Exchange-Traded Funds (ETFs) have grown in popularity due to their flexibility, low cost, and diversification benefits. Among the most widely used ETFs are iShares funds, which offer exposure to equities, bonds, and commodities worldwide.
If you're an investor looking to buy iShares ETFs, understanding how to do so through major brokerage platforms like Schwab and Fidelity can make the process seamless, cost-effective, and aligned with your financial goals. This guide provides a comprehensive overview of the steps, considerations, and expert insights for purchasing iShares ETFs through these two leading brokerages.
Understanding iShares ETFs
iShares is a family of ETFs managed by BlackRock, one of the world’s largest asset managers. iShares ETFs cover a broad range of asset classes, sectors, and geographies. Key benefits include:
Diversification: Access to hundreds or thousands of securities in a single trade.
Liquidity: Most iShares ETFs trade on major U.S. exchanges and have tight bid-ask spreads.
Low Costs: Expense ratios are generally lower than mutual funds.
Transparency: Holdings are published daily.
Popular iShares ETFs include:
iShares Core S&P 500 ETF (IVV): U.S. large-cap exposure.
iShares MSCI EAFE ETF (EFA): International developed markets.
iShares Core U.S. Aggregate Bond ETF (AGG): Broad U.S. bond market.
iShares Russell 2000 ETF (IWM): U.S. small-cap exposure.
Choosing Between Schwab and Fidelity
Both Schwab and Fidelity are reputable brokerages with competitive pricing and user-friendly platforms. Choosing between them may depend on your account type, fee considerations, and personal preference.
Charles Schwab
Commission-Free Trades: Schwab offers commission-free online trades for U.S.-listed ETFs.
Platform Access: Users can trade via web, mobile app, or desktop platform.
Research Tools: Schwab provides analyst reports, ETF screeners, and historical performance data.
Account Types: Schwab supports individual, joint, IRA, 401(k) rollover, and custodial accounts.
Fidelity
Commission-Free Trades: Fidelity also offers zero-commission trades on U.S.-listed ETFs.
Trading Platforms: Fidelity Active Trader Pro, mobile app, and web platform.
Research Tools: Fidelity provides ETF comparison tools, ratings, and reports.
Account Types: Fidelity offers a similar range of account types, including IRAs and brokerage accounts.
Both brokerages provide access to all major iShares ETFs, so investors should consider additional factors such as account integration, ease of use, and customer support.
Steps to Buy iShares ETFs Through Schwab
1. Open an Account
Visit Schwab’s website.
Choose the account type (Individual, Joint, IRA, etc.).
Provide personal information, including Social Security number, address, and employment details.
Fund your account via bank transfer, wire transfer, or check deposit.
2. Research ETFs
Use Schwab’s ETF screener to filter iShares ETFs based on asset class, expense ratio, dividend yield, and performance.
Review prospectuses and holdings for transparency.
Consider liquidity and average daily volume for efficient trading.
3. Place a Trade
Log in to your Schwab account.
Navigate to the “Trade” tab.
Enter the ETF ticker symbol (e.g., AGG, IVV, EFA).
Choose order type:
Market Order: Executes immediately at the current market price.
Limit Order: Executes at a specified price or better.
Stop Order: Executes when the ETF reaches a specified price.
Enter the number of shares.
Review order details and submit.
4. Confirm the Trade
Schwab will display a confirmation screen showing the executed price, total cost, and fees (if any).
The trade settles in two business days for most ETFs (T+2).
5. Monitor Your Investment
Use Schwab’s portfolio dashboard to track performance.
Set alerts for price changes or news updates.
Rebalance your portfolio periodically based on your investment strategy.
Steps to Buy iShares ETFs Through Fidelity
1. Open an Account
Go to Fidelity’s website.
Select account type (Individual, Joint, IRA, etc.).
Enter personal details and fund your account.
2. Research ETFs
Fidelity offers an ETF screener to compare iShares ETFs.
Evaluate factors such as expense ratios, past performance, dividend distributions, and holdings.
Check historical performance charts and analyst ratings.
3. Place a Trade
Log in to Fidelity.
Click “Trade” and select “Stocks/ETFs.”
Enter the ETF ticker (e.g., AGG, IVV, IWM).
