Best Online Brokers for ETFs:
- Best Online Broker for ETFs:
- Best ETF Research:
- Best ETF Screeners:
Fidelity: Best Online Broker for ETFs
- Account Minimum: $0
- Fees: $0 for stock/ETF trades, $0 plus $0.65/contract for options trade
Why We Chose It
Fidelity is a new winner this year as our pick for Best Online Broker for ETFs, in addition to being our best overall pick among brokers. We chose Fidelity for the top slot because they have increased efforts to meet customers’ needs by adding associates and introducing new platform offers and tools. Fidelity has also enhanced its mobile platform for all trading, including ETFs. The competition for this category has been close between Fidelity and Charles Schwab in recent years. However, Fidelity’s offering of fractional share trading for ETFs is what has moved this broker to the front of the pack.
- Customizable trading dashboard
- Digital, direct indexing
- Fractional shares trading in over 7000 U.S. stocks and ETFs
- Higher broker-assisted trade fees
- Minimum balance for some index trading
- Limited branch locations
Overview
Fidelity was founded in 1946 to strengthen and secure its clients’ financial well-being, and this mission is the same today. Not only is Fidelity a global brokerage firm, but the company also manages various types of assets, such as mutual funds, ETFs, fixed income investments, and alternative investments. Fidelity also provides retirement plans for employers and financial planning services.
Fidelity continues to grow, with gains in retail accounts and discretionary assets in 2023. In 2022 introduced two new digital, direct indexing platforms, refreshed its suite of mobile apps, and several new ETFs, including two bond funds following environmental, social, and governance (ESG) criteria, one following companies providing the technology around cryptocurrency, and one focused on the metaverse. Fidelity's additions in 2023 so far have been focused on support, including a young investor toolkit for wealth management firms, the acquisition of an equity management platform for startups, and a financial independence planner, among other improvements. One major change at Fidelity is that the direct crypto investment capabilities previously limited to institutional clients are now open to retail investors. This is in addition to the cryptocurrency-related ETF Fidelity launched in 2022.
You can find ETF-related education and topics in Fidelity’s learning center. The customizable ETF screener is a great tool to help investors identify specific ETFs based on various characteristics, including socially responsible investing (SRI) criteria. You can also compare multiple ETFs using the same screener. Fidelity’s Research tool can also be leveraged to evaluate ETFs, providing comprehensive information on risk factors, growth outlook, top holdings, performance, volatility, and more. The tools are easily accessible on Fidelity’s website and mobile apps.
Customers can receive direct help and guidance from a Fidelity advisor at one of its 200 investor centers across the United States. Fidelity has more than 70,000 associates and its customers consist of over 43 million individuals and nearly 23,000 businesses.
Interactive Brokers: Best ETF Research
- Account Minimum: $0.00
- Fees: $0.00 commissions for equities/ETFs available on IBKR’s TWS Lite, or low costs scaled by volume for active traders that want access to advanced functionality such as order routing. $0.65 per contract for options on TWS Lite; that is also the base rate for TWS Pro users, with scaled rates based on volume. $0.85 per contract for futures.
Why We Chose It
We selected Interactive Brokers as the best for ETF research because its platforms and tools help customers and non-customers research and access real-time, global market data. Its ETF scanner is top notch for researching financial metrics and market prices in multiple currencies for over 150 global markets. As in many categories throughout our review, the sheer breadth of the markets covered by Interactive Brokers in a given asset class gives it a huge advantage for serious investors.
- Impressive breadth of products
- ETF commission rebate program
- Extensive global market access
- IBKR's SmartRouting not available to IBKR Lite clients
- Tiered fee-based pricing structure can be confusing
- May be too advanced for new investors
Overview
We selected Interactive Brokers as the best for ETF research because of its extensive platforms and tools that customers (and even non-customers) can use to research the global market and make fully informed investment decisions. Interactive Brokers is an incredibly robust trading platform for all assets and markets, but it can be intimidating to newer investors. If you take the time to absorb the educational content the company has been actively enhancing, however, you’ll be able to appreciate that IBKR has built one of the most powerful platforms in the industry for researching and trading ETFs.
Interactive Brokers was originally formed as T.P. & Co. in 1978 by Thomas Peterffy, who is the Chairman of the Interactive Brokers Group. The company’s purpose has always been to "Create technology to provide liquidity on better terms. Compete on price, speed, size, diversity of global products, and advanced trading tools."
Interactive Brokers has a breadth of products in desktop, mobile, and web formats, which provide investors with access to global market information and services. In 2023, Interactive Brokers passed the 2.22 million mark in terms of customer accounts and reports $342.1 billion in client equity.
Charles Schwab: Best ETF Screeners
- Account Minimum: $0
- Fees: $0 for stock/ETF trades, $0.65 per contract for options.
Why We Chose It
We selected Charles Schwab to win best broker for ETF screeners because of its diverse selection of trading platforms and tools, its robust ETF screening tool, and the direct access customers have to their accounts through Schwab.com or the Schwab Mobile app. Charles Schwab provides real-time market research data for its customers along with its excellent screener, making well-informed investing decisions easy for investors.
