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An Introduction to Exchange-Traded Funds and Mutual Funds

ETFs: Introduction to Brokerage House Choice

In the world of exchange-traded funds (ETFs) and other investments, after someone has a portfolio in place at a brokerage house such as Fidelity, Vanguard, or Schwab, that client is often very hesitant to switch.

Moving your account can sometimes be a big, costly, and time-consuming hassle. So if you have money to invest, it behooves you to spend some serious time researching brokerage houses and to choose the one that will work best for you.

What to look for with an ETF broker

Here’s what you want from any broker who is going to be holding your ETFs:

  • Reasonable prices

  • Freebies, including free trades on certain ETFs

  • Good service, meaning they answer the phone without putting you through answering-system hell

  • A user-friendly website

  • Good advice, if you think you’re going to need advice

  • A service center near you, if you like doing business with real people

  • Incentives for opening an account, which can run the gamut from a certain number of fee-free trades to laptop computers

  • Financial strength

Financial strength really isn’t as important as the others because all brokerage houses carry insurance. Still, a brokerage house that collapses under you can be a problem, and it may take time to recoup your money.

ETFs: A price structure like none other

Shopping for shoes? Beer? Pickled herring? Go to one store. Go to another. Or open up an issue of Consumer Reports. Compare the prices. Easy business.

Comparing the prices at brokerage houses is anything but easy. At Vanguard, for example, you’ll pay from $2 to $7 per ETF trade, depending on how much money you have with Vanguard. But if you are trading a Vanguard ETF at Vanguard, you’ll pay nothing for the trade.

At TD Ameritrade, there are 100 ETFs that you can buy and pay nothing for the trade. But beware! If you don’t hold on to them for a full 30 days, you’ll be assessed a $20 charge.

At ShareBuilder, you can pay only $4 a trade, but you need to commit to a schedule of regular trades that occur only on Tuesdays. (That’s right, only on Tuesdays.) This is not easy business.

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