Roughly $2 trillion worth of assets are now held in exchange-traded funds worldwide.

Costs are low, because the funds typically track a benchmark index and turnover of stocks in their baskets of holdings is not great.

But the most fundamental difference with mutual funds-which still dominate the field with $13 trillion in assets-is that shares of these funds trade like shares of stock. On exchanges. At any time of day, as long as the market is open.

But, like shares of stock, that has meant paying commissions on trades. Until recently.

Vanguard Group, TD Ameritrade, E*TRADE, Charles Schwab and Fidelity Investments all now offer commission-free purchases of shares in exchange-traded funds.

But Fidelity, perhaps surprisingly, raised eyebrows in March when it said it would charge a redemption fee on exchange-traded funds it was marketing from BlackRock's iShares product line.

In certain cases, investors would pay a $7.95 fee if they sold their shares in an ETF within 30 days. Investment advisors would pay that fee if they sold shares off within 60 days.

That affects what Lipper head of research services Tom Roseen calls an ETF's "tradeability.'' In effect, it means there's a cost incurred in getting rid of shares that's not there in acquiring them.

The short-term trading fee nets out to a total commission of under $10 for buying and selling shares, Fidelity notes. That is significantly lower than what competitors charge.

Both TD Ameritrade and E*TRADE, for instance, have similar charges, when shares in their commission-free ETF programs are not held for 30 days.

TD Ameritrade charges $19.99 to sell the shares. E*TRADE charges roughly the same amount.

Charging "$7.95 is not that big of a deal,'' contends Roseen. "If I really need to get out, $7.95 is not going to bother me."

Closed-end mutual funds, by comparison, he notes, often have very high management fees. That "front-end load" is capped at 8.5% by the Financial Industry Regulatory Authority. But even if it's 2% or 3%, that's costly by comparison, said Roseen. On a $10,000 investment, its $200 or $300. Far more than the $7.95 fee to get out of a commission-free ETF.

What the commission-free ETFs are trying to do, really, is compete with "no-load" mutual funds. So no part of a mainstream investor's investment is swallowed up front, at all.

And the fund can pull in more assets, notes Michael Rawson, ETF analyst for Morningstar, the fund research and rating firm.

The commission-free programs, he notes, are not aimed at the outfits that are most concerned about trading fees. High-frequency traders, for instance, already have worked out agreements that limit their fees to a few pennies-if that-a share, on the buying or selling of exchange-traded funds.

More specifically targeted by the short-term trading fees are likely to be individuals that have come to be called "active" traders. Those who "churn" shares in a fund. In the early days of online trading, they were called "day" traders.

Fund companies such as Fidelity or Vanguard are "not putting these programs out there for day traders,'' said Rawson. "They're putting these programs out there to collect assets.''

"We think having the 60-day short-term sell commission positions these ETF investments for a longer-term holding period,'' said Michael Durbin, president of Fidelity Institutional Wealth Services. ''If advisors wants to trade more frequently, they are only paying $7.95 for the sell, which nets out to $4 per 'round trip' trade.''

In the Fidelity case, that means the number of commission-free iShares ETFs got more than doubled, from 30 to 65. The average expense ratio? Roughly one-third of a cent against assets in the fund, each year. That 34 basis points a share average compares to an industry average of 61 bps.

Fidelity's chief rival in mutual fund marketing, Vanguard, also offers 65 commission-free ETFs, at this point. A couple of international bond funds are about to be added, according to public relations principal John Woerth, bringing the total to 67.

So far, Vanguard has avoided any holding period fees. Its customers can buy or sell its collection of commission-free ETFs, at any time, without a trading fee.

For its part, TD Ameritrade now offers commission-free acquisition of 101 ETFs, including shares in funds from iShares, Vanguard, State Street Global Advisors, Barclays Capital, Van Eck, Deutsche Bank, Pacific Investment Management Co., Powershares and Wisdom Tree. The list includes ETFs chosen by Morningstar, as an independent advisor.

In its case, the $19.99 charge for selling off shares within 30 days is essentially what a person would have paid when purchasing an ETF off the commission-free list, according to Christina Goethe, a communications specialist for the firm.

TD Ameritrade's commission-free ETF program is intended for long-term investing and the funds were selected with that premise in mind, she notes.

The avoidance of upfront commissions has a secondary purpose, besides just holding costs for an individual purchase of ETF shares down, note both Roseen and Rawson.

The approach makes ETFs attractive to long-term investors who are trying to build up holdings through the technique known as "dollar-cost averaging."

This generally involves a program of spending a fixed amount of a given fund's shares, say $2,500, at a regular interval, such as every quarter.

This means an individual investor gets more shares, when a fund's shares have a low price and low costs. And fewer shares when prices and costs are high.

Institutional investors, Rawson notes, are more interested in being able to get in and out of ETF shares, whenever they want to face the need.

Individual investors, by contrast, tend to be "buy and hold" investors.

Which commission-free funds tend to encourage. And for which a trading fee in the first 30 days is largely inconsequential, he and Roseen note.

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