Schwab Reduces Expense Ratio on its ETFs; Bond ETFs in the works

Schwab has reduced the expense ratio on its commission-free ETF offerings (currently only eight).  Certainly the amounts we're talking about are not huge; it looks like Schwab is attempting to beat Vanguard by at least 0.01% on all its funds (which amounts to $1/yr for a $10,000 investment). The only fairly significant change is its emerging market ETF, which has been reduced to 0.25% from 0.35%.  The rest have decreased by 0.02%.

Following is an updated comparison of ETF offerings from Schwab, Vanguard, iShares/Fidelity, and SPRDs, courtesy of Schwab.  Obviously, they highlight their own offerings!  Recall that the Schwab, Vanguard, and Fidelity customers can trade these ETFs without paying transaction charges.  Schwab currently has 8 such offerings, Vanguard has 43, and Fidelity/iShares has 25:



Domestic Equity ETFs
Schwab
Vanguard
