Commission-Free Trading Is Great For
Everyone
The Dynamic Wealth Report
May 17, 2011
by Corey Williams, Editor
It’s amazing how quickly financial markets move these days. Everything
from stocks to commodities and even currencies are prone to dramatic
swings.
Now more than ever, it’s essential for investors to stay flexible and
manage risk. No wonder investors are flocking to Exchange Traded
Products (ETPs).
You see, ETPs are indexed funds that can be traded in your brokerage
account just like a stock. They include stocks funds (ETFs), exchange
traded notes (ETNs), and even funds based on other assets like
commodities and currencies.
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ETPs give investors an easy way to diversify and make changes to the
portfolio at a moment’s notice. And they’re fast becoming the investment
vehicle of choice for institutional and retail investors alike.
Consider this…
Investors have more than $1 trillion in ETPs… And billions of new
dollars are pouring in every month!
To get a better idea of how popular ETPs are, just look at what’s going
on at Charles Schwab (SCHW). Last year they introduced commission-free
trades for Schwab ETFs.
As a result, interest in their ETFs skyrocketed. Schwab ETF assets shot
up from $516 million to more than $3 billion! That’s more than a six
fold increase in a year.
Clearly, investors are itching to trade ETPs.
And heavy investor interest is creating a firestorm of activity from ETP
providers. They’re rushing to bring hot new products to market ahead of
the competition.
But that’s not all…
Fierce competition amongst ETP providers is driving down trading costs
for everyday investors. More and more ETP providers are teaming up with
brokerages to offer commission-free trading of their ETPs.
Simply put, it’s a fantastic development for investors.
I don’t know anyone who enjoys paying a brokerage commission. And this
is the biggest development in lowering the cost of trading since online
trading.
I’m sure you’ll agree lower fees are a good thing. But here’s the catch…
You’ll have to do some leg work to make the most of commission-free
trading.
Most of the deals between brokerages and ETP providers are exclusive.
For example, you can trade Schwab ETFs for free in a Schwab account. But
the same trade at another broker will still cost you a broker’s fee.
So remember, do your research. You need to find out what ETFs different
brokers offer commission-free trading on. You’ll want one that offers
the types of ETFs that fit your trading style… Commission-free trading
isn’t going to do you any good if your broker doesn’t offer the right
ETFs.
Here’s a recent example of an ETF provider and a brokerage working
together.
Interactive Brokers and FactorShares are teaming up to offer
commission-free trading on FactorShares’ five new ETFs. So, anyone who
trades on Interactive Brokers’ Trader Workstation can now trade these
five ETFs commission-free.
It’s a win-win-win…
The investor pays lower trading costs. The broker gets exclusive rights
to offer the ETFs commission-free. And the ETF provider gains more
assets under management.
The way I look at it, active investors should be taking advantage of
commission-free ETP trades. If your broker doesn’t offer them, start
shopping around for one that does. It could end up saving you thousands
of dollars in commissions. And that’s something worth looking into…
It’s a busy week in the IPO market. Two of the most interesting IPOs
expected to price this week are social media and networking site LinkedIn (LNKD) and a leading regenerative medicine company,
Advanced BioHealing (ABHB).
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