Best ETF Brokers
An exchange-traded fund (ETF) is typically a basket of different assets — essentially a ‘mini mutual fund’. Through diversification, ETFs provide a number of advantages when compared to directly investing in just one particular asset. Due to their popularity, more brokers offer ETFs than ever before. So which online ETF broker is the best? In this guide, we break them all down, comparing the top ETF brokers on fees, performance, fund selection, tools and more.
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Exchange-traded funds (ETFs) are investment funds traded on stock exchanges, similarly to stocks. An ETF consists of assets such as commodities, stocks or bonds and generally works to try and maintain trading relatively close to its net value.
According to Reuters, ETFs that use leverage to double — and in some cases even triple their return of daily U.S stock indexes — come in at the 10 highest performing funds over the past decade. With some traders earning returns of almost a phenomenal 2,000%, regardless of the fact that there were warnings that most investors would not be suited to them.
These wins for leveraged ETFs showcase the advantages of speculating on an increase during “the longest bull market in history”. However, they also show how a record-low volatility gave investors a boost.
The company argues that high volatility damages leveraged ETFs because it increases the cost daily rebalancing trades that are fundamental to maintaining leverage.
Be aware though, experts are cautioning traders and investors that this substantial return may not reflect what is to come in the next 10 years.
ETF Experts forecast that 2020 will bring some new surprises to the ETF fund space, including the anticipation of the SECs approval of nontransparent ETFs, or funds that will now disclose their portfolio holdings monthly, rather than daily.
In the midst of this change, and to help you conquer any surprises that may be coming your way, we’ve created a list of the 5 best ETF brokers.
Not only this, but following our best ETF brokers lists, we have written out some of the most important ETF basics in a clear and simple way to help you get off to the right start.
Best ETF Brokers
Here are our picks for the top online brokers for ETFs:
- Charles Schwab – Best Overall
- ETrade – Best Research and Tools
- TD Ameritrade – Best Trading Performance
- Fidelity – Great for Beginners and Advanced Traders
- Ally Invest – Great Customer Service
1. Charles Schwab – Best Overall
Charles Schwab is all about a simple and modern investing style, and the firm remains at the top of its game after its recent acquisition of TD Ameritrade. Schwab is only getting better, and the firm shows time and time again that it wants to help individual investors become their best.
Since October 2018, the broker offers $0 commission on all ETFs, including funds from top-tier providers, Invesco, Pimco, and State Street SPDR. Individual stock trades are also free.
- Free commissions on ETFs
- Wide range of ETF
- Comprehensive Insights on ETFs
- First class customer support
- Low default cash sweep rate
Not only does the firm make trading accessible, it offers an impressive 245 commission-free ETFs that are tough to beat.
With this, Schwab helps you find ETFs that are right for your needs based on your goals and how you like to invest. The company offers an ETF Portfolio Builder tool, and provides a professional to help you “define and pursue your goals.”
Schwab also provides a quarterly list of prescreened ETFs and a first class customer support team, and is our top pick for the best online ETF brokers.
Investors are encouraged to customize their portfolios and browse through the categorized list of ETFs to create a diverse portfolio with minimal risk.
Schwab is also growing its commission-free ETF offerings to include its OneSource program, which is a list of commission-free ETFs that span a range of asset classes and index weightings. In addition to this, Schwab offers free commissions, low expense ratios and experts on hand.
The broker offers a selection of the best research on the market; their ETF Select List, for example, analyses things such as fees, a fund’s historical record, and how good of a match it would be for you individually. It also spotlights around 70 ETFs, as stated by the brokers experts.
Schwab continues to shine with a comprehensive, informative, and well-structured insights and ideas section, that has a variety of articles on ETFs, including fundamental ways to build an ETF portfolio and comparisons of ETF vs. mutual fund investing strategies, that will satisfy anyone’s need for knowledge.
A good place to start, if you’re new to buying and investing in ETFs, is Schwab’s Beginners Guide to Commodity ETFs to discover how commodity ETFs can help provide relatively low-cost access to an asset class that’s otherwise difficult to invest in, and why commodities shouldn’t make up a very large portion of your assets.
