Investors who want to get exposure to the high returns of the stock market without risking the potential downside of individual stocks are increasingly choosing to invest in exchange-traded funds, or ETFs.
The more popular ETFs have become, the more they’ve popped up. Here’s a look at the best online brokers for ETF investors.
What is an ETF?
While mutual funds are priced just once a day based on their net asset value, ETFs trade on public exchanges just like stocks, making them extremely liquid and tradable. But instead of a single stock, ETFs are funds that invest in dozens or hundreds of stocks, commodities and/or other securities all at once, allowing investors to achieve major diversity all in one swoop.
Why buy ETFs?
By buying ETFs rather than all the individual stocks the ETF holds, investors can limit risk, save time and avoid thousands of dollars in trading fees. ETFs typically have similar trading fees as stocks, although they also involve a fee known as an expense ratio that is charged for fund management.
Best for beginners
Many ETF investors are retirement investors looking for funds to buy and hold. These investors may not necessarily be the most savvy traders.
Charles Schwab makes ETF investing simple and cheap and provides plenty of guidance and support for new investors. Schwab charges just $4.95 per ETF trade, which is very competitive given the amount of resources available on its platform. In addition, it has 24/7 phone and email support, as well as live online chat and more than 300 local branches where investors can go and get face-to-face guidance.
But maybe the best part about ETF investing with Schwab is the 245 commission-free ETFs the firm offers for customers. Sure, $4.95 per trade is cheap, but there’s no beating free trades! You don’t need to be a Wall Street guru to start investing in ETFs with Schwab, and it won’t break the bank, either.
Check out Benzinga’s Charles Schwab review for more information.
Best discount broker
Once again, Schwab provides customers with a premium broker experience at a discount broker price. The $4.95 trading fee and 200 commission-free trades puts Schwab among the cheapest sources of ETF investing, but you wouldn’t know it by looking at the service and resources customers can access. Schwab actually charged $8.95 per trade as recently as a year ago, but cut its rate to $4.95 to keep pace with falling commissions among other brokers.
But looking beyond commissions, Schwab offers ETFs with expense ratios as low as 0.03 percent, and Schwab’s average expense ratio is only 0.12. These low fees mean Schwab customers won’t have to deal with the type of fee-driven lag that other ETF investors must swallow. In fact, the only potential drawback for budget-minded investors is that Schwab requires an opening account minimum balance of at least $1,000, which could be prohibitive for some new investors.
Best ETF robo-advisor
For investors who are looking to leverage the full power of diversification and technology, letting the Wealthfront robo-advisor manage your portfolio of ETFs could be the best option.
Wealthfront offers ETFs from 11 different asset classes, including emerging market stocks, real estate, commodities, and government bonds. Wealthfront’s trading algorithm automatically rebalances the portfolio when assets generate uneven returns. It also reinvests dividends, adjusts to changing market conditions and automatically takes advantage of tax-loss harvesting opportunities. Aside from fees, mismanaging taxes is one of the most common reasons long-term investors miss their targets.
The average expense ratio of Wealthfront ETFs is only 0.12 percent. In addition, Wealthfront manages the first $10,000 of customer assets completely free of charge.
For investors looking for a set-it-and-forget-it portfolio, Wealthfront is the place to be. Just open up an account, set your personal preferences, and let the algorithm do all the heavy lifting.
Wealthfront also topped Benzinga’s Best Robo-Advisors list for 2017.
Best ETF research
For ETF investors tired of scouring the internet looking for tradable news or fed up with trying to piece together an understanding of the market one metric at a time, Fidelity is the best one-stop research source out there. Fidelity provides market research from 20 different providers.
Users get access to analyst ratings, specialized ETF reports, Equity Summary Scores, and even mutual fund fact sheets.
Fidelity offers 91 commission-free ETFs, and its personalized research quiz allows customers to get access to the research that matters and not get overwhelmed with useless information.
With so many ETFs out there, it can be difficult to know which ones are the best choices for long-term investors. Top-tier research can provide the information and confidence ETF traders need to put their great investing ideas to work.
