Exchange-traded funds are one of the most popular ways to invest in the stock market. They offer diversification, potentially attractive returns, and generally lower risk than individual stocks. And they do it all for what often amounts to a very reasonable cost.
However, traders must take time to research ETF brokers before selecting one. An ETF broker might seem suitable because it provides access to low-cost ETFs, but you never know if they might require large minimum deposit requirements. Therefore, analyzing brokers on a set of metrics is important. Here is a list of metrics according to which ETF brokers can be analyzed and selected:
What To Look For In An ETF Broker?
- ETF Broker Assets – Traders should carefully scan the broker’s website to get a good idea of which financial markets it provides access to. Since the point of investing in an ETF is to benefit from a diversified portfolio, it’s very important to know that the broker offers a variety of asset exposure. Also, ensure that the best ETF broker provides ETFs with high liquidity.
- ETF Trading Platforms Regulation – It is very important to determine the regulatory status of the potential broker. Platforms regulated by the FCA have that information displayed next to their registration numbers.
- ETF Broker Fees – Every investor must be aware of the fees they will most likely come across when trading through their ETF broker:
- Dealing charges – These are the charges traders have to pay every time they carry out an ETF trade. Regardless of the amount invested, these charges have to be paid every time traders buy or sell an ETF. Some platforms do not charge any dealing fees.
- Yearly Maintenance charges – This is a fee charged by the ETF broker traders choose.
- Platform and Usability – It is always recommended to choose brokers offering a simple interface and platform. This begins with an easy setup process that is registration and fund depositing. Also, the platform should be easy to browse to view the list of assets available. This lets traders easily look for the ETF they want to invest in without having to look through hundreds of options.
- Research, Analysis, And Educational Resources – Always look for brokers offering key news developments and market insights. This keeps the traders up to date with financial market updates, and they are more knowledgeable that how this may affect their ETF investment value.
- Trading Features and Tools – Every category of trader has a different preference for trading tools and features.
- Professional investors demand a variety of features and tools. The features you end up going for are based on your experience as an investor.
- Advanced traders with a lot of experience usually require access to advanced research tools and technical indicators.
- New investors, on the other hand, can look for the Copy Trading feature that could help them learn from experienced investors.
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Some may also benefit from stop-loss or take-profit market orders when dealing in ETFs. This can help them establish entry and exit parameters to automatically close their trades.
- Mobile Application And Device Support – The best brokers offer local applications for all well-known firmware and devices. That allows traders to invest on the go and instantly close losing positions if they are away from their desktop computers.
- Customer Support – Choose a broker offering top-rated customer support. The best online brokers offer various ways to contact their representatives. Some online brokers also provide telephone support. Go for a broker offering numerous contact methods, especially live chat, since it is the most convenient. Try to steer clear of brokers only offering customer support via email, as that can take longer and will not be helpful if your problem requires urgent attention.
- Payment Method – Reputable brokers offer instant payment options like bank cards or e-wallets. That helps traders to begin the withdrawal process instantly, without having to wait for bank transfers.
- Expense Ratio – This is a fee ETF providers charge. If traders invest in a particular company via an ETF broker, the company will charge, for example, 0.15 percent every year.
- Misc. Charges – Apart from the above-mentioned charges there are certain charges which traders might or might not have to pay:
- Dormancy Fees: These charges are applicable if the traders leave their account unused for an extended period (typically twelve months). These charges will be applied every month until the traders resume trade or the account balance goes to 0.
- Deposit and Withdrawal Fees: Few ETF brokers charge deposit or withdrawal fees. It can be a flat fee or a certain percentage of the amount you fund.
- Spreads: These refer to the variance between the buy and sell price of the ETF you choose. The greater the gap, the more you may have to indirectly pay in fees. It is usually recommended to choose online brokers who offer tighter spreads.
- Overnight Rate: While ETFs as CFDs, traders have to be mindful of overnight rates. That is because CFDs count as leveraged financial instruments, and as a result, a fee is applied for every day the trade position is open.
Selecting a reliable and reputable online ETF trading brokerage involves assessing its track record, regulatory status, customer support, processing times, international presence, and language capabilities. These factors help traders make informed decisions and trade ETFs confidently.
Keep the following factors in mind before finalizing the decision of selecting an ETF broker:
- Assure that the chosen ETF broker has a good record of at least two years in the industry.
- A good customer support team of a minimum of 15 members is adequate to be responsive to queries and concerns.
- Double-check the regulatory status of the ETF broker. This will assure the trader that the broker can be held accountable for any misconduct or resolve disputes fairly and impartially.
- Ensure that the deposits and withdrawals process time is within two to three days. This is crucial in case traders need to access their funds quickly.
- Look for ETF brokers with an international presence in multiple countries, offering their clients local seminars and training programs.
List of the best brokers for ETFs in 2023
Here is a list of the best brokers for ETFs in 2023:
Robinhood was founded to help provide everyday people with easy access to the financial markets. They pioneered the concept of zero-commission stock trading upon its 2015 launch. Following their course many other brokers have shifted to a commission-free stock trading model as well.
