7 of the Best Commission-Free ETFs at TD Ameritrade in 2018 | The Motley Fool (2024)

TD Ameritraderecently revamped its list of ETFs that its clients can buy and sell without paying a commission. The list runs the gamut from simple and inexpensive stock index funds to so-called "smart beta" ETFs that attempt to beat the market with rules-based stock picking methodologies.

I sorted through the TD Ameritrade's commission-free ETF list and found seven index ETFs that would make for good buy-and-hold investments in an individual retirement account (IRA) or health savings account (HSA). Here are my seven favorite commission-free ETFs at TD Ameritrade, complete with the case for each fund below.

Commission-Free ETF

Ticker

Expense Ratio

SPDR Portfolio Total Stock Market ETF

(SPTM -0.60%)0.03%

SPDR Portfolio Small Cap ETF

(SPSM -0.14%)0.05%

SPDR Portfolio Mid Cap ETF

(SPMD -0.54%)0.05%

SPDR Portfolio World ex-US ETF

(SPDW -0.25%)0.04%

SPDR Portfolio Emerging Markets ETF

(SPEM -0.25%)0.04%

SPDR Portfolio Aggregate Bond ETF

(SPAB 0.04%)0.04%

SPDR Portfolio S&P 500 High Dividend ETF

(SPYD 0.60%)0.07%

Data sources: TD Ameritrade, SPDRs.com.

SPDR Portfolio Total Stock Market ETF

This fund is a really good way to get exposure to most stocks on domestic exchanges that are incorporated or headquartered in the United States. This total stock market ETF tracks the SSGA Total Stock Market index, which generally includes companies that have a minimum market cap of $100 million.

Like all total stock market ETFs, this one fund gives you a lot of diversification, as it currently holds about 2,800 stocks. However, note that its holdings are weighted by market cap, so the three largest stocks (Apple, Microsoft, andAmazon) make up roughly 7.6% of the portfolio combined.

This fund is best compared to ETFs that track the Russell 3000 index, as well as other total stock market ETFs like Vanguard's populartotal stock market fund. A low expense ratio of just 0.03% makes this fund a cheap way to invest in a very diversified portfolio of U.S. stocks.

SPDR Portfolio Small Cap ETF

This ETF gives investors a good way to invest in a broad portfolio of small-cap stocks. The fund tracks the SSGA Small Cap Index, which includes companies that together add up to only 10% of the stock market's value. (Most of the stock market's value comes from small a number of really large companies. The 500 companies in theS&P 500make up about 80% of all stock market value in the United States.)

With nearly 2,100 holdings, this market-cap weighted index is roughly comparable to the Russell 2000, which is generally regarded as the small-cap index. Note that because it only includes companies with a minimum market capitalization of $100 million, this SPDR ETF has slightly less exposure (27.5% of the fund) to micro-caps compared to the Russell 2000 index (31.6% of the index), according to Morningstar data. The Russell 2000 has a minimum market cap of $30 million, so it ventures further into micro-cap territory than other small-cap indexes.

SPDR Portfolio Mid Cap ETF

Though it carries the "mid cap" label, this fund isn't a truemid-cap ETF. It tracks theS&P 1000 index, which includes companies in S&P's MidCap 400 and SmallCap 600 indexes. Therefore, it tilts further into smaller stocks, as the average company in the index has a market cap of $3.75 billion compared to the Russell Mid Cap Index's average of $12.6 billion, based on Morningstar data.

With this in mind, investors who use this fund to get mid-cap stock exposure may want to dial down their investments in other small-cap funds, or use this fund as a way to get mid-cap and small-cap exposure in portfolio.

The table below compares the allocations of the total stock market, mid-cap, and small-cap ETFs in this article by market cap. Note that the total stock market ETF is more of a large-cap fund, while the small-cap fund obviously tilts more toward smaller companies. This mid-cap fund roughly fills the void between the largest and smallest stock ETFs.

Market Cap

SPDR Portfolio Total Stock Market ETF

SPDR Portfolio Mid Cap ETF

SPDR Portfolio Small Cap ETF

Giant

41.4%

0%

0%

Large

30.6%

0.2%

0.1%

Medium

19%

42.7%

5.9%

Small

6.6%

45.3%

66.4%

Micro

2.4%

11.8%

27.5%

Data source: Morningstar.com.