Overall, Schwab covers all bases and is the best ETF online broker for all levels.
2. ETrade – Best Research and Tools
ETrade is undoubtedly second in our list of ETF brokers, but they are popular for other reasons, too; The firm provides several advanced trading platforms, easy-to-use tools and guidance, commission free stocks, options and exchange-traded funds, and a huge amount of mutual funds, oh and even better – they are transaction free.
- Wide selection of free ETFs
- Easy and quality research
- Flexible options to buy and sell
- Valuable ETF knowledge section
- Higher rate on fee paying ETFs
ETrades moto is, “your money will never be the same” and the broker lives up to this in many ways. In a similar fashion to broker giant, and ETrade’s competitor, Schwab, the firm offers a whopping selection of over 250 commission-free ETFs, including some of the best valued in the industry – now you can’t argue with that.
ETrades ETFs offer low cost, diversification, and include:
- An array of equities, fixed income or commodities
- The option to buy and sell quickly
- 25 x 5 trading on a particular group of popular ETFs
You can read the firm’s, “Don’t Sleep on Opportunity” article to discover how to create the best opportunities for success by reacting to after-hours events and overnight breaking news, with 24 hour trading on some of their most in demand ETFs.
E-Trade makes research enjoyable. Their detailed list of ETFs tracks data in different asset-classes, all in one user-friendly spot. The data is actionable, up-to-date and best of all, you will be waiting no more than 15 minutes for a quote to come through.
Check out ETrade’s knowledge section which allows you to check your investment style, as shown in the colorful graph above, and more.
Any traders looking to trade outside of ETrade’s commission-free ETFs will be charged a sweet rate of $6.95 per ETF trade, a steeper price than competitors, which should be kept in mind.
3. TD Ameritrade – Best Trading Performance
TD Ameritrade is right up there in third place and has earned its spot in our best brokers for ETFs list, thanks to its award winning investing experience, over 2,300 commission free ETFs, the right tools to help you understand them better, and Morning Star research to keep you on top of your game.
- Quality research from Morning Star
- Award-winning investing experience
- Focus on knowledge and learning
- $0 ETFs from trustworthy and credible names
- High margin rates
TD Ameritrade caters to the needs of new and seasoned ETF investors who are building a portfolio by offering the complete ETF investing experience.
The firm offers research that includes today’s prices, last prices, gross expense ratio, net expense ratio and ratings, all on one user-friendly place. The broker offers ETFs from some of the most trustworthy and credible names in the industry such as iShares, Wisdom Tree, and First Trust.
It must be noted again here, before we get in to deep, that in November 2019, Charles Schwab announced its acquisition of TD Ameritrade and both companies will merge once the deal is finalized.
Take a look at TD Ameritrade’s customized learning experience, created to give you the information you need, without all that extra and unnecessary stuff.
TD Ameritrade has one goal in mind with their industry leading tools and knowledge, and that’s to help you be the smart, confident investor you deserve to be.
The broker’s tools are all about being easy-to-use and helpful. Their ETF screener for example helps you discover funds that match your goals based on certain metrics and performance.
Any techies out there will appreciate TD Ameritrade’s leading digital features. In October 2018, the company introduced an updated version of Amazon Alexa that allowed investors to make trades by voice commands.
Although other companies allow you to use voice commands to get things like your balance, it’s a real show of advancement to be able to move money and make orders through voice command, and the company state that they are the first to offer these voice-driven trades of its kind.
4. Fidelity – Great for Beginners and Advanced Traders
Fidelity takes the fourth spot in our best brokers for ETFs list, and for good reason. The broker is best for beginners and active traders, and offers investors the best research tools and metrics to help you understand the market.
- Superb research and best source available
- Advanced tools
- Good fit for active traders
- Although their stats and information is good the firm don’t offer it in a fun way
Although Fidelity offers some of the best offerings, the firm was recently rebuked by Hong Kong’s financial regulator for conducting around $40bn futures trades in the past 11 years; without having the appropriate licence, and for failing to report this breach to the authorities in time.
