Smaller Brokerage Houses that House Exchange-Traded Funds - dummies

Smaller Brokerage Houses that House Exchange-Traded Funds

By Russell Wild

There are a few smaller brokerage houses, mostly newcomers to the investing scene, which you could consider as places to house your exchange-traded funds (ETFs):

  • eTrade: 800-387-2331. Not only can you house your ETFs here, but you can refinance the mortgage on your house, as well.

  • TIAA-CREF: 800-927-3059. A good company, but this brokerage house works only with teachers. (If you’re married to a teacher, you qualify, too.)

  • Folio Investing: 888-973-7890. This is a very different kind of brokerage house, where you pay a flat rate ($29 a month) and then perhaps a nominal trading charge. It also offers pre-fab, ready-to-go ETF portfolios for the laziest investors.

  • TradeKing: 877-495-5464. Despite the somewhat hokey name, this newcomer to the industry is offering the lowest trading prices — $5 per ETF trade, regardless of whether that’s online or by phone — and customer service is reportedly excellent.

  • ShareBuilder: At $4 a trade, or even less if you’re willing to pay a monthly fee, it’s hard to beat ShareBuilder, a subsidiary of ING Bank, on price. The catch is that you have to commit to regular trades. You need to make trades (investing as little as $25) once a week or once a month. And therein lies the problem.

    If you’re putting in money each week or month, chances are you’re not putting in a whole lot. You’re a drib-and-drab investor, and drib-and-drab investors, although likely better off with ShareBuilder than most other brokers, should be investing in mutual funds, not ETFs.

    Do the math. Even if you are saving a very impressive $200 every week out of your paycheck, at $4 a trade, you’re losing 2 percent right off the top.

    ShareBuilder, alas, also took last place in a customer-service ranking published by SmartMoney magazine in 2010.