SPDR Portfolio World ex-US ETF

This fund is a fine fit for people looking for international stock exposure. It tracks theS&P Developed Ex-U.S. BMI index, which is includes roughly 1,600 stocks all around the world. Major country exposures include Japan, United Kingdom, and France at roughly 23%, 15%, and 8% of the fund, respectively.

International stocks doesn't mean unrecognizable companies. The fund's three largest holdings (Nestle S.A., Samsung Electronics, and Novartis) are companies with which most investors have some familiarity. Because this fund is market-cap weighted, it invests the most in the largest companies. The weighted average market cap of its holdings was $44.6 billion, putting it well into large-cap territory.

This fund is best compared toVanguard FTSE Developed Markets ETF,which offers similar country-level exposure at a low cost, and was previously on TD Ameritrade's commission-free ETF list.

SPDR Portfolio Emerging Markets ETF

When it comes to emerging markets, the SPDR Portfolio Emerging Markets ETF is a low-cost, diversified fund that offers exposure to more than 1,200 stocks that are listed and incorporated in emerging market economies. The largest country exposures are China, Taiwan, and India at 33%, 14%, and 12% of the portfolio, respectively.

Its market-cap weighting mechanism give this fund a bias toward large Chinese stocks including Tencent and Alibaba, which together make up more than 9% of the portfolio. South African media company Naspers rounds out the list of its top three holdings.

This fund is most closely comparable toSchwab Emerging Markets Equity ETFandVanguard FTSE Emerging Markets ETF. The latter fund was previously on TD Ameritrade's list of commission-free ETFs prior to the changes made in 2017.

SPDR Portfolio Aggregate Bond ETF

This fund generally seeks to track the performance of the Bloomberg Barclays U.S. Aggregate Bondindex, a bond index for high-quality government and corporate bonds. This fund acts as a good one-stop shop for bond exposure, as it roughly matches the composition of the bond market.

Bonds rated AAAmake up roughly 70% of assets, but the fund boasts a yield of approximately 3%, due to the fact it invests in bonds with an effective duration of six years. As a result, this bond fund has some interest rate exposure, as a 1% increase or decrease in rates will result in a 6% decrease or increase in the fund's value, calculated by multiplying the interest rate change in percentage points by its effective duration.

The premise for investing in this ETF is simple: It gives you broad exposure to a mix of super-safe bonds at an extraordinarily low price of just 0.04% per year, making it a good "set it and forget it" bond ETF.

SPDR Portfolio S&P 500 High Dividend ETF

Investors who want to add a little yield to their stock portfolio should take a look at this ETF. The ETF tracks the S&P 500 High Dividend index, which includes the 80 highest-yielding stocks in the S&P 500. All holdings are equally weighted, so all stocks make up 1.25% of the fund when it is rebalanced twice per year in January and July.

Note that because this fund selects stocks based on yield alone, it has a natural bias toward real estate investment trusts (REITs) and utilities, which make up approximately 22% and 19% of the fund, respectively. This sector composition results in an ETF that yields more than twice as much as (3.8% vs. 1.8%). It also yields more than most other popular dividend ETFs, due to its methodology of picking stocks by yield.

Using ETFs the smart way

Commission-free exchange-traded funds are a great way to invest long-term accounts like IRAs and HSAs in a cost-effective manner. But investors should be careful when placing trades. Many of the ETFs on this list are relatively thinly traded, as only a few thousand shares may trade hands on a given day.

Investors who use these funds in their portfolios should be sure to buy or sell shares with limit orders rather than market orders, to ensure that their transaction goes through at a reasonable price. (Market orders are used to buy a stock or ETF immediately at the prevailing price, and such orders could result in overpaying for thinly traded ETFs.)

That said, a combination of no commissions and low expense ratios makes these seven funds attractive for investors who plan to use TD Ameritrade to set up a long-term buy-and-hold portfolio in 2018.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Jordan Wathen has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AMZN, AAPL, NSRGY, and TCEHY. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.

7 of the Best Commission-Free ETFs at TD Ameritrade in 2018 | The Motley Fool (2024)

FAQs

Which ETFs are commission free on TD Ameritrade? ›

Commission-Free ETFs on TD Ameritrade
Symbol SymbolETF Name ETF NameCommission Free Commission Free
IVViShares Core S&P 500 ETF3 Platforms
VTIVanguard Total Stock Market ETF2 Platforms
VEAVanguard FTSE Developed Markets ETF2 Platforms
VUGVanguard Growth ETF2 Platforms
4 more rows

Which ETF has the best 10 year return? ›

The best-performing ETF in the last 10 years was VanEck Semiconductor ETF (SMH).

