TD Ameritrade account holders enjoy commission-free trading in over 100 ETFs, including a number of low-cost Vanguard funds, and many other popular ETFs. Three of the ETFs used in our Adaptive Portfolios are on Ameritrade's zero-commission list: iShares Barclays 20+ Year Treasury Bond (TLT) for exposure to long-term bonds, SPDR Dow Jones International Real Estate (RWX) and even the PowerShares DB Commodity Index Tracking Fund (DBC). Great substitutes — Vanguard funds — are available for 3 other asset classes: U.S. real estate, European and emerging market stocks. But Ameritrade does not provide a commission-free alternative for medium-term U.S. bonds or gold.

The table below lists the ETFs we use in our model portfolios, and the zero-commission ETF that Ameritrade account holders can substitute for each. We identify these funds by systematically measuring the correlation of the daily returns of each commission-free ETF offered by Ameritrade, and comparing that to our usual set of 9 ETFs. Scroll down or click any ETF symbol in the Ameritrade column to see the detailed analysis for that fund.

Asset Class Usual ETF
Ameritrade Commission Free Alternative
U.S. Stocks SPY VTI
Medium-Term U.S. Bonds IEF -
Long-Term U.S. Bonds TLT TLT
European Stocks IEV VGK
Emerging Markets Stocks EEM VWO
U.S. Real Estate (REITs) ICF VNQ
International Real Estate RWX RWX
Commodities DBC DBC
Gold GLD -

U.S. Stocks: use Vanguard Total Stock Market ETF (VTI)

In our model portfolios, we use the SPDR S&P 500 Index Fund (SPY) to track U.S. stocks. Ameritrade offers a great commission-free ETF to invest in this asset class: Vanguard Total Stock Market (VTI). VTI should appeal to investors who prefer a broader index. While SPY tracks the 500 largest U.S. stocks, VTI tracks the MSCI U.S. Broad Market Index, which represents over 99% of the total market capitalization of all U.S. common stocks. As shown in the chart below, VTI has a 0.987 correlation to the SPY, which is very high (1.0 indicates a perfect proxy). Based on the large amount of data included in our comparison — 12 years of daily returns — we expect the VTI and SPY to continue to be interchangeable in the future.

Correlation of daily returns between SPDR S&P 500 Index Fund (SPY) and Vanguard Total Stock Market ETF (VTI)

VTI has an annual expense ratio of 0.05%, which is lower than SPY (0.09%). It is a highly regarded fund that currently has 29.3 billion dollars under management, and trades an average of 1.9 million shares per day.

European Stocks: use Vanguard FTSE Europe ETF (VGK)

For exposure to European equities, our model portfolios use the iShares S&P Europe 350 ETF (IEV). Ameritrade allows free trading in the industry-standard European equities fund: the Vanguard FTSE Europe ETF (VGK), which has a very high (0.988) correlation to IEV, making it a great substitute. VGK has over $5.7 billion under management, trades on average 2.1 million shares a day, and has an expense ratio of 0.12 percent (compare this to 0.60% for IEV). The fund tracks the FTSE Developed Europe Index which contains about 500 European stocks, more than the 350 tracked by the IEV fund.

Correlation of daily returns between iShares S&P Europe 350 ETF (IEV) and Vanguard FTSE Europe ETF (VGK)

Emerging Markets Stocks: use Vanguard FTSE Emerging Markets ETF (VWO)

Our model portfolios use EEM (iShares MSCI Emerging Markets Index) for exposure to emerging markets equities. Ameritrade offers a highly correlated (r=0.977) zero-commission alternative: Vanguard FTSE Emerging Markets ETF (VWO). This fund has an average daily trading volume of 19.8 million shares, a total of $56 billion under management, and an annual expense ratio of 0.18 percent (which is very low for emerging markets ETFs — compare to 0.69% for EEM). It tracks the FTSE Emerging Index. VWO is an excellent alternative to EEM.

Correlation of daily returns between iShares MSCI Emerging Markets Fund (EEM) and Vanguard FTSE Emerging Markets ETF (VWO)

U.S. Real Estate (REITs): use Vanguard REIT Index ETF (VNQ)

There are a number of good U.S. REIT funds on the market. In our model portfolios we use iShares Cohen & Steers Realty Majors (ICF). If you're a Ameritrade customer, take a look at the zero-commission Vanguard REIT Index ETF (VNQ). With a correlation coefficient of 0.989 against ICF, its returns are going to be practically identical. VNQ tracks the MSCI U.S. REIT Index, has $19.34 billion under management, trades 2.4 million shares per day, and will cost you only 0.10 percent per year in management fees. What's not to like?

Correlation of daily returns between iShares Cohen & Steers Realty Majors (ICF) and Vanguard REIT Index ETF (VNQ)