Thankfully, ETF investors don’t need to worry too much about that now.
Fidelity is on top of their ETF game, and Schwab’s acquisition of TD Ameritrade might push the firm towards even more improvements and offerings for customers in 2020.
Fidelity offers advanced tools at a nice rate of just $4.95 per trade. The firm also offers about 100 commission-free ETFs, making them a good fit for active traders. Just make sure to be aware of the early redemption fees for iShare funds.
The broker’s advanced and reliable trading tools include Active Trader Pro and Wealth-Lab Pro. Active Trader Pro is a customizable trading platform that gives you access to real-time market data and quotes, an analytics tool, and Strategy Ideas to help you create the perfect strategy for your goals.
Wealth-Lab Pro is available for traders with a minimum account balance of $25,000, and is an advanced strategy-testing that provides historical data. The firm’s mobile platform is also great for beginners and active traders looking for an accessible option.
Currently, Fidelity offers market research from an impressive 20 providers, and is the best research source available. The downside to this is that it can be a bit heavy to get through because it’s not presented in the most visually pleasing way.
You can learn all the information you need to know about ETFs in Fidelitys Learning Center, with their Beginners Guide Recorded Webinar and articles on Exchange Trades Products (ETPs) and ETF Types, to name a few.
Customers will have access to Equity Summary Scores, analyst ratings, ETF reports, and mutual fact information.
The broker has a slightly lower range of commission-free ETFs to those listed above, which come in at 91, but potentially makes up for it with its unique offerings like a personalized quiz that help you find the information that matters and to avoid all the rest that might potentially overwhelm you.
Too much information on ETFs can be distracting and overwhelming. However, TD Ameritrade’s news and research has 3 objectives:
- Get to know the main terms and concepts of various ETP types
- Understand the potential advantages and risks of investing in opposite or leveraged ETPs
- Decide if ETP investments are suitable for your portfolio
Fidelity’s focus is to help traders put their out-of-the-box ideas out there to reap the results.
5. Ally Invest – Great Customer Service
We couldn’t create this list of the Best Brokers for ETFs without including Ally Invest. The brokerage is arguably an underrated ETFs broker. Despite having fewer customers, being newer, and having less AUM than many of the other ETF brokerage firms listed above, Ally offers more than 100 commission-free ETFs which includes some credible names, including iShares, WisdomTree, Smart Beta, and many of their most in demand ETFs.
- Over 100 hand-picked commission-free ETFs
- Great customer service
- No account minimum
- Traders need to hold an ETF for a minimum of 90 days to trade it free of charge
- Higher charges than competitors
Ally Invest’s motto is that customers deserve more for their money. A moto they have used to introduce their commission-free fees on their hand-picked ETFs, to enable you to create a diverse portfolio without burning a hole in your pocket.
The firm offers commission-free ETFs from Vanguard, GlobalX, iShares, and more.
Ally Invest’s goal is to help you:
- Trade Easily
- Explore ETFs that reflect your style and goals
- Cost-effective options
- More diversification with lower risk
Below, Ally Invest breaks down the anatomy of an ETF to give you a better idea of the potential of an investment.
There is a small catch to this though, traders who want to do it free of charge will need to hold the ETF for a minimum of 90 days. Traders who sell out before 90 days will be charged a hefty fee of $9.90.
With that, Ally Invest charges $4.95 for standard ETFs, with no minimum balance. Traders with a minimum balance for $100,000 will be charged $3.95 per ETF trades, for select pricing. This makes the firm’s pricing higher than competitors.
Ally invest does offer great customer service, a reading section with articles on, ETFs for Beginners, Building a Diversified Portfolio, and leveraged and invested ETFs.
How do ETFs Work?
Where to Buy and Sell ETFs?
A key feature of ETFs is that they can be traded in the same way individual stocks are bought and sold. Investors can benefit from this feature when buying and selling ETFs.
Similarly to stocks, you can buy and sell ETFs freely on an exchange such as the New York Stock Exchange.
How do you Trade ETFs?