What is the best ETF to buy and hold? ›

7 Best Long-Term ETFs to Buy and Hold
ETFAssets Under Management10-Year Annualized Return
iShares Core S&P Mid-Cap ETF (IJH)$85 billion9.9%
Invesco QQQ Trust (QQQ)$259 billion18.6%
Vanguard High Dividend Yield ETF (VYM)$55 billion10.1%
Vanguard Total International Stock ETF (VXUS)$69 billion4.5%
3 more rows
3 days ago

Which ETF is best for long-term investment? ›

6 Best Performing ETFs last 10 years in India
  • Nippon India ETF Nifty 50 BeES. 102.38% 707.9%
  • Nippon India ETF Gold BeES. 99.57% 467.4%
  • Invesco India Gold ETF. 107.00% 288.0%
  • UTI S&P BSE Sensex ETF. 95.56% 200.8%
  • BHARAT 22 ETF. 161.65% 172.2%
  • Nippon India ETF PSU Bank BeES.
Mar 27, 2024

Does TD Ameritrade charge fees for Vanguard ETFs? ›

Both Vanguard and TD Ameritrade have a $0 account minimum. Additionally, they allow for $0 fees for trading stocks and exchange-traded funds (ETF). However, outside of these necessary trades, their fee schedules are different.

When did TD Ameritrade Go commission-free? ›

Several hours following Charles Schwab's announcement that they were eliminating trading fees for stocks, ETFs and base options trades, TD Ameritrade announced that they, too, were chopping fees, effective October 3, 2019.

Which ETF gives the highest return? ›

100 Highest 5 Year ETF Returns
SymbolName5-Year Return
URAGlobal X Uranium ETF22.23%
XLKTechnology Select Sector SPDR Fund21.43%
XHBSPDR S&P Homebuilders ETF21.09%
IYWiShares U.S. Technology ETF20.92%
93 more rows

Where to invest to get 10% annual return? ›

Summary of the best investments with 10% ROI
  • Private credit.
  • Individual stocks.
  • Real estate.
  • Fine art.
  • Debt.
  • A business.
  • Private startups.
  • Cryptocurrencies.
Jan 4, 2024

What is the highest performing ETF in the last 10 years? ›

Best Performing ETFs Over the Last 10 Years
TickerETF Name
1GBTCGrayscale Bitcoin Trust
2SMHVanEck Semiconductors ETF
3XLKTechnology Select Sector SPDR Fund
4IXNiShares Global Tech ETF
1 more row
Apr 16, 2024

What is the safest ETF to buy? ›

Broad-market funds are one of the safest types of ETF. With the right strategy, you could potentially earn hundreds of thousands of dollars or more.

Is there a best time of day to buy ETFs? ›

Generally speaking, the best time to trade ETFs is closer to the middle of the trading day rather than the beginning or end.

How many ETFs should I own? ›

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

Are there ETFs with no fees? ›

In a bid to attract cost-conscious investors, some ETF providers have begun to offer products with a 0% expense ratio. Yes, you read that correctly—these ETFs come without any management fees, making them essentially free to invest in (aside from the bid-ask spread and any other trading costs).

Does TD have commission-free trading? ›

Get 50 commission-free trades a year.

What trades are free on TD Ameritrade? ›

$0 commission applies to online U.S. exchange-listed stocks and ETFs. A $6.95 commission applies to online trades of over-the-counter (OTC) stocks which includes stocks not listed on a U.S. exchange. Orders executed in multiple lots on the same trading day will be charged a single commission.

Are Vanguard ETFs commission-free? ›

You'll never pay a commission to buy or sell Vanguard mutual funds or ETFs in your Vanguard Brokerage Account.

Top Articles
Latest Posts
Article information

Author: Mr. See Jast

Last Updated:

Views: 5919

Rating: 4.4 / 5 (75 voted)

Reviews: 82% of readers found this page helpful

Author information

Name: Mr. See Jast

Birthday: 1999-07-30

Address: 8409 Megan Mountain, New Mathew, MT 44997-8193

Phone: +5023589614038

Job: Chief Executive

Hobby: Leather crafting, Flag Football, Candle making, Flying, Poi, Gunsmithing, Swimming

Introduction: My name is Mr. See Jast, I am a open, jolly, gorgeous, courageous, inexpensive, friendly, homely person who loves writing and wants to share my knowledge and understanding with you.