Want to avoid trading costs on exchange traded funds (ETFs)? It's now becoming easier to do so.

This week, Fidelity teamed up with iShares to eliminate trading fees on more than two dozen popular ETFs. The move comes three months after Schwab introduced eight of its own free-trade ETFs.

Traditionally, if you wanted to invest in an ETF, you had to pay a sales charge each time you bought or sold shares. When Schwab rolled out free-trade ETFs in November it put pressure on other big brokerages to do the same.

And Fidelity has responded–in a big way.

Fidelity investors now can choose from among 25 popular iShares ETFs (compared with Schwab's eight). Examples include the iShares S&P 500 Index (IVV), iShares Barclays Aggregate Bond (AGG) and iShares MSCI Emerging Markets Index (EEM).

And collectively, the iShares ETFs offer sweeping coverage of the market, including emerging-market stocks and bonds, blue-chip U.S. stocks, Treasury Inflation Protected Securities (TIPS), and muni bonds.

To buy the iShares ETFs at no cost, you have to have an account with Fidelity and the trades must be done online. Go here to read the fine print.

But the bottom line is this: Until now, the sales charge on ETFs, which tend to carry lower annual fees than mutual funds, has dinged investors who make small but regular contributions to their portfolio.

Now, however, Fidelity and Schwab (and others soon, perhaps) are offering the best of both worlds: super-low annual fees "without paying the price of admission," as one Morningstar article put it.

To me, that sounds like a good reason to get in line for a ticket.

Investing in ETFs just got a little cheaper.

At a press conference in New York City Monday, Charles Schwab unveiled eight new exchange-traded funds, the first of the brokerage's Schwab-branded ETFs. The big news: For these select ETFs, Schwab has waived the commission typically charged when you buy or sell shares of an ETF or stock. In other words, an investor could jump in and out of these ETFs several times a day (not that that strategy is a particular good one) and not pay a dime in transaction costs. (The deal is good only for Schwab customers trading on Schwab's website. Place the order over the phone or use another brokerage and standard fees apply.)

In addition, the expense ratios are among the lowest out there, ranging from 0.08% for a total U.S. stock market ETF to 0.35% for international small-cap and emerging-markets stocks ETFs. By comparison, Vanguard's Total Stock Market ETF (VTI) has an expense ratio of 0.09% — a hair higher than Schwab's — while its international small-cap and emerging-market ETFs have expense ratios of 0.38% and 0.27%, respectively.

Schwab's aim is clear: The brokerage, based in San Francisco, wants to encourage more investors to open accounts at Schwab. It also wants to stand apart from the competition. Already, investors can choose from more than 800 ETFs. By offering free trades, Schwab hopes to attract some of that business, as well as appeal to the "little guy" who invests through dollar-cost averaging (and therefore may normally avoid ETFs because of the usual fee on every transaction).

"We think this is game-changing within the ETF space," said Walter Bettinger, president and CEO of the Charles Schwab Corp., via a video feed.

Could be. Peter Crawford, a senior vice president in Schwab's investment management services, made a point of saying that the free trades are not a promotion. (He argued that thanks to its size — Schwab manages a total of $1.3 trillion in assets — the company could afford to waive the fees.)

More than a few people at the press event seemed skeptical about the idea that volume could make up for costs. But as long as free trades and low expense ratios are available, investors stand to benefit. In fact, with investors still licking their wounds from the market's crash, demand for low-cost options could persuade more fund companies and brokerages to follow Schwab's lead.

The first four of the ETFs — U.S. Broad Market (SCHB), U.S. Large-Cap (SCHX), U.S. Small-Cap (SCHA) and International Equity (SCHF) — launch Tuesday, Nov. 3. The remaining four — U.S. Large Cap Growth (SCHG), U.S. Large-Cap Value (SCHV), International Small-Cap Equity (SCHC) and Emerging Markets Equity (SCHE) — will become available in December.

Legg Mason's Bill Miller

For a top-notch stock fund manager, there’s nothing worse than poor returns. But one thing comes close: great performance that everyone ignores.  As The Wall Street Journal reported recently, many ace stock-pickers are having trouble attracting investors, even as they rack up double-digit return.

Consider Harry Lange of Fidelity Magellan (FMAGX), who has guided his fund to a 31% gain so far in 2009—some 15 percentage points ahead of the Standard & Poor’s 500. But during the first nine months of this year, shareholders have yanked $1.8 billion from the fund.

Investors are also slighting the once–revered Bill Miller of Legg Mason Value (up 32%; down nearly $1 billion in net cash flow); and Bill Nygren of Oakmark Select (up 40%; down $250 million).

It’s easy to dismiss these numbers are another example of classic investor bad timing. Shaken by the market plunge, many people are still seeking the apparent safety of bonds, even as they miss out on an historic rally. According to data through August compiled by Financial Research Corp., so far this year investors have  plowed more than $225 billion into bond funds, while pulling $5 billion out of domestic stock funds.

There's even bigger change at work, though: Investors are giving up on active fund managers. Even as many mutual funds are starved for cash, money is flooding into ETFs, which are basically index funds that trade like stocks. FRC predicts that exchange-traded funds will capture some $91 billion in net cash flows this year, which rivals the $100 billion expected to go into traditional funds. And by 2014, ETFs are expected to reach nearly $2 trillion in assets, a growth rate that far exceeds mutual funds.

In order to compete, some fund companies are launching their own ETFs. Fund giant Vanguard has offered ETFs for several years—it now ranks among the top three ETF providers, along with State Street and iShares. Now PIMCO and Charles Schwab are bringing out their own offerings, and even Legg Mason is thinking about it.

So is there still a future for active fund managers? Sure — there will always be investors who prefer to have a human being run their portfolios. But it's unlikely active managers will ever enjoy the same rock-star status that they once did. Question is, will star managers be able to transition into the burgeoning world of ETFs? The first ETF that allowed its managers to choose their own stocks, Grail American Beacon Large Cap Value (GVT), began trading in May; Grail is bringing out four more actively managed ETFs this month. Another new offering is Dent Tactical, (DENT), run by forecaster Harry Dent, which invests mainly in ETFs based on his view of economic trends.

So far, both of the new actively managed ETFs have attracted few investors — Grail, for example, has only $4 million in assets. And both carry expense ratios exceeding those of many regular  funds — 0.79% for Grail, while Dent charges 1.6%. That expense hurdle will make it tough for any ETF to beat its benchmark. Unless actively managed ETFs can reduce their costs and deliver the returns investors demand, star managers will continue to fade.