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In what appears to be the beginning of a price war that will help small investors, Fidelity Investments has followed Charles Schwab's lead, and has slashed the cost of buying stocks and exchange traded funds.
Fidelity has set a $7.95 commission on trades; even for small investors who rarely buy or sell stocks or funds. Further, the firm is offering 25 iShares exchange traded funds free of any commission. The free ETF program covers the key indexes that allow individuals to assemble a diversified portfolio -- ranging from large and small U.S. stocks to international stocks.
For small customers, who do little trading, the new $7.95 commission will cut trading costs by about 60 percent. Previously, commissions were as high as $19.95. To take advantage of the new commissions, individuals must trade online at Fidelity.com, and have a minimum of $2,500 in taxable accounts, IRAs or other retirement accounts in which they trade. The new prices begin Wednesday.
Although some firms, such as Scottrade, charge lower commissions, the free ETFs are unique.
Schwab, which lowered its commissions for all customers to $8.95 recently, offers some ETFs free, but they are the company's own product rather than popular iShares funds.