Pros & Cons
- Powerful StreetSmart Edge ETF screener
- Robust and customizable trading platforms and tools
- Automated investing
- Solid overall brokerage
- High transaction fee on some mutual funds
- Minimum investment for Schwab Intelligent Portfolios account
- No fractional share trading in ETFs
Overview
We selected Charles Schwab to win best broker for ETF screeners because of the robust ETF screening tool, variety of trading platforms and tools, and the flexible digital platforms available to customers to access their accounts.
Charles Schwab was originally formed in April 1971 as First Commander Corporation by Chuck Schwab and his partners, and the company’s name was changed to Charles Schwab & Co., Inc. in 1973. The company’s goal has always been to put the customer first and provide more value and better experiences than its competitors as part of its “Through Clients’ Eyes” philosophy.
Charles Schwab provides an automated investing tool for customers called Schwab Intelligent Portfolios, which is a robo-advisor. Customers also have access to 24/7 live support from a Schwab investment professional if they have questions. As of Sept. 30, 2023, Charles Schwab services 34.5 million brokerage accounts, manages $7.82 trillion of customers’ assets, and has $890.4 billion in proprietary mutual funds and ETFs. Customers can use the Schwab Mobile app 24/7 to manage and monitor their accounts, make trades, deposit checks, research the market, and more. The app has an intelligent assistant called Schwab Assistant, which allows customers to use voice commands to do things such as make trades, set alerts, find answers to their questions, and more.
After TD Ameritrade was acquired by Charles Schwab in 2020, the integration between these two top-rated brokers is expected to conclude in late 2024. TD Ameritrade is no longer accepting new clients. Even though Charles Schwab has acquired TD Ameritrade, the broker still operates as a separate entity.
Final Verdict
Part of evaluating the best brokers for ETFs is researching the types of tools and resources they provide to help you find the right ETFs for your portfolio strategy. As technology evolves, online brokers must also upgrade their services, platforms, and tools so that customers can have access to the most current information and resources for ETFs. We found that Fidelity and Charles Schwab are focusing on providing more socially responsible ETFs and expanding ETF offerings in emerging themes that include cryptocurrencies, artificial intelligence, and digital economies. Interactive Brokers does not create ETFs, but offers access to all manner of ETFs across the globe. There are fine points of differentiation, such as Fidelity and Interactive Brokers both offering fractional shares on ETFs, while Schwab does not. Due to the wider offering at IBKR, however, not all the ETFs available are necessarily eligible for fractional share purchase. Beyond a wide selection of ETFs, investors also need research and tools to evaluate ETFs, as well as the education and customer support to use them. These three brokers have high scores in all the categories related to ETFs and any of them will give you an excellent investing experience. In the end, though, we ultimately gave the top spot to Fidelity. Fidelity’s platform may not be as expansive as IBKR when it comes to selection, but it gives you access to fractional share trading in ETFs, along with the educational content and research tools needed without being overwhelming for casual investors.Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read. Supporting documentation for any claims, if applicable, will be furnished upon request.
There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. See Fidelity.com/commissions for details.
Everything You Need to Know About Brokerage Accounts
What Is ETF Trading?
Who Should Invest in ETFs?
What Is the Difference Between ETFs, Stocks, and Mutual Funds?
How Do I Buy an ETF online?
ETFs trade on stock exchanges just like stocks. You can buy and sell ETFs through your brokerage account during regular market hours (when the stock exchanges are open). Many brokers today offer commission-free trading for ETFs; however, ETFs charge fees, known as expense ratios. The expense ratio is listed as an annual percentage. For example, a 1% expense ratio means you'll pay $10 for every $1,000 you invest in the ETF. The expense ratio can take a significant bite out of your profits, so it's important to compare expenses when researching ETFs (and mutual funds).
Do ETFs Pay Dividends?
- Qualified dividends: These dividends are taxed at the capital gains rate, which depends on your modified adjusted gross income and taxable income rate (0%, 15%, or 20%). These dividends are paid on stocks the ETF held for at least 60 days during the 121-day period beginning 60 days before the ex-dividend date. To receive the dividend, you must own shares of the dividend-paying ETF for at least 60 days during the 121-day period that begins 60 days before the ex-dividend date. That means investors who actively trade ETFs generally don't receive any dividends.
- Non-qualified dividends: These dividends are taxed at ordinary income tax rates because they are not designated as qualified. Dividends may be nonqualified if the ETF held the dividend-paying stock for fewer than the required 60 days.
Are ETFs Safe?
Why Invest in ETFs?
What to Consider When Choosing a Broker for ETFs
Should You Buy Commission-Free ETFs?
Commission-free means that whenever you buy or sell shares of an ETF, you don’t pay any trading fees. However, there are still other costs associated with commission-free ETFs such as the operating expense ratio (OER). The OER is the percentage taken from the fund annually to pay for the fund’s expenses. For example, if you have $5,000 in an ETF with a 0.3% OER, your expense is $15 a year. A good rule of thumb is to look for ETFs with an OER that doesn’t exceed 1%. Commission-free ETFs are also a good idea if you trade frequently and you want to save money on overall investing costs.
Methodology
Read our full Methodology for reviewing online brokers.