Investopedia: Best Brokers for ETFs 2019

Exchange-traded funds (ETFs) offer an affordable way to build a diversified portfolio, thanks to their expense ratios and greater tax efficiency than mutual funds. ETFs are simple to trade since the transactions take place, much like stocks, on regulated exchanges. ETFs can be traded on margin, have no short-selling restrictions, and provide intraday trading opportunities and plenty of liquidity. A large percentage of ETFs are optionable as well, allowing traders to manage their portfolio risk using derivatives.

ETFs surged in popularity following the market timing scandals that plagued the mutual fund industry in 2003. More than a dozen firms were charged with front running and insider trading as well as market timing, and several big players were driven out of the industry entirely. The mutual fund industry was subjected to additional regulatory oversight, and largely cleaned up its collective act, but the stain remains. Investors turned to ETFs due to their relative transparency.

Interested in making ETFs a part of your portfolio? Here are Investopedia’s top five online brokers for ETF investing, listed in alphabetical order.

Schwab’s ETF OneSource is a group of more than 500 commission-free ETFs from 16 providers, including State Street Global Advisors, iShares, Invesco and OppenheimerFunds. You’ll pay $4.95 to trade all other ETFs.




Schwab provides plenty of tools designed to help you select the best ETFs for your portfolio, including their ETF Select List and ETF Portfolio Builder, which you can use to create a diversified portfolio of ETFs based on your financial goals, risk tolerance and time horizon. All customers can use Schwab’s platforms for free, regardless of account size or trading activity.

Pros

  • Great selection of commission-free ETFs

  • Comprehensive analysis from Schwab and third-party independent providers

  • Website , desktop and mobile platforms automatically sync

  • Excellent customer service with live support 24/7

Cons

  • There is a real push towards using a financial advisor, which can make a self-directed investor and trader lose confidence in their own abilities. 

  • As with other brokers that offer multiple platforms and such a wide range of tools, it can take some effort to find the features you want the most. And you might have to use more than one platform to access them all.

  • Margin rates are above average.

  • Account Minimum: $500
  • Fees: $6.95 stock and ETF trading
  • Awards: Best for Options

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E*Trade offers more than 290 commission-free ETFs from providers like Invesco, iShares and Vanguard. You’ll pay $6.95 per trade for all other ETFs, or $4.95 if you place at least 30 trades per quarter.

As a full-service financial institution, E*TRADE offers ample tools and resources designed to help you research your own investments, including E*TRADE’s All-Star ETF list, plus an ETF Screener and Prebuilt ETF Portfolios – a tool that helps you pick ETFs based on your investment time frame and risk tolerance.


Pros

  • Offers every ETF sold, with a large selection of commission-free ETFs, with numerous ETF-specific tools and resources

  • 24/5 trading on some very active ETFs, allowing you to respond to after-hours market news

  • Mobile app watchlists and tools synch up with web-based platform

  • 24/7 phone and live chat support

Cons

  • Higher commissions than many online brokers unless you trade frequently

  • Above average margin rates

  • Like other brokers with multiple platforms and services, you may have to use more than one platform to find all the tools you’d like to use. 

  • Account Minimum: $0
  • Fees: $4.95 per stock or options trade 
  • Awards: Best Online Stockbroker

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Fidelity offers 265 commission-free ETFs — 25 from Fidelity itself and 240 from iShares without paying a commission. The management fees for the Fidelity ETFs are very low. All other ETFs cost $4.95 per trade.

Fidelity’s ETF Research Center offers ETF/ETP comparisons, expert commentary and research, and a screener that lets you search by dozens of criteria, including volatility, fundamentals, technical, exposures, performance and analyst ratings.






Pros

  • Good selection of commission-free ETFs

  • Outstanding in-house and third-party research

  • ETF Research Center makes it easy to research and analyze ETFs

  • User-friendly mobile app

  • Account Minimum: $0
  • Fees: $6.95 for stock and ETF trades, $6.95 per leg plus $0.75 for options
  • Awards: Best for Beginners and Expert Traders

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TD Ameritrade offers more than 300 commission-free ETFs from providers like Invesco, iShares and State Street Global Advisors. You’ll pay a $6.95 flat-rate commission on all other online ETF trades. 

TD Ameritrade offers free access to all its trading platforms, including the pro-level thinkorswim platform and two mobile apps. Customers have access to a good selection of educational content, including articles, videos and in-person events at one of 364 branch locations throughout the U.S.

Pros

  • Large selection of commission-free ETFs

  • 24/5 trading on select ETFs

  • Free access to all trading platforms, real-time streaming quotes and Level II quotes

  • Well-organized educational content

  • ETF Market Center provides a one-stop shop for ETF tools and commentary

Cons

  • Above average ETF commissions and pricey broker-assisted trades

  • Above average margin rates at most dollar levels

  • Two mobile apps – one for casual investors and one for active traders – can be confusing

  • Account Minimum: Target Retirement Funds and STAR Funds $1,000, $3,000 for most mutual funds
  • Fees: $7/stock and ETF trade, $7 plus $1 per contract for options
  • Best for: wealthy, buy-and-hold investors

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Vanguard is one of the world’s largest investment companies,and is the world’s largest provider of mutual funds and second-largest provider of ETFs (after BlackRock’s iShares). Their offerings are known for sporting below-average expense ratios. The company offers an impressive 1,800 commission-free ETFs from more than 100 providers, which is a huge majority of the funds available. You’ll pay $7.00 to trade all other ETFs.

Vanguard’s selection of commission-free ETFs and its low expense ratios can’t be beat. The company offers an online trading platform, but it’s very basic and not well suited for active traders or anyone who wants advanced charting capabilities. Still, if you want to invest in low-cost ETFs and don’t need a robust platform, or if you’d like an advisor to do the legwork, Vanguard might be a good fit.

Pros

  • Commission-free trading on about 1,800 ETFs

  • In-depth expert analysis

  • Notoriously low management expenses

  • Low-cost Personal Advisor Services

Cons

  • Account service fee if total Vanguard assets are less than $10,000

  • Bare bones platform is not suitable for active traders or charting gurus

  • Website can be challenging to navigate

Methodology

Investopedia’s mission is to provide online investors with the most unbiased, comprehensive reviews and ratings of self-directed brokers. Vetted by multiple industry experts – including a financial research firm with more than 20 years of experience in broker ratings – Investopedia’s Broker Ratings and Reviews embody industry best practices for research design.

Investopedia consulted independent researchers, and financial institutions, and conducted multiple tests, to design a system that rates brokers based on 10 categories and 149 carefully selected variables. Selection of ratings elements was a culmination of 5,498 survey responses, 100+ hours of industry research, and 100 hours of user feedback. Each category encapsulates the key elements needed for thorough evaluation. All have been tested for replicable results with a battery of evaluators. Every review goes through a rigorous verification process to maintain editorial separation and ensure an unbiased ratings result.

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Source: investopedia.com

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