Since the first exchange-traded fund (ETF) was introduced 25 years ago, they’ve surged in popularity among both individual and institutional investors. Today, these investment vehicles boast more than $3.5 trillion in assets under management in the U.S. alone and over $5 trillion worldwide.
ETFs are popular because they offer an affordable way to build a diversified portfolio. Compared to mutual funds, ETFs have lower expense ratios and are more tax efficient (they tend to create fewer taxable events). ETFs are also easy to buy and sell. They trade much like stocks on regulated exchanges, can be traded on margin, have no short-selling restrictions, and provide intraday trading opportunities and plenty of liquidity.
Interested in making ETFs a part of your portfolio? Here are Investopedia’s top five online brokers for ETF investing, listed in alphabetical order.
Founded in 1971, the Charles Schwab Corporation is a financial services company that offers online brokerage, investing, advisory and banking solutions for active traders and investors. Schwab’s ETF OneSource is a group of more than 250 commission-free ETFs from 16 providers, including State Street Global Advisors, 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.
|• Great selection of commission-free ETFs||• Educational content is limited and not as well organized as that of competitors|
|• Comprehensive analysis from Schwab and third-party independent providers||• Unlike many of its competitors, Schwab doesn’t offer social sentiment or discussions|
|• Website , desktop and mobile platforms automatically sync||• Mobile quotes require manual refreshing|
|• Excellent customer service with live support 24/7|
Founded in 1982, E*TRADE has the distinction of executing the first-ever electronic trade by an individual investor, more than 30 years ago. The company offers more than 250 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…