The lucrative features of this broker are:
- Zero Commission Fee – Robinhood is best known for pioneering the idea of zero-commission stock trading.
- Fractional Shares – Robinhood lets investors buy fractional shares even if they have only $1 to invest. This can be an incredibly valuable tool. It allows traders to invest all of their money and also provides a diversified portfolio without a ton of investment capital.
- Exposure to Cryptocurrency trade – Robinhood offers cryptocurrency trading through its Robinhood Crypto service. Customers can buy and sell Bitcoin, Ethereum, Litecoin, and other cryptocurrencies at any hour of the day. As of August 2023, there are 15 different cryptocurrencies available on Robinhood.
- Cryptocurrency Limit Orders – Robinhood Crypto, offers the use of limit order to set the price at which traders want to buy or sell.
- Cash Management – Robinhood cash management account that allows clients to earn returns that fluctuate with prevailing interest rates on their uninvested cash.
- IRA Investing – Robinhood offers IRA investing for its account holders, and it doesn’t stop there. Robinhood matches 1% of every dollar on all IRA contributions for all members, and 3% for Robinhood Gold users
- Robinhood Gold – This version of the account charges $ 5 per month but comes with a variety of services which include High APY on uninvested cash, Instant access to larger deposits, Margin investing at 8% versus 12% through a standard account, Level II market data from Nasdaq, Access to Morningstar stock research reports and 3% match on IRA contributions and 401(k) rollovers, versus 1% for standard accounts.
Robinhood’s rise to fame is due to its zero-commission approach. This also means that they can trade ETFs commission free. While the trades are free there are a few charges that investors should be aware of:
- Returned check or ACH fee: $ 0 ($ 25 for IRA rollovers)
- Domestic/International wire transfers: $ 0/$ 0
- Domestic overnight check delivery: $ 20
- Paper statements: $ 2 monthly
- Paper trade confirmations: $ 2
Robinhood is a leading trading app. It offers a simple and easy-to-use platform that has been preferred by customers. Now Robinhood has rolled out expanded capabilities through the web version of its platform. Both the web portal and mobile app versions are simple in design and are intended to be easy to learn and use.
The free platform of Robinhood offers simple features but the paid Robinhood Gold offers access to research reports. Their customer support has also significantly improved. Customers can email customer service or get help via 24/7 live phone or chat support.
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Ally Invest offers some of the most competitive pricing on stocks, exchange-traded funds (ETFs), options, and mutual funds. Zero-dollar commission fees make this one of the best stock brokers we’ve seen.
The most attractive features of this broker are:
- Commission-free trades – Ally Invest offers $ 0 trades for stocks, options, mutual funds, and ETFs. However, stocks priced less than $ 2 per share are charged a commission of as much as $ 4.95 plus $ 0.01 per share. Bonds trade at $1 commission.
- Reasonable margin rates – The margin rates Ally Invest offers are in the mid-range; lower than the biggest players of the industry but higher than small brokers.
- No Minimums – Ally Invest is a no-minimum discount broker. Traders can open an account with as little as $ 1 to start. This is an excellent offer for beginner traders.
Although Ally Invest offers more than 17,000 mutual funds. While the fees have been mentioned above, there are a few other charges that traders should be aware of:
- Paper Statements –
- Penny Stock Fee –
This brokerage doesn’t have a complicated trading platform. The company’s web-based trading platform is built using HTML 5, so it works well on large and small screens. It also offers a mobile app for investors to stay up-to-date on the go.
There are two notable research and news solutions available to Ally Invest customers:
- CFRA Research
- News, real-time updates of the market
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Merrill Edge is a top brokerage that offers lucrative perks. The attractive features of this broker are:
- $ 0 trades – Merrill Edge offers commission-free trading for online stock, ETF, and options trades.
- Fee-free debit card and bill pay – Merrill Edge offers all account holders to be able to access their account balances via any Bank of America ATM without paying a debit or ATM fee. In addition to it, the feature of free bill pay makes it easy to pay bills straight from your account balance.
- Account types – Merrill Edge offers a wide array of taxable brokerage, retirement, small business, and children’s investment accounts.
- Investment vehicles – Merrill Edge offers access to multiple investment vehicles, including stocks, ETFs, options, mutual funds, CDs, and bonds.
- National branch access – All Merrill Edge account holders can access the advisors available at Bank of America financial centers during normal banking hours for assistance. This feature is a major selling point for the broker.
- Preferred Rewards program – Merrill Edge is owned by Bank of America, which has the gold standard for banking loyalty programs. Bank of America Preferred Rewards members can secure rate and fee discounts for most of the bank’s products, plus bonus credit card rewards.
