Exchange traded funds, or ETFs for short, have become very popular these days become they offer investors flexible ways to invest in multiple stocks in just one fund, thus, providing much needed diversification. Constructed in the same way as mutual funds, ETFs differ from mutual funds in the way that they are price instantaneously during the trading hours and, therefore, can be traded at any time. Mutual funds, on the other hand, price only once a day, at the close which prevent them from real-time trading.
Since ETFs are sold and bought on exchanges, the transactions, as you can imagine, involve fees, or commissions as we all know, just like when we buy and sell individual stocks. However, the nature of ETFs also make them possible for commission free trade because they are essentially mutual funds after all. In fact, that’s indeed the case. Currently, there are a few full service brokers do offer ETF trading without commission. If you want to invest in ETFs for free, you definitely want to check out these brokers:
- Fidelity: Though Fidelity doesn’t have its own ETFs, it does have 29 iShares ETFs that are free of commission charge for its customers. The free offerings cover US Equity, International Equity, and Fixed Income funds, including very popular funds such as MSCI Emerging Markets (EEM) and S&P 500 (IVV).
- Vanguard: Unlike Fidelity, Vanguard has its ETFs and they are all commission free if you are a Vanguard brokerage account customer. All 48 low cost Vanguard ETFs can now be traded for free for Vanguard customers.
- Charles Schwab: Schwab is quite new in the ETF business and currently only have a few ETFs to offer. However, the good news is they are all free of commission for Schwab customers.
- TD Ameritrade: In terms of quantity, TD Ameritrade no doubt has the largest selection of free ETFs among the four brokers. If you are a TD Ameritrade customer, you can buy and sell 101 ETFs from Vanguard, iShares, etc, for free.
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As you can see, if your goal is to build a diversified portfolio with ETFs, you really don’t have to go with other discount brokers and pay a fee when investing ETFs with them. You can just go with any of the above and trade ETFs for free. Isn’t it nice?