A new way to buy ETFs online

Exchange-traded funds (ETFs) have become popular in their relatively short history because they provide investors large and small the opportunity to have a diversified portfolio while maintaining low fees and flexible trading opportunities . As the ETF market continues to expand, many financial technology (fintech) companies and online discount brokers such as Robinhood have also begun to provide the lowest fees and trading flexibility. As a result, they have taken a large market share from traditional financial consulting services. The available options include some applications, artificial intelligence-driven solutions, and robo-advisors, whose names may sound familiar.

Some popular stock trading applications

Robinhood, Motif and Ally Invest (formerly TradeKing) are the most popular stock trading applications.

  • Robinhood was launched in 2014 and charges zero commissions for stock and ETF transactions. Investors pay the usual management fees to ETF providers, and the expense ratio is usually less than 0.5%. Robinhood makes money in two ways: charging interest on margin accounts and investing cash held by customers in interest-bearing accounts. The company is backed by venture capitalists and angel investors, including Google Ventures, Jared Leto, and Snoop Dogg.
  • Motif Explorer is the mobile trading application of online broker Motif Investing. It was launched in 2012 and allows individual investors to invest in selected themed portfolios such as Online Gaming World and Cleantech Everywhere. A unique feature even allows users to build a basket of up to 30 stocks, which is basically custom-built ETFs. The next day trading is free, real-time trading is 4.95 USD. Motif now also offers Impact Portfolios, which is a fully automated service that allows investors to invest funds into their value.
  • Ally Invest acquired TradeKing in 2016, providing investors who understand their portfolios with commission-free trading of stocks, options and ETFs. At the same time, those seeking to manage investment portfolios can choose from investment portfolios that are selected in terms of social responsibility and tax optimization.
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Robot Advisor

Services featuring robo-advisors are designed for investors who focus on long-term rather than daily transactions. A series of ETF investment portfolios are provided to investors, which will be automatically monitored and adjusted over time. They are another low-cost option.

Wealthfront and Betterment are pioneers in the robo-advisor industry and both charge a 0.25% annual consulting fee and zero transaction or account transfer fees.

Betterment charges management fees ranging from 0.25% to 0.40%, while ordinary financial consultants charge management fees ranging from 1% to 1.5%. Both applications will guide users through the process of establishing an ETF portfolio based on the users’ answers to a series of questions about risk tolerance and investment preferences.

Wealthfront and Betterment offer a wide range of ETFs, from simple ETFs that track a broad range of U.S. stock indexes such as the Standard & Poor’s 500 to professional tools such as emerging markets and real estate investment trust (REIT) funds. These two platforms also allow easy setting up of tax-avoided retirement accounts, such as IRAs.

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About ETF fees

Low fees are a big deal for ETF investors, and there are good reasons. Most ETFs track indexes. If multiple competitors offer ETFs based on the same index, there should be no significant difference in returns. This makes fees and commissions a decisive factor in choosing another.

In any case, when deciding on an online broker, please review the range of ETFs provided. Each has a different combination. There are so many types of ETFs today, and with a new wave of apps and robo-advisors cutting fees and planning custom investment portfolios, the options seem almost endless.

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