Morningstar's Guide to Free ETF Trading
We look for the best of the bunch among commission-free trading programs for exchange-traded funds.
Today, almost every major discount broker offers a commission-free trading program for exchange-traded funds. Brokerages are competing for investor accounts, and they are leveraging ETFs' popularity to lure investors. This competition among brokers has helped to reduce the cost of investing in ETFs. This article will highlight the pros and cons of the commission-free ETF trading programs offered by Fidelity, TD Ameritrade (AMTD), Charles Schwab (SCHW), E*Trade (ETFC), Vanguard, and Merrill Lynch.
Unpacking the Total Cost of ETF Ownership
Before we get to the broker breakdown, it's important to remember that commissions aren't the only costs investors face when buying and selling ETFs. There are other implicit transaction costs to consider. For example, investors also should assess bid/ask spreads before buying and selling shares of an ETF. As a general rule of thumb, ETFs with large asset bases and high trading volumes generally will have lower bid/ask spreads than smaller ETFs with lower trading volumes.
Timothy Strauts does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.