Updated October 2019. TD Ameritrade has announced $0 commissions on online stock, ETF and option trades. Applies to U.S. exchange-listed stocks, ETFs, and options. A $0.65 per contract fee applies for options trades, with no exercise or assignment fees. No more worrying about looking through the free ETF list, because they are all free!
Original post:
TD Ameritrade has made several changes to their commission-free ETF trading program over the years. I am not an active trader, so that is the focus of this post. Most recently, they made an important shift from offering fewer, popular ETFs to offering a higher number of niche ETFs. In addition, TDA also has various promotions if you do decide to move over some assets.
Commission-free ETFs. Here is the current list of 300+ commission-free ETFs. ETFs held less than 30 days will be charged a short-term trading fee of $13.90. ETFs on the commission-free list cannot be used as collateral for a margin loan, nor can they be included in margin equity for 30 days after purchase.
(For posterity, here is the old ETF list [pdf] which ended in November 2017. These ETFs were chosen by 3rd-party Morningstar to be the best 100 ETFs from the biggest providers (Vanguard and iShares) and with the highest assets, highest trading volume, and lowest expense ratios.)
Current providers include AGFiQ QuantShares, First Trust Portfolios, iShares ETFs, J.P. Morgan Asset Management, PowerShares by Invesco, ProShares, State Street Global Advisors’ SPDR, and WisdomTree Investments.
The bad. Unfortunately, this move also puts TD Ameritrade more firmly into the pack of brokerage with ETF/mutual fund “supermarkets” based on who will pay them for shelf placement:
TD Ameritrade receives remuneration from certain ETFs (exchange-traded funds) that participate in the commission-free ETF program for shareholder, administrative and/or other services, generally ranging from the equivalent of approximately 15% to 30% of the ETFs’ annual net operating expense ratio.
This is a common arrangement and you’ll see the same thing at Schwab and Fidelity, but in my opinion you end up a bigger list of less-attractive products. They also tend to have higher expense ratios. In my opinion, the quantity has gone up, but the quality has gone down. Here are some examples that I’ve never even heard of before:
- First Trust Alternative Absolute Return Strategy ETF
- iShares Fallen Angels USD Bond ETF
- PowerShares Optimum Yield Diversified Commodity Strategy No K-1 Portfolio
- QuantShares US Market Neutral Anti-Beta Fund
The good. To be fair, there are still some iShares Core ETFs (though not the broadest ones) and some SPDR ETFs that cover broad indexes (though with lower asset size and trading volume). There are maybe 15-20 ETFs that I could see as part of a low-cost, long-term portfolio. A few examples:
- SPDR Dow Jones Total Market (SPTM)
- SPDR S&P World ex-US (SPDW)
- SPDR Lehman Aggregate Bond (SPAB)
- iShares 0-5 Year TIPS Bond ETF (STIP)
- iShares Core International Aggregate Bond ETF (IAGG)
- iShares Core U.S. REIT ETF (USRT)
- iShares Global REIT ETF (REET)
However, I still don’t like that they changed it. You might have built up a position with $0 trades, and now it costs $6.95 per trade to buy more. You can try and switch to the closest approximate ETF, but what about next time they shake up the list? TD Ameritrade won “#1 for Long-Term Investing” in the Barron’s magazine 2018 rankings. I don’t know if long-term investors like to switch holdings every 7 years. Maybe the niche ETFs are a better draw for TDA’s target audience.
The competition. If you want to construct a low-cost, broadly-indexed ETF portfolio, I would compare with the offerings from Schwab, Vanguard, and Fidelity. None of those are an independent brokerage like TD Ameritrade, but they do offer commission-free trades on low-cost, broad ETFs. You could also look into the free trade offers from Bank of America ($50k+ in relationship assets), Robinhood (free share bonus), WeBull (free share bonus), and Firstrade.
The Best Credit Card Bonus Offers – November 2024
Big List of Free Stocks from Brokerage Apps
Best Interest Rates on Cash - November 2024
Free Credit Scores x 3 + Free Credit Monitoring
Best No Fee 0% APR Balance Transfer Offers
Little-Known Cellular Data Plans That Can Save Big Money
How To Haggle Your Cable or Direct TV Bill
Big List of Free Consumer Data Reports (Credit, Rent, Work)
The new list is 90% garbage. They are mostly low volume and hard to trade oddballs. I’ve tried niche ETFs in the past and won’t do it again. Some of my ETFs even got dissolved and I ended up with cash to reinvest. High volume = health and liquidity of the ETF.
The conspicuous avoidance of mainstream ETFs means they want the marketing bullet “free” but to make more money on trades. It’s unfortunate as my Scottrade accounts are being rolled over to TD Ameritrade — I thought it was a good company.
Wait and see. Sticking with Vanguard for now…
I found out the bid ask spread on these new thinly traded etf’s are far wider with the old Vanguard etf’s. I bought SPYV this morning. SPYV was an 18 cent bid/ask spread this morning, when ends up being an extra 0.14%. I am thinking I am far better by paying the $25 commissions to goto mutual funds instead.
I think that you may like the following low cost ETFs
SPTM – US Total stock market, mer of 0.03%
SPDW – World Ex US with Mer of 0.04%
Thanks, I have added those to the list, along with their US total bond ETF.
Hi Jonathan,
Do you use TDA yourself?
I have an open and active account and have used them more heavily in the past, but currently I only hold a small portion of my money there.
What are your current thoughts on TD vs Fidelity? Recently saw a post from you praising Fidelity Customer service but wanted to see your overall impression of TD vs Fidelity.
This is certainly sad news that TD removed Vanguard ETFs.
This is why I check this blog every day. I had not seen this information. Looks like a mistake to me. Vanguard is the only reason to use Ameritrade. Or it was my only reason. Without the free Vanguard accounts, Schwab and Fidelity are much better options.
I first moved all of my investments (403b, 457, traditional IRA, Roth IRA, and brokerage accounts) to TD Ameritrade in May 2012 when I found out that they offered T Rowe Price mutual funds and many Vanguard ETFs commission free. Now, just a little over 5 years have passed, and they have changed the rules in the middle of the game, so to speak. So much for long-term investing and counting on one’s new brokerage house to at least keep policies concerning transaction fees in place, if not enhance them, but certainly not retract them. I would have hoped that TD Ameritrade might have at least considered grandfathering customers who had bought into the old list of 100 commission-free ETFs and allowed them to continue to sell any of these funds commission-free even beyond November 21, 2017. I, for one, find it very difficult to find a good equivalent ETF on their new list to match VYM. As Jonathan has said, the “old” list of 100 ETFs were the most useful for long-term investors to build an ETF portfolio. The “new” list of 296 ETFs are mostly niche ETFs. TD Ameritrade now touts 296 no-fee ETFs versus 100 from before, but let’s not forget about what’s most important…quantity or quality?
It’s hard to imagine a broker could triple the number of commission-free ETFs it offers and come up with an inferior platform. TD Ameritrade made it look easy.
I assume you can buy t-bills through Ameridtrade? I’m thinking it’d be worthwile to start account, get bonus, and just buy t-bills for the duration money needs to be there
That would probably work, or just transfer over some ETFs that you are already holding at another brokerage firm and then transfer them out again if you don’t like it there.