investors make informed decisions.

Fidelity Investments

Fidelity is a leading investment firm that offers commission-free ETFs and has a long history of being investor-friendly. They provide comprehensive research and screening tools, allowing investors to filter ETFs by various criteria such as company size, fund size, and expense ratio. Fidelity also offers a mobile app for easy portfolio monitoring and trading on the go.

Vanguard

Vanguard is known for being a low-cost fund provider, and they were one of the first to offer commission-free ETFs. They offer a wide range of ETFs and provide screening tools to help investors compare funds based on expense ratios, management style, average annual return, and other factors. Vanguard also offers planning tools to help investors develop a comprehensive financial game plan.

E-Trade

E-Trade offers various ways to invest in ETFs, including commission-free options. They have a user-friendly ETF screener that allows investors to sort through over 3,000 funds using criteria such as Morningstar rating, investing strategy, and yield. E-Trade also offers prebuilt ETF portfolios for different investment strategies and the ability to trade some highly traded ETFs 24 hours a day, five days a week.

Firstrade

Firstrade offers commission-free trading on over 2,200 ETFs and provides free access to Morningstar research to help investors make informed decisions. They also have an ETF screener to identify funds based on performance, analyst ratings, or other criteria. Firstrade offers extended customer service hours and a mobile trading app for on-the-go portfolio management and trading.

Merrill Edge

Merrill Edge offers commission-free ETF trades and a user-friendly ETF screener that simplifies the discovery process. It allows investors to filter ETFs by fund size, asset class, and investing style. Merrill Edge often recommends iShares and Vanguard funds, but investors can purchase any ETFs available on their platform. They also offer predefined screens for a wider variety of ETFs, providing easy access to Morningstar 5-star stocks.

Ally Invest

Ally Invest offers commission-free ETFs, including options from iShares and Vanguard. Their screener allows investors to search for funds by predefined screens, such as tech ETFs or S&P 500 index funds. Ally Invest provides performance data, Morningstar ratings, and top holdings data for each fund. They are an attractive option for customers of Ally Bank looking to expand their relationship to include investment services.

Pros and cons of ETFs

Pros of ETFs:

ETFs have become an increasingly popular investment vehicle since their introduction in the 1990s. Here are some of the reasons why:

• Lower costs: ETFs tend to have lower costs than other types of investments, such as mutual funds, due to their passive management style. This means that investment managers are fairly hands-off, and only buy and sell what's needed to keep the ETF tracking its intended investment mix. Over time, these slightly lower costs can compound and result in a significantly larger nest egg.
• Diversification: ETFs typically offer diversified investments, with some aiming to provide exposure to the total stock market. This diversification reduces an investor's risk by spreading out their investment across many different companies and assets.
• Tax efficiency: ETFs are considered more tax-efficient than mutual funds because they generate fewer capital gains and losses. This is because most ETFs focus on passive or index investing, resulting in fewer trades compared to actively managed mutual funds.
• Trading flexibility: ETFs trade throughout the day on exchanges, similar to stocks. This provides more flexibility and control for investors who want to buy and sell at specific times during the day.
• Lower volatility: Since ETFs comprise several stocks instead of just one, they have lower volatility than individual stocks. This means they are less prone to substantial declines due to internal management issues or high debt servicing costs.
• Risk management: ETFs offer various risk management opportunities, such as market, stop-loss, and limit orders.

Cons of ETFs:

Despite their many advantages, ETFs also have some potential drawbacks:

• Costs: While ETFs may be more affordable than mutual funds, investors still incur costs when buying and selling, such as trading fees. These costs depend on the brokerage firm and type of ETF.
• Limited diversification: In some cases, ETFs might only offer exposure to large-cap stocks within certain sectors or foreign markets, limiting investors' access to growth opportunities in mid- and small-cap companies.
• Lower returns: Although some ETFs pay dividends, the returns may be lower than those of high-yielding stocks. Investors who are willing to take on more risk might earn higher returns by investing directly in stocks.
• Challenges for hands-on investors: ETFs may not be ideal for investors who want to be very hands-on and selective with their investments. For example, those with specific values or sustainability goals might find it challenging to use ETFs to meet their investment goals, as ETFs may include companies or assets that do not align with their personal criteria.

How to invest in ETFs

Before investing in Exchange-Traded Funds (ETFs), beginners should familiarise themselves with the process and try their hand at a practice portfolio.

Step 1: Practice

Using a simulated trading application, you can practice selecting ETFs for your portfolio, allocating a certain percentage or weight in each ETF, and deciding how often you might rebalance your portfolio based on your personal investment goals. Most online brokers, such as TD Ameritrade and eToro, provide practice accounts where you can learn about ETF investing without risking any money.

Step 2: Decide on a Broker

When you're ready to start investing for real, you'll need to open a brokerage account. This can be done in just a few clicks, but it may take a few days to receive all the necessary documents. Popular options include TD Ameritrade, eToro, Charles Schwab, E*Trade, Fidelity, and Interactive Brokers. Many of these brokers provide commission-free trading, but it's important to confirm how much each buy or sell transaction will cost.

Step 3: Select ETFs

When choosing which ETFs to invest in, it's important to remember that one of the most important investment rules is: "Don't put all your eggs in one basket, spread the risk!" You can choose from a wide range of ETFs, including those that focus on specific sectors or themes, such as technology, energy, or bonds.

