Exchange-traded funds were already a low-cost way to invest. Now large brokerages have slashed trading commissions on hundreds of ETFs, making it possible to build a diversified portfolio with almost no trading costs.

That sounds like an investor’s dream, but the new “free” landscape comes with trade-offs that deserve careful attention.

Trading Commissions Vanish

Major discount brokers now let investors buy and sell large menus of ETFs online without paying standard online trade commissions. Firms such as Schwab, Fidelity and Vanguard each offer hundreds—sometimes thousands—of funds that can be traded with a $0 commission on eligible online trades, dramatically lowering the friction of frequent contributions and rebalancing.

For investors putting in a few hundred dollars each month, even a modest commission on every trade used to eat into returns. Removing those commissions makes ETFs more competitive with many no-load mutual funds, which can often be purchased without a trade commission but may carry higher ongoing expense ratios.

Free Trading Explained

Under expanded programs, brokers curate lists of eligible ETFs from multiple fund providers. As long as trades are placed online and meet basic rules, investors pay no standard commission. Outside those lists, regular stock or ETF commissions may still apply, so it can help to stay within the commission-free lineup when practical.

Traditional mutual funds are usually purchased with no trade charge but can have minimum investments of several hundred or even several thousand dollars. In contrast, ETFs can often be purchased one share at a time, and many platforms allow fractional shares, making it simple to invest small amounts regularly without worrying about minimums.

Costs Behind “Free”

Zero-commission trading does not mean the brokerage is working for charity. Firms still earn money from other services and features surrounding those accounts. Common revenue sources include higher-fee funds, advisory programs, cash sweep products with relatively low interest rates and margin lending.

Investors who chase every new “smart beta” or actively managed ETF simply because it trades commission-free may end up in funds with much higher expense ratios than basic index ETFs. A broad market fund might charge an expense ratio of 0.03%, while a complex strategy on the same commission-free list could cost ten or twenty times as much.

Trading Risks

Unlike mutual funds, which always transact at end-of-day net asset value, ETFs trade throughout the day at market prices. In normal conditions, those prices stay very close to the value of the underlying holdings, but during market stress the gap can widen briefly, creating unexpected execution prices for careless traders.

Using market orders can be risky when prices are jumping around or when an ETF is thinly traded. A better approach is to use limit orders, specifying the maximum price you are willing to pay when buying or the minimum price you will accept when selling. This simple habit can help avoid unpleasant surprises during sudden price swings.

Too Many Choices

The explosion of commission-free options means investors are now confronted with menus of hundreds of ETFs, many focused on narrow themes, factor tilts or complex strategies. It is easy to feel that a portfolio needs a specialized fund for every idea, from covered calls to multifactor screens.

Yet every layer of complexity typically comes with higher ongoing costs and more moving parts to monitor. Over time, a handful of low-cost, broadly diversified funds will normally serve most investors better than a patchwork of niche products that are hard to understand and easy to abandon at the wrong time.

Simple Portfolio Blueprint

For many long-term investors, an ETF-based portfolio can be built around just a few core holdings. A total domestic stock market ETF, a total international stock ETF and a broad bond market ETF, all with low expense ratios, can cover thousands of securities across regions and asset classes.

Once those anchors are in place, rebalancing periodically keeps the mix aligned with risk tolerance. Commission-free trading makes it easier to nudge the portfolio back to target weights without worrying about small trade costs, especially for investors who contribute monthly or quarterly.

If more refinement is desired, one or two additional ETFs can be added thoughtfully, such as a real estate fund or a value or small-cap tilt. The key is knowing exactly why each fund is in the portfolio and what role it plays, rather than accumulating funds simply because they are available at no trade cost.

Staying Cost Conscious

Even when commissions are zero, expense ratios still matter. A difference of a few tenths of a percent per year can compound into thousands of dollars over a long investing lifetime. Before buying any ETF, compare its fee to that of a broad, low-cost alternative offering similar exposure.

Benjamin Graham, an economist and investor, writes, “The investor’s chief problem—and even his worst enemy—is likely to be himself.” This reminder fits the commission-free era: low trading costs can tempt investors into unnecessary activity, chasing short-term moves instead of sticking to a written plan.

Also pay attention to how often trades are made. Commission-free status can tempt some investors into unnecessary activity, chasing short-term moves instead of sticking to a written plan. Frequent trading increases the risk of buying high and selling low, eroding the very benefits that low-cost ETFs are meant to provide.

Conclusion

Commission-free ETFs have made it easier than ever to build a diversified portfolio with modest sums and minimal friction. Used wisely, they can support long-term investing built on simplicity, low costs, and periodic rebalancing. A practical next step is to write down a target mix, choose a small set of broad, low-fee ETFs, and set a simple contribution and rebalancing schedule that keeps decisions consistent over time.