Man, the price wars in the discount-brokerage arena are really starting to heat up. Remember how Charles Schwab cut all its online brokerage trading fees to one level -- $8.95? And launched its own line of exchange-traded funds with no commissions at all?

Yeah. Is Fidelity doing something? Tell me Fidelity's doing something.

Yup, Fidelity is doing something -- they just came back the other day and cut commissions to $7.95. And better yet --

That's cool. Man, I remember when we all thought $29.95 a trade was crazy-cheap. Remember when we used to see Charles Schwab himself on the TV ads they ran during Days of Our Lives?

I don't remember their running ads during soap operas, but then I don't watch soap operas. Unlike you, some of us work during the day. Anyway, Fidelity one-upped Schwab on the ETFs, too -- they're offering 25 of the big iShares ETFs at no commission. That totally beats Schwab's little homegrown ones, because the iShares funds are super-liquid and easy to trade.

ETFs? You mean like those funky sector things you were talking about when you told me to forget about Warren Buffett? I'm still trying to learn how to use those things.

No, these are broad-based index ETFs. They're index funds, basically, that you trade like stocks. Most of them are for various U.S. indexes like the S&P 500 and the Russell 2000, but there are a few that offer international exposure, like the iShares MSCI Emerging Markets (NYSE:EEM). The big companies in that one are stocks like Samsung, Taiwan Semiconductor (NYSE:TSM), and Petroleo Brasileiro (NYSE:PBR). Heavyweights, but in interesting parts of the world.

OK, but so what? It's nice that Fidelity is cutting my fees, but why do I care about the other stuff?

There are a couple of reasons why this is important. First, this isn't the last shot. Schwab might answer this with more discounts, or one of the other big guys like TD AMERITRADE (NASDAQ:AMTD) or E*TRADE might decide to jump in.

What Fidelity did here is remind everyone that they're really serious about the discount-brokerage business. People still think of them as mutual funds and Peter Lynch, but their brokerage unit is a big, big business for them. The fact that they're a private company and have the big revenue streams from those mutual funds means that they can play rough with the discounts, and it seems like that's where they're going.

But I'm already at Fidelity and I'm not likely to move. Why does this matter to me?

You remember that little talk we had last week about why IRAs are so important? Lots of people wait until tax time to think about their IRAs, and then go "Oh geez, I don't have five grand sitting around to put into my IRA, I guess I'll wait until next year" and totally miss out. Those people could be putting in small monthly contributions instead.

That's expensive, isn't it? Unless you're buying no-load mutual funds, don't you have to pay commissions when you invest those little chunks of money?

That's the point. The cost of buying stocks every month or quarter just went down, and the cost of buying high-quality index ETFs just went way down.

But how do I use those index thingies?

You did your asset allocation plan, right?

Yeah. I got my big growth guys like Google (NASDAQ:GOOG) and Cisco (NASDAQ:CSCO), some midcaps, and some little value guys ... I'm kinda short on small growth ideas right now, though, and I need some.

Boom, that's a perfect example. If you're short on ideas in one particular corner of your asset allocation plan, buy the relevant index ETF and sit on that until you find something better. In this case you'd buy the iShares S&P Small Cap 600 Growth, which owns companies like Dress Barn and Deckers Outdoor (NASDAQ:DECK). And since you'd be doing it at Fidelity, it wouldn't cost you anything. It totally beats sitting in cash.

Huh. Yeah, that's a good point.

That's why I think this price war is so important. It gets rid of some major excuses people use to avoid saving more for retirement. And those no-fee ETFs make it extremely easy to be fully invested in line with your asset allocation plan, even if your portfolio is small and you're just starting out.

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Fool contributor John Rosevear has no position in the companies mentioned. Google is a Motley Fool Rule Breakers pick. Charles Schwab is a Motley Fool Stock Advisor recommendation. Petroleo Brasileiro is a Motley Fool Income Investor choice. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.