Step 4: Order Your ETFs

Once your brokerage account is available, you can start investing in ETFs. Log in to your broker's website or app, search for the desired ETF using its ISIN (the identifier for every ETF), enter the number of units you would like to buy, and complete any other necessary details.

Step 5: Additional Considerations

When investing in ETFs, it's important to understand the costs involved, including any account minimums and fees for transferring your account. Additionally, consider the level of customer service and assistance provided, especially if you're new to ETF trading. Finally, remember that the key to success in ETF investing is to buy and hold for the long term.

How to choose an investment app

When choosing an investment app, there are several factors to consider. Here are some key points to help you make an informed decision:

• Account fees: Pay close attention to the app's fee structure, including monthly or annual account fees, transaction fees, and trading fees. If you plan to be an active trader, minimising fees will be important.
• Minimum deposit: If you are new to investing or unsure about committing a large sum, look for apps with low or no minimum deposit requirements.
• Mobile app rating: If you plan to invest primarily via your mobile device, opt for an app with a high rating and user-friendly features. Read reviews to spot potential issues that may impact your experience.
• Educational resources: If you are new to investing, look for apps that offer educational tools, webinars, and resources to help you make informed decisions.
• Customer service: Consider the level of customer support offered. If you prefer speaking to a human, ensure the app provides phone support in addition to chat or email options.
• Integrations: For streamlined financial management, choose an app that integrates with other tools such as bank accounts and tax software.
• Fractional shares: Consider whether the app offers fractional shares, allowing you to buy a partial slice of a company without purchasing a full share.
• Types of investments: Diversify your portfolio by selecting an app that offers a wide range of investment options beyond stocks and ETFs, such as bonds, mutual funds, cryptocurrencies, or alternative assets.
• Security features: Prioritise the safety of your investments by checking the app's security measures, including biometric logins, encryption protocols, and two-factor authentication.
• Account type: Choose an account type that aligns with your financial goals, time horizon, and investment plans. Common types include individual brokerage accounts, Roth IRAs, traditional IRAs, and custodial accounts.
• Fidelity: Good for those with competing money goals. Offers low fees, quality customer service, and tools for managing finances. Users can invest in stocks, mutual funds, ETFs, options, bonds, and more.
• Interactive Brokers: Best for those seeking a wide range of investment options, including stocks, ETFs, options, futures, cryptocurrencies, and bonds. Offers educational resources and low commissions.
• Stash: Best for educational tools and budgeting resources. Provides life insurance and allows users to earn stock on everyday purchases through the Stock-Back Card.
• SoFi Invest: Ideal for beginner investors, offering commission-free trades and a low minimum investment of $1. Provides access to financial planners and educational resources.
• Greenlight: Tailored for teaching kids about investing, with parental oversight. Allows parents to set spending limits and help children make investment decisions.
• Robinhood: Popular for commission-free trades and a referral program. Offers retirement account tracking and competitive interest rates on uninvested cash.
• Betterment: Specialises in robo-advisor services, providing automated, goal-based investing with personalised portfolios.
• Public: Provides access to alternative investments such as collectibles and fine art, along with a social feed for community-driven investing.
• Webull: Suited for those interested in crypto investing, offering over 44 cryptocurrencies. Also offers advanced charting and analysis tools for active traders.
• Acorns: Simplifies investing by rounding up purchases and automatically investing the difference into a portfolio of ETFs. Includes automated portfolio rebalancing.

How to trade ETFs

Trading ETFs, or exchange-traded funds, is a popular way to invest in the stock market. They are similar to mutual funds in that they are a basket of securities, but they trade like stocks throughout the day when the market is open. This makes them attractive to investors as they provide a way to diversify their portfolio without the stress of choosing individual stocks.

ETFs are bought and sold on the stock exchange and are typically bought and sold through a brokerage house, either by phone or online. They are priced, bought, and sold throughout the day, and there is no minimum investment.

If you are new to ETF trading, it is a good idea to do some research first. You can open a brokerage account with a company that offers free ETF trading, such as E*Trade, TD Ameritrade, Charles Schwab, Fidelity, Vanguard, or Firstrade. You can then use the brokerage's website or online trading platform to place an order with the ETF's ticker, the order type, and the number of shares you'd like to purchase.

When choosing an ETF, it is important to evaluate the costs, investment objectives, the index it tracks, the length of time it has existed, the expense ratio, taxes, and the management team's experience and track record.

There are several different types of ETFs, including equity, index, sector, bond, commodity, currency, specialty, factor, sustainable, and geographic ETFs. You can also trade ETFs using contracts for difference (CFDs), futures, and options.

Some popular online trading firms that offer free ETF trading include:

• ETrade: Offers 117 commission-free ETFs from Global X, Wisdom Tree Investments, and Deutsche Asset Management.
• TD Ameritrade: Offers ETFs from eight providers, including iShares, Vanguard, and Pimco.
• Charles Schwab: Offers more than 200 commission-free ETFs from its own funds and additional picks from State Street Global Advisors, Guggenheim, and PowerShares.
• Fidelity: Offers almost 100 commission-free ETFs from Fidelity and iShares.
• Vanguard: Offers 55 of its own ETFs without transaction fees.
• Firstrade: Offers commission-free trading on over 2,200 ETFs, with free access to Morningstar research.

Frequently asked questions