Choose order type (market, limit, or stop order).
Specify the number of shares.
Review and submit your order.
4. Confirm the Trade
Fidelity provides a trade confirmation detailing the price, total amount, and settlement date.
Trades settle on T+2.
5. Monitor Your Investment
Use Fidelity’s portfolio view to track returns, dividends, and allocations.
Set up alerts and watchlists for ETF performance.
Rebalance your portfolio as needed.
Factors to Consider When Buying iShares ETFs
1. Expense Ratios
Lower expense ratios mean more of your money is invested rather than spent on fees. iShares core ETFs like AGG and IVV typically have very low expense ratios (0.03%–0.09%).
2. Liquidity and Trading Volume
Higher liquidity ensures tighter bid-ask spreads and easier execution. ETFs with higher daily trading volume are generally preferred, especially for large orders.
3. Dividend Yield
Bond ETFs like AGG pay regular interest.
Equity ETFs like IVV pay dividends quarterly.
Consider how distributions fit into your income strategy.
4. Tax Considerations
ETFs are generally tax-efficient.
Consider holding taxable bonds or dividend-paying equity ETFs in tax-advantaged accounts to minimize liabilities.
5. Investment Goals
Define your risk tolerance, time horizon, and asset allocation.
Use iShares ETFs to fill gaps in domestic equities, international equities, or fixed-income exposure.
Tips for Using Schwab and Fidelity Effectively
Research Tools
Use screeners to filter ETFs by sector, geography, or asset type.
Compare performance, yield, and expense ratios.
Check historical volatility and beta to assess risk.
Automated Investing
Schwab Intelligent Portfolios and Fidelity Go offer robo-advisor services that may include iShares ETFs.
Automated rebalancing helps maintain desired asset allocation.
Order Strategies
Dollar-Cost Averaging: Invest fixed amounts regularly to reduce market timing risk.
Limit Orders: Ensure you don’t overpay for high-volatility ETFs.
Dividend Reinvestment Plans (DRIPs): Automatically reinvest dividends for compounding growth.
Customer Support
Both Schwab and Fidelity provide extensive support via phone, chat, and email.
Use support for technical issues or clarification on trading rules.
Comparing Schwab vs. Fidelity for iShares ETFs
| Feature | Schwab | Fidelity |
|---|---|---|
| Commission-Free ETF Trades | Yes | Yes |
| ETF Screener | Yes | Yes |
| Research Reports | Yes | Yes |
| Mobile App | Yes | Yes |
| DRIP Options | Yes | Yes |
| Robo-Advisors | Schwab Intelligent Portfolios | Fidelity Go |
| Customer Support | 24/7 Phone & Chat | 24/7 Phone & Chat |
Insight: Both platforms are highly competitive. Investors may prefer Schwab for integration with Schwab bank accounts or Fidelity for access to Active Trader Pro for advanced charting.
Common Mistakes to Avoid
Ignoring Expense Ratios: Even small differences compound over time.
Neglecting Liquidity: Low-volume ETFs may be harder to sell quickly.
Overlooking Tax Implications: Understand capital gains and dividend taxes.
Failing to Rebalance: Portfolio drift can lead to unintended risk exposure.
Chasing Performance: Past returns do not guarantee future results.
Expert Insights
Morningstar Analysts: Recommend focusing on core iShares ETFs like AGG, IVV, and IWM for long-term investors.
BlackRock Research: Suggests considering global diversification and sector tilts when adding iShares ETFs.
Financial Planners: Advise combining ETFs with traditional assets to maintain balanced portfolios.
Conclusion
Buying iShares ETFs through Schwab or Fidelity is straightforward, thanks to commission-free trades, intuitive platforms, and comprehensive research tools. By understanding the process—from account setup to ETF selection, trade execution, and portfolio monitoring—investors can efficiently add iShares ETFs to their portfolios.
Key considerations include expense ratios, liquidity, dividend yield, tax efficiency, and alignment with investment goals. Leveraging the features and tools of Schwab or Fidelity ensures that you can invest in iShares ETFs effectively while minimizing costs and maximizing long-term growth potential.
Investors should also consult with a financial advisor to ensure that their ETF selections fit within their broader financial plan, especially when managing tax implications, retirement planning, and risk management.