March 1, 2013

Top 4 Commission-Free ETF Platforms

Here's what the major firms offer when it comes to trading for free in the exchange-traded universe

The ability to buy and sell funds without paying any brokerage commissions is one of the biggest trends in the booming ETF marketplace.

Not only is it drastically reducing the cost of ETF investing, but it’s directly influencing ETF asset flows.

Let’s look at some of the biggest and boldest players in this rapid evolving space:

Charles Schwab

In February, the San Francisco-based broker expanded its list of commission-free ETFs to a total of 105 ETFs by launching its Schwab ETF OneSource platform.

The company’s ETF list covers major asset classes, with fund families like State Street SPDR ETFs, Guggenheim Investments, PowerShares, ETF Securities, United States Commodity Funds, and Charles Schwab ETFs.

“Just as Schwab Mutual Fund OneSource changed the landscape for investors and advisors by providing convenient, affordable access to leading mutual funds when Chuck Schwab introduced it 20 years ago, we believe Schwab ETF OneSource will deliver enormous benefit and change the way our clients buy and sell ETFs,” said Walt Bettinger, CEO of Charles Schwab (SCHW), in a statement.

Non-Schwab ETFs added to the company’s commission-free trading platform include the Guggenheim S&P 500 Equal Weight ETF (RSP), PowerShares S&P 500 Low Volatility ETF (SPLV), Guggenheim BRIC ETF (EEB) and the ETFS Physical Precious Metals Basket Shares (GLTR). 

TD Ameritrade

If you want one access to one of the broadest lists of commission-free ETFs, TD Ameritrade (AMTD) is a good place to start. The brokerage firm offers up 100-plus ETFs on its list.

The broker has commission free trades on 47 iShares, 32 Vanguard ETFs and 12 State Street Global (SPDR) ETFs.  While you won’t find huge-volume ETFs like the SPDR S&P 500 ETF (SPY) on the list, you'll still get a great choice in lesser-known funds covering important asset classes, like international TIPS (WIP), international real estate (RWX), and international small-cap stocks (VSS). 

Another big plus to TD’s ETF platform is commission-free trades on commodity linked ETPs. Investments like the PowerShares DB Commodity Index Tracking Trust (DBC) and PowerShares DB Oil Trust (DBO) add diversification to a mostly bond and stock ETF lineup.  

Fidelity

Customers of Fidelity Brokerage Services can buy and sell 30 iShares ETFs without incurring any transaction fee. The funds cover a broad swath of investment categories, like domestic and international stocks, along with fixed income.

Among the ETFs included on Fidelity’s commission-free list are the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), the iShares MSCI EAFE (EFA), iShares Dow Jones Select Dividend (DVY) and iShares JP Morgan USD Emerging Markets (EMB). Unfortunately, no commodity ETFs are included, and the iShares Dow Jones U.S. Real Estate (IYR) is the only sector fund on the commission-free list.

Fidelity’s Nasdaq Composite Index Tracking Stock (ONEQ), which tracks the Nasdaq Composite Index, is also eligible for commission-free trades. Most online ETF trades placed at Fidelity Brokerage Services have a $7.95 commission.

Vanguard

Vanguard brokerage clients can make commission-free trades on the company’s entire lineup of Vanguard ETFs. This includes core portfolio funds like the Vanguard Total Stock Market ETF (VTI), Vanguard Total Market Market ETF (BND) and the Vanguard FTSE Emerging Markets ETF (VWO).

Most Vanguard brokerage clients pay $2 or $7 to trade stocks and non-Vanguard ETFs, depending on the size of their investment account. For example, a $750,000 account, dubbed Voyager Select Services, gets charged $2 per trade on stocks and non-Vanguard ETFs.

"For 35 years, Vanguard has been committed to reducing the cost of investing in mutual funds for our clients. Now, Vanguard is expanding our low-cost commitment to ETFs," said CEO Bill McNabb, in a statement. "Importantly, Vanguard offers a greater choice of ETFs with expense ratios that are among the lowest in the industry."

One other key differentiator with Vanguard’s ETF platform is that the same commission rates apply whether you trade online (through Vanguard.com) or by phone with a brokerage associate.

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