Merrill Edge offers $ 0 commissions on online stock trades, and no-transaction-fee funds make it an attractive bargain. Base commission prices are:
|Stock an ETFs||Options||Mutual Funds|
|$ 0||$ 0.65 per contract||$ 0 – $ 19.95|
Other fees/ charges are:
- $ 39.95 early redemption fee for no-transaction-fee funds
- $0 ATM charges
- Free checks and bill pay
Merrill Edge has an easy-to-use and easy-to-access trading platform. It can be accessed by a web browser or through a mobile app. Its highly-rated mobile apps are available for any customer on an iOS, Android, or Windows device, so virtually any smartphone, tablet, or other mobile device has an app for making trades on the go.
One major advantage of using a brokerage that is tied to one of the nation’s largest banks is its customer service and support. Clients can get help at thousands of Bank of America financial centers (branches), where there are Merrill Edge advisors on staff to help you with anything related to your account. Merrill Edge also offers help 24/7 over the phone and an online chat service is available from 7 a.m. to 11 p.m. ET, Monday through Friday, and from 7:30 a.m. ET to 6 p.m. ET on Saturdays.
Merrill Edge offers a few noteworthy research capabilities to its clients:
- Bank of America/Merrill Lynch equity research
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Charles Schwab is a good option for seeking a one-stop-shop brokerage solution. Schwab’s commissions, investment options, and an array of account offerings (investing and banking) make it a clear top pick to consider.
Its top features are:
- No commissions for stocks and ETFs – Charles Schwab is one of the least expensive online discount brokers for basic stock and ETF trades offering $0 stock and ETF trades.
- No account minimums –Schwab recently eliminated account minimums on its retail brokerage accounts, making it one of the best stock brokers for beginners.
- Fractional share investing – Beginner investors will find Schwab’s Stock Slices valuable. All you need is $5 to begin investing in S&P 500 companies with share prices that are much higher.
- International Access – It offers trading in more than 30 global markets. With the Schwab Global Account, investors can trade stocks online in 12 of the top-traded foreign markets, each with real-time quotes during market hours.
- Customer service – Charles Schwab has a branch network of more than 340 locations across the country. It’s one of a handful of discount brokers that offer in-person help when you need it, which is a compelling advantage.
- ETF Investing – Schwab offers one of the largest marketplaces for low-cost ETF and index investing, including its own line of branded ETFs.
- Mutual Fund Investing – Charles Schwab has a diverse marketplace for mutual fund investors who are wanting to put their money into the mutual fund of their choosing.
- Investment account offerings – Schwab offers one of the widest array of account types; from taxable brokerages to IRAs, custodial accounts, trusts, and more.
- Banking and cash management – Charles Schwab is truly a one-stop shop for your money needs and it offers banking products such as the Charles Schwab High Yield Investor Checking account, CDs, and credit cards.
- Managed portfolios – Schwab Intelligent Portfolio is among the best robo-advisors for passive investors. Further, Schwab offers managed portfolios and access to a network of financial advisors that rivals the biggest names in the market.
- Branch access – Customers valuing in-person investing and banking relationships will want to add Schwab to their shortlist.
- Investment app -Schwab’s mobile app is among the best available from a big brokerage house. It has an iOS rating of 4.8 out of 5 stars. While it’s Android rating of 3 out of 5 stars is lower than average, our research has found the ratings aren’t aligned with the app’s high quality overall.
Charles Schwab offers a massive selection of mutual funds, including mutual funds that can be purchased without paying a load, transaction fee, or commission. It has several platforms aimed at different types of investors. In addition to a basic browser-based solution, Charles Schwab offers a streamlined web trading tool (Trade Source) plus a desktop platform (StreetSmart Edge) for advanced traders and sophisticated investors. Below are the platform types the broker offers:
Trade Source – Its key features include streaming quotes, clean charts, quick access to news on all of your portfolio holdings, plus the ability to quickly switch between ticker symbols thanks to its use of tabs. In addition, traders can also link other financial accounts (even non-Schwab accounts) to Trade Source. This is an excellent feature as it allows them to view their complete financial picture from one screen.
- StreetSmart Edge: This is Schwab’s platform for active traders. As a desktop-based platform, it offers more functionality than you’d expect from a true trading platform: advanced stock charting, quick access to fundamental research, an all-in-one trade ticket (for placing conditional orders), and a customizable layout so you can modify your screen to show only what’s most important to you.
- Mobile apps: Schwab offers mobile apps for iOS, Android, and Windows devices that give users streaming data and the ability to place complex trades (e.g., multi-leg options trades).
The few notable research and screening tools available to Schwab brokerage customers.
- Multiple equity research reports: Schwab has research from several major providers. Brokerage customers get access to Schwab ratings and research, plus access to research from Argus, Credit Suisse, Morningstar, MarketEdge, and Reuters, among others.
- Daily market reports: The broker offers daily market reports, including Credit Suisse First Edition, Morningstar Morning Notes, Market Edge Daily Commentary, and more from your online account.
- Screeners: Its screening tools are available on its website and through its SmartEdge desktop trading platform.
Schwab offers 24/7 support over the phone. Additionally, owing to the vast branch network, customers can also get help in person at offices scattered across the U.S. It has more than 340 branches in 46 states.
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