Published On: Sun, Dec 21st, 2014

What’s the catch with no-fee ETFs? – dcresource.biz

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Commissions of only a few dollars on ETFs can really add up for investors who want to dollar-cost average, or invest a certain amount of money on a regular basis — for instance, with every paycheck. So no-fee ETFs enable them to invest regularly without worrying about incurring regular costs.

Investors also can choose to have dividends reinvested for free in most cases.

“Free dividend reinvestment facilitates the compounding that can turbocharge long-term returns,” says Bankrate’s chief financial analyst Greg McBride, CFA.

Benefits of no-fee ETFs

Investment costs are one variable that investors can control. Slashing costs can be particularly beneficial to small investors without a lot of money to invest on a regular basis.

“Without commission, you can buy as few as one share at a time whenever you get some spare change in your brokerage account,” McBride says.

Paying less to invest leaves more money in your investment, which can translate to greater returns in the long run. Commissions aren’t the only fee to worry about, though. Keep an eye on other costs to make sure you’re getting the most bang for your investment bucks.

Fee-free ETFs from online brokers

Broker Number of fee-free ETFs Free dividend reinvestment? Number of ETF providers Holding period to avoid short-term trading fee
Fidelity Investments 76 Yes 2 30 days minimum
Vanguard 67 Yes 1 No minimum
E-Trade 108 Yes 3 30 days
Firstrade 10 Yes 3 30 days (10 share minimum)
TD Ameritrade 101 Yes 9 30 days
Charles Schwab 119 Yes 6 None

Expense ratios

Most ETFs have relatively low expense ratios as they typically passively track an index. Indexing is cheaper than actively managing a fund or ETF since there’s no team of specialists on the payroll researching and trading stocks. But even among relatively low-expense ratios in plain-vanilla ETFs, the fees vary.

[ Source :- bankrate.com ]