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DEFINITION of 'No-Fee ETF'

An exchange-traded fund (ETF) that a broker does not charge a commission or fee to be traded. Most ETFs require an investor to pay each time a buy or sell order is executed, which increases the cost associated with placing frequent trades. A no-fee ETF is used as an incentive to get an investor to move his or her account to a particular broker, with the broker forgoing a transaction fee in order to gain access to the investor's assets. This in turn allows the broker to provide other financial product and services to the investor.

BREAKING DOWN 'No-Fee ETF'

No-fee ETFs are a relatively new category of investment, as ETFs typically carry a per-trade fee. Unlike mutual funds, which are typically traded much less frequently because their value is calculated at the end of the day and because of higher transaction costs, ETFs were seen as investments that could be traded just as a share of stock because their value is updated continuously.

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