See Benzinga’s Fidelity review for more information.
- Retirement investors
- Active traders
- Premium research
- Low fees
- No-transaction-fee mutual funds
Most commission-free ETFs
Many brokers offer a handful of commission-free ETFs, which are funds typically geared toward retirement investors. However, Charles Schwab is the gold standard of commission-free ETFs, offering 245 different funds from which to choose. E-Trade, TD Ameritrade and Fidelity each offer somewhere in the neighborhood of 100 different commission-free ETFs, but Charles Schwab takes ETF selection to the next level.
Schwab’s ETF OneSource program is still growing as well. As recently as July, Schwab added 15 new free ETFs to its program. OneSource provides ETFs from 16 different providers that cover 69 different Morningstar asset categories, including equities, fixed income, international and commodities.
The cherry on top of the commission-free Schwab sundae is that there is absolutely no early redemption fees, meaning investors can buy and sell what they want when they want and not worry about being charged an arm and a leg.
Best broker for active ETF traders
Fidelity offers all the tools advanced ETF traders need at a cost of only $4.95 per trade. Fidelity also provides roughly 100 commission-free ETFs that can be a godsend for active traders, as long as they make sure to avoid the $12.95 early redemption fee for iShares funds.
When it comes to trading tools, Fidelity offers advanced traders access to Active Trader Pro, a fully customizable trading platform with real-time streaming quotes and market data updates. Traders can also use the Real-time Analytics tool, and Strategy Ideas and Trade Armour features to streamline and optimize their trading strategies.
Traders who trade at least 36 times per year and maintain an account balance of at least $25,000 get access to Wealth-Lab Pro, an advanced strategy-testing tool which allows traders to backtest multiple strategies at once by utilizing up to 20 years of historical data. The best part is that all these advanced features are customizable for your own personal trading style.
Finally, Fidelity has an easy-to-use mobile platform for active traders on the go.
No matter how many ways you look at it, 245 commission-free ETFs is tough to beat. But if you add low expense ratios, Schwab’s ETF Portfolio Builder tool, its quarterly list of prescreened ETFs and its world-class customer service team, Schwab becomes the top online destination for ETF investors. Investors can customize a portfolio of ETFs based on their personal risk tolerance and financial goals. They can also browse through the categorized prescreened ETF lists and make sure their portfolio covers all the bases.
Schwab is still actively adding offerings to its commission-free ETF OneSource program, and investors never have to worry about early redemption fees. Outside of the program, commissions are free, expense ratios are low, and face-to-face feedback is as easy as going down to the local branch. Schwab has everything an ETF investor could ever want, and offers a great starting point for retirement investors.
|Broker||Best For||Commissions||Account Minimum||Choose your platform|
||$4.95||$1,000 waived if you set up an automatic monthly transfer of $100 through direct deposit||
Get started securely through Charles Schwab's website
1 Minute Review
Charles Schwab is known for high quality competitive trading platforms, a large selection of commission-free exchange traded funds and no-transaction-fee mutual funds. Consistently winning awards with J.D Power, Fortune, and Inventors Business Daily, Charles Schwab is praised for its heritage of innovation, modern wealth management capabilities and customer service.
$100 referral award for first-time clients
||0.25% annual fee||$500||
Get started securely through Wealthfront's website
1 Minute Review
At Wealthfront we believe that everyone deserves access to sophisticated financial advice, without the hassle or the high fees. So live the life you want.
None at this time
||$4.95||$0 for IRAs. Some accounts may require a minimum opening balance of $2,500||
Get started securely through Fidelity Investments's website
1 Minute Review
Fidelity's customized market research for individual investors is unmatched. Fidelity is best for experienced traders willing to make a minimum 36 trades per quarter. Not only does Fidelity offer 24/7 customer support, there are branches nationwide that offer in-person seminars and webinars to ensure that customers are always informed on the latest market research and technologies.
Commission-free trades good for 2 years