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Best Online Brokers for ETF Investing 2019

April 5, 2019
Brokers, Investing
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Exchange-traded funds have surged in popularity because they offer investors a simple way to build a diversified portfolio on the cheap. Investors don’t have to search far and wide to invest in these assets: They’re a common offering of both online brokers and robo-advisors.

ETFs trade like individual stocks, so many of the features sought by investors in a stock trading account are also relevant to ETF-focused investors. But because ETFs essentially are mini-mutual funds, it’s important to consider other criteria, including a broker’s fund selection and tools for creating a well-diversified portfolio. Of course, the number of commission-free offerings also is important.

Here are cheatgame.info’s picks for best online brokers for every kind of ETF investor, whether you’re looking for a broker with the broadest range of ETFs, the lowest account minimum, the least-expensive commissions, the best platform to help you build and manage a portfolio, or the breadth of ETFs with a socially responsible focus.

cheatgame.info rating

Fees

$6.95

per trade

Account minimum

$500

Promotion

Up to $600

cash credit with a qualifying deposit

The bottom line

E-Trade has long been one of the most popular online brokers, largely because of its easy-to-use tools. They offer a tiered commission structure that favors frequent traders but can add up to high costs for casual investors.

Show pros & cons

Pros

  • Easy-to-use tools.

  • Large investment selection.

  • Excellent customer support.

  • Access to extensive research.

  • Advanced mobile app.

  • Reduced commissions for frequent traders.

Cons

  • Higher commissions for low-volume traders.

  • Minimum balance requirement for active trading platform.

Read full review
cheatgame.info rating

Fees

$6.95

per trade

Account minimum

$0

Promotion

60

days of commission-free trades with qualifying deposit

The bottom line

TD Ameritrade makes up for higher-than-average trading commissions with better-than-average service, research and trading tools that will make everyone from beginner investors to active traders happy.

Show pros & cons

Pros

  • Large investment selection.

  • Free research.

  • High-quality trading platforms.

  • No account minimum.

  • Good customer support.

Cons

  • Higher trade commission.

  • Costly broker-assisted trades.

  • High short-term ETF trading fee.

Read full review
cheatgame.info rating

Fees

0.25%

management fee

Account minimum

$0

Promotion

Up to 1 year

of free management with a qualifying deposit

The bottom line

Betterment has maintained its status as the largest independent robo-advisor for a reason: The company offers a powerful combination of goal-based tools, affordable management fees and no account minimum.

Show pros & cons

Pros

  • No account minimum.

  • Fractional shares limit uninvested cash.

  • Robust goal-based tools.

Cons

  • No direct indexing.

Read full review

Want to compare more options? Here are our other category winners for the best online brokers for ETF investing:


Best online brokers for ETFs: summary

Broker
Best
for
Highlights
Commiss-
ions
Promotion
Account minimum
Start investing
Charles Schwab
Chales Schwab
Overall +
socially conscious investing
Robust tools specific to ETF investors; 260+ commission-free ETFs;
$4.95
per trade
$100 referral award for first-time clients
$0

Vanguard

Vanguard
Overall
Low-cost investing model; extensive research; about 1,800 commission-free ETFs
$2 to $20 per trade depending on account balance
None
$0
Robinhood
Robinhood
Low cost
Easy-to-use interface; free trading app; 2,000+ commission-free ETFs
$0
per trade
Refer a friend who joins Robinhood and you both earn a free share of stock
$0
Interactive Brokers
Low cost + active ETF traders
Advanced trading tools; high-quality research; volume discounts
$0.005 per share; minimum $1 and maximum 1% of trade value; volume discount available
Lower minimum activity requirements ($3/month) for clients 25 and younger
$0
Wealthfront
Wealthfront
Hands-off investing
ETFs from 11 asset classes; offers tax-optimized direct indexing
0.25% of account balance
per year
$5,000 managed for free (for cheatgame.info users)
$500
Betterment
Betterment
Hands-off investing
ETFs from about 12 asset classes; goal-setting features guided asset allocation
0.25%-0.40% of account balance
per year
Up to 1 year of free management with minimum deposit
$0
TD Ameritrade
Portfolio building
300+ commission-free ETFs; portfolio planner tool
$6.95
per trade
Trade commission-free for 60 days and get up to $600 back
$0

E*Trade

E*Trade
Portfolio
building
250+ commission-free ETFs; quarterly
analyst recommendations
$6.95
per trade; volume discounts
Up to 500 commission-free trades with deposit of $10,000 or more
$500 ($0 for IRAs)
TD Ameritrade Essential Portfolios
Tdameritrade.com-promotions
Socially conscious investing
8 ETFs in Socially Aware portfolio; investment mix reflects risk tolerance
0.30% of account balance
per year
None
$5,000

ETF FAQs

ETFs allow investors to invest in a diversified selection of stocks, bonds or other investments in a single transaction. Like mutual funds, ETFs pool investor money to purchase shares of a number of different investments.

