ETF Brokers Explained

Graph painted with a marker
What is the best way to multiply or get good returns for your money? The best and safest strategy probably is to put it to work or in other words invest them. If you are already trading in stocks and saving money on different platforms, you may think it enough. However, have you thought about diversifying your investments with the help of ETF Brokers? That is one way to ensure consistent returns through any upheavals in the market. This is where an ETF or Exchange Traded Fund comes into the picture. If you are new to ETF, then read on to learn more about everything related to ETF brokers.

What is an ETF?

How do you decide to buy a stock? You look at the performance and analyze it to decide if it is worth investing in the stock. What if you did not have time to do so? An ideal way to invest would be to invest in an ETF. You can define it as a basket of securities with its shares being sold on an exchange. It is different from Mutual Funds in two major ways:
  • ETF shares are traded throughout the day via platforms like ETF brokers UK, unlike mutual funds.
  • ETFs are managed passively while mutual funds are actively managed.
ETFs are a great way to invest because they offer the best of both asset classes, the diversification benefits of mutual funds, and the ease of trading in stocks. For any investor, buying ETFs is an easy and alternate way to buy individual stocks without extensive research. ETFs are bundles of stocks and you can buy a part of. If an ETF has 30 stocks, you can buy 5% of that ETF, which means you would be the owner of 5% of all the stocks in the ETF. This is what makes ETFs so popular and are part of many portfolios.

How do ETFs work?

The fund provider owns the assets, which are the stocks. The fund manager will design the fund to track the performance of the stocks and then sell shares of the fund to investors. Even if an investor does not own the underlying assets, they still share dividend payments or reinvestments. These steps can explain the workings of an ETF more simply.
  • The first step is creating a basket with a variety of assets such as stocks, bonds,
  • currencies, or commodities.
  • Now it is offered to investors, and they can buy shares of this fund.
  • The fund is traded on an exchange throughout the day, and buyers and sellers trade their share of the fund.
For investors who want the high returns of the stock market but do not want to risk the possibility of stocks going downside, ETFs present a unique opportunity.

ETF and Brokerage

Can you invest in ETFs directly? Unfortunately, that is not possible. ETFs are sold and bought on the secondary market. If you decide to invest in ETFs, you will need to open a brokerage account. There are big and small brokerage companies offering ETF investing options. The options are so many that they can confuse you. Here are a few tips which can help you before starting to trade in ETFs.
  • Commission: many ETF brokers offer free trading or charge very low trading commissions. Look at any hidden charges that can increase the overall cost.
  • ETF selection: some brokerages offer between 150 and 200 ETFs to choose from. The bigger the variety, the better it is for investors.
  • Research: the brokerage firms should offer enough data about the ETF they are offering. Specific information about the origin, strategy, aims, and past performance must be easily available to the investors.
  • Compare: compare the past performance of similar, competing ETFs to get a better idea. A proven track record of at least 3 years of good performance should be a good indication.
  • Level Of Liquidity: you need to make sure that the fund you choose has a high level of liquidity. The actual volume of trading will give you a good indication of how liquid the fund is.

How do you trade ETFs?

Like we mentioned earlier, trading ETFs directly is not possible. Investors can trade either through traditional brokers or through online brokers. You can also day trade ETFs, and many of them are as liquid as stocks. Because ETFs are traded like stocks, they can also be shorted. When a trader sells borrowed shares intending to buy them when available at a cheaper rate, it is known as short selling. ETFs also payout dividends attached to the stocks in their basket. Usually, quarterly payments of the dividends are made to the investors. Not all dividend-based funds are equal. The difference between funds can be huge. So, it is essential to understand fully before choosing any ETF .

The Best ETF Brokers

If you are looking for a broker to help you in trading ETFs, look at the list here. These are the best ETF brokers and quite well known for their excellent track record.
  1. Charles Schwab. This firm remains at the top of most lists when it comes to ETF brokers. It offers a simple and modern style of investing. They are well known for helping individual investors reach their full potential. It not only makes trading accessible to all but also offers more than 245 commission-free ETFs to choose from. 
  2. ETrade. This firm provides easy-to-use tools and advanced platforms for investors to trade on. They offer commission-free stocks, options, mutual funds, apart from the ETFs. So, it can be a one-stop-shop for your financial investments. You get a valuable ETF knowledge section that provides a lot of guidance and quality research. 
  3. TD Ameritrade. Another broker firm that offers a great trading experience to investors. It provides mind-boggling 2300+ commission-free ETFs. You also get the right tools and research to understand the process better. It caters to both new and experienced ETF investors and gives a complete ETF investment experience.


There is no one-size-fits-all solution to finding the perfect ETF broker. Even a low-risk investment option like ETF can seem complex to many. It mainly depends on your circumstances and what your priorities are. If you want to invest in ETFs, you will need a broker who can guide you, and help you reap benefits.