Best online brokers for ETF investing in December 2020


Exchange-traded funds have skyrocketed in popularity since the first ETF in the U.S. was launched in the early 1990s. ETFs are baskets of securities similar to mutual funds that track broad indexes like the Standard & Poor’s 500 or smaller slivers of the market, such as social media stocks, gold or sectors like health care.

However, ETFs trade like stocks throughout the day when the market is open, which makes them attractive to investors. These funds provide another way for investors to diversify their portfolio without having the stress of choosing individual stocks.

In fact, 85 percent of financial advisers “use or recommend” ETFs to their clients, according to the Financial Planning Association’s 2020 Trends in Investing survey. ETFs are seen as more tax-efficient and less expensive when compared with mutual funds.

The benefits of investing with ETFs are plentiful, according to Greg McBride, CFA, chief financial analyst at Bankrate.

“Many ETFs can be purchased and sold commission-free, depending on which brokerage firm you’re using,” says McBride. “Like mutual funds, reinvestment of stock dividends and bond (interest payments) is frequently offered and the only real minimum investment amount you face is the price of buying one share. Further, expense ratios are lower for ETFs than the mutual fund version of the same holding.”

ETFs are much more flexible from a trading standpoint than mutual funds.

“ETFs offer the convenience of intraday buying and selling, so you know the price you (paid), rather than rolling the dice on what the mutual fund’s net asset value is going to be at the market close,” says McBride. “You get the benefit of diversification over a market sector or an entire market from your very first share, rather than the concentrated risk of buying individual stocks. As (Vanguard founder) Jack Bogle famously said, ‘Rather than look for the needle in the haystack, just buy the whole haystack.’”

Here are the best online brokers for ETF investing:
Charles Schwab — Best overall
Fidelity Investments — Best for research and tools
TD Ameritrade — Best for beginners
Vanguard Group — Best for investor-friendly ETFs
Overview: Top online brokers for ETFs in December 2020
Charles Schwab: Best overall

Charles Schwab is a longtime advocate of individual investors, and the well-known discount broker remains one of the most affordable platforms.

The brokerage has long charged zero commissions on its own ETF offerings, such as Schwab U.S. Large-Cap Growth ETF. But now the brokerage has lowered commissions on all ETFs to zero. This includes funds from major providers like Pimco, Invesco and State Street SPDR. Individual stock trades are also free. Opening and maintaining a brokerage account at Schwab is also free.

Charles Schwab also provides a wide breadth of educational resources. Bankrate’s review of the brokerage found that it offers some of the best research and user-friendly tools in the market. Consider its ETF Select List, for instance. The tool, which takes into consideration things like commissions and fees, as well as a fund’s track record and suitability for individual investors, spotlights around 100 ETFs, according to the firm’s experts.

Do-it-yourself clients appear to be quite satisfied with the firm’s offerings. Schwab in 2020 was ranked first in J.D. Power’s annual study of self-directed firms.

Trade commission: $0
Minimum amount to open a brokerage account: $0
Number of commission-free ETFs: All
Fidelity Investments: Best for research and tools

It wasn’t that long ago that the Boston-based fund giant increased the number of commission-free ETFs to more than 500, nearly doubling the menu offerings investors can choose from. Now it’s upped its game even more, offering all ETFs on its platform at no commission.

If you want research and screening tools, Fidelity won’t disappoint. It offers a wide array of useful online tools to help you make more informed investment decisions, according to Bankrate’s review of the account. Fidelity also provides ETF investing ideas based on your goals, such as “investing for income” and “enhanced growth.”

Additionally, Fidelity’s mobile app will allow you to monitor your portfolio, check your account balances, make trades, view your watch list in a grid view or as a heat map and more.

Trade commission: $0
Minimum amount to open a brokerage account: $0
Number of commission-free ETFs: All
TD Ameritrade: Best for beginners

TD Ameritrade is a good option for beginners and any investor on the hunt for ETFs.

The discount brokerage now offers all the ETFs on its platform for a commission of zero, and there is no minimum balance required. One caveat? To remain free of any charges you will have to hold an ETF for at least 30 days, per the fine print on what TD Ameritrade calls a “short-term trading fee.” Otherwise, you will be charged $13.90.

Among the tools available to you include an ETF screener that is meant to help you find funds that match your trading goals based on performance and other metrics..

If you’re into tech and keep track of your investments online or on your mobile device, TD Ameritrade is a leader in the digital features it offers. It’s also updated its Amazon Alexa skill so that investors can make trades via voice commands on Alexa devices. While many companies, including traditional banks, let you use your voice to, say, get your balance on a voice-enabled device, it’s rare to let customers move money and place trades with their voice. TD Ameritrade claims it’s the first to offer voice-driven trades.

(Charles Schwab has purchased TD Ameritrade, and will eventually integrate the two companies.)

Trade commission: $0
Minimum amount to open a brokerage account: $0
Number of commission-free ETFs: All
Vanguard Group: Best for investor-friendly ETFs

The Vanguard Group, which introduced its first ETF in 2001 and manages more than $6 trillion in global assets, is best-known for being a low-cost fund provider. In August 2018, this powerful player pushed the boundaries of retail investing by making about 90 percent of all ETFs on its platform commission-free. Today investors may trade all available ETFs at no cost using Vanguard’s platform.

To sort out all of those ETF options, Vanguard offers screening tools, including the ability to compare ETFs based on factors like expense ratios.

Trade commission: $0
Minimum amount to open a brokerage account: The price of one share
Number of commission-free ETFs: All
Other options

Robo-advisers, such as Betterment, will also invest in ETFs on your behalf — so don’t forget about these all-electronic portfolios as a potential option. You may also consider buying ETFs via brokerage accounts from companies like E-Trade Financial and Ally Invest.

Learn more:
Best online brokers for beginners
Best online brokers for mutual funds
Best online brokers for low fees

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