Those investments generally mimic a benchmark, like the S&P 500. Unlike with mutual funds, ETF investors don’t own the underlying assets in the fund — the ETF provider maintains ownership. Instead, ETF shareholders own a portion of the ETF itself.

ETFs are traded on an exchange, much like an individual stock, which means they can be bought and sold throughout the day. You can read more about ETFs in this explainer: What is an ETF?

All investments carry risk, and ETFs are no exception. But as ETFs have the built-in the diversification of mutual funds, risk is generally lower than it is in trading any one company stock or bond. Still, most ETFs mirror an underlying asset, which also can rise and fall in value depending on market conditions.

Other risks include the liquidity of the fund (that is, how easily you can buy or sell the ETF) and the potential for the fund closing down.

Like any investment, that varies. But again, as with mutual funds, ETF costs come from a couple of different directions.

  • Commissions. Because ETFs trade on an exchange, they’re subject to broker stock commissions. But many brokers — including the ones above — now have a lengthy list of commission-free ETFs that can be traded at no cost. If you’re planning to buy and sell ETFs frequently, make sure the ones you’re interested in are on that list.
  • Expense ratios. As with any fund, ETFs charge an expense ratio to pass the cost of administering the fund on to investors. The expense ratio is an annual fee, expressed as a percentage of your investment: a 1% expense ratio costs $10 a year for every $1,000 you invest in the fund. In general, because ETFs passively track a benchmark, their expenses tend to be lower than what you’d pay for an actively managed mutual fund. Take a look at average fund expense ratios so you know where your ETF stands.

ETFs combine the flexibility of stock trading with the instant diversification of mutual funds. As most ETFs are passively managed — tracking a benchmark index rather than trying to beat market returns — management fees are on average about one-third lower than that of actively traded mutual funds. Costs are transparent, and the value of the fund’s holdings are reported at the end of each day (as opposed to monthly or quarterly for mutual funds).

ETFs also typically draw lower capital gains taxes than mutual funds. Investors might pay only upon the sale of the ETF, whereas mutual fund investors can incur capital gain taxes throughout the life of the investment.

Most ETFs are passively managed, meaning they try to track an underlying asset, like a basket of stocks like the S&P 500 or a commodity like gold, which may be turnoff for investors who prefer active management. Also, while costs are generally lower for ETFs they can vary from fund-to-fund (even ETFs tracking the same index). Like stocks, you pay a commission every time you trade an ETF as well; no-load mutual funds, on the other hand, are sold without a commission or sales charge. Nasdaq recommends “any investor buying less than $1,000 worth of ETFs at a time should consider buying a transaction-free ETF or mutual fund.”
Like stocks, ETFs are traded on exchanges like the New York Stock Exchange (hence the name, exchange-traded funds). But unlike a stock, which buys assets in one publicly traded company, an ETF tracks an index, a basket of securities, bonds or other assets.
The main difference is in how these funds invest, and how they’re bought and sold. As we noted above, ETFs can be traded throughout the day, leading to the kind of price fluctuations you might see with individual stocks. They also tend to be more tax-efficient. Mutual funds are typically purchased from fund companies rather than other investors, and are priced once a day after the market has closed.

Though ETFs can be actively managed, most are passive, tracking an index. Many mutual funds are actively managed and employ a professional to pick and choose investments, which can result in higher fees.

Here’s our full comparison of ETFs and mutual funds.

Because they are traded for a share price, you don’t run into the typical mutual fund minimums, which can be $1,000 or more. You can purchase an ETF share for as little as $10 or $20 in some cases. Robo-advisors that use ETFs in their portfolios may even allow you to buy fractional shares — portions of a fund smaller than a single share.

That said, some brokers have account minimums, though there are quite a few options above that do not.

To trade ETFs, you’ll need an account with an online broker. If you don’t have one, you can open one with one of the companies listed above in about 15 minutes — the whole process can typically be done online. Here’s the step-by-step of how to open a brokerage account.

Once the account is funded, you can purchase ETFs using their ticker symbol, very similar to the way you’d buy stocks. (Here’s how to narrow your options when investing in ETFs.) You’ll place an order on your broker’s website or online trading platform with the ETF’s ticker, the order type and the number of shares you’d like to purchase.

» Want more information? Read our step-by-step guide to buying an ETF.

Yes — if the portfolio owned by the ETF includes equities such dividend-paying stocks (in fact, you can buy ETFs made up only of these kind of assets). These can be paid monthly or on some other time frame, depending on the ETF.
Yes, you can use dividends to acquire more shares in the same ETF, but there may be commissions for reinvesting dividends. Check with your brokerage to learn more.

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