Investors can trade ETFs through either online brokers or traditional brokers, like the ones we’ve mentioned above.
Can ETFs Be Shorted?
Because ETFs are treated the same as stock on exchanges, they are allowed to be shorted. Short selling is when a trader sells shares that they have borrowed, usually from a broker, with the intention of buying them back at a cheaper rate.
They may also do it to hedge a position held in another security. For instance, if you sell a put option, you might offset that by short selling the underlying security.
Does Bitcoin Affect ETFs?
Let us start by saying that there has been growing issues with launching bitcoin ETFs and therefore, they do not currently exist. This is largely due to the fact that cryptocurrency lacks regulation; and because the U.S Securities and Exchange Commission (SEC) has been careful not to allow ETFs focused on the largely untested cryptocurrency market to become a reality for the public.
However, there has been more progress in this area and so, it seems inevitable that ETFs and bitcoins will meet sooner rather than later. SEC Chair Jay Clayton confirmed this fact when questioned in September 2019, and cryptocurrency traders will no doubt keep pushing for its potential in their market. So, let us take you through how this would work.
Firstly, let us clarify quickly what an ETF is. An ETF is an investment fund that tracks the price of an asset, or a collection of assets. ETFs create diversity without needing to buy the assets that are tracked by the ETF.
If you’re mainly looking to make a profit from ETFs, then this is an easier option than going through the hassle (and expense) of buying and selling individual assets. A bitcoin ETF would trade close to the net value of the most in demand digital currency in the world. Investors could then buy into the ETF and avoid the complexities of trading bitcoin.
With that, as ETF holders won’t be trading bitcoin itself, they won’t need to worry about storage and security procedures that cryptocurrency traders must abide by.
Do ETFs Pay Dividends?
Yes, exchange-traded funds (ETFs) pay out the total dividend that are attached to the stocks within the funds. This is done through quarterly dividend payments that the ETF pays out by keeping all of the underlying stocks throughout the quarter, and then paying them to shareholders proportionally.
With that said, not all dividend based funds are the same, and the differences from fund to fund can be enormous. So, make sure that you are aware of the particulars of your ETF.
Why Choose ETFs Over Stocks?
For a couple of reasons, including market pullbacks and increased volatility in the market, many investors have switched from trading stocks to exchange-traded funds. ETFs have an advantage over stocks for investors because they price throughout the day market, have the ability to track an index, and generally accrue lower fees than traditional mutual funds.
Investors can also be drawn more towards ETFs because they are highly liquid and usually come with a low expense ratio. ETFs are simpler solutions to creating a diversified portfolio for investors who prefer a more hands-off style.
Many investors consider broad index ETFs a crucial and foundational element of their portfolio, while traditional stocks are deployed more so to create returns or help avoid risks.
What are the Advantages of ETFs?
ETFs are a good investment for many reasons including being low cost, and minimal effort to create diversification. An ETF’s cost simply includes the operational and management costs of the fund.
So what are the advantages of ETFs? Well they are several — yet there are a number of disadvantages as well. Here are the pros and cons of ETFs:
- Increased access to stocks across multiple industries
- Low overall expense
- Helps you hedge against risk
- Risk management through diversification
- ETFs that are actively managed accrue higher fees
- A focus on industry limits diversification
- Less liquidity isn’t good for market transactions
How to Get Started with ETFs
It might come as a surprise that there are numerous ways to invest in ETFs, and no one way is the right way. ETFs allow you to invest in an entire industry, and interestingly, this will soon include the marijuana industry for European investors.
Thankfully, ETFs are offered by most online brokers, but we believe that the ones mentioned here are the best, with Charles Schwab coming out top overall. Getting started will vary per broker; Chales Schwab clients can use the firm’s free Portfolio Builder to create an ETF portfolio.
This will help you figure out a fund preference that you would like to invest in. You can then choose from a list of ETFs with no minimum investment needed.
Although ETFs are becoming more popular for their benefits and simplicity, it is important to understand ETFs fully in order to get the best out of them. With our list of the top 5 best brokers for ETFs, and some of the basics covered, you are already on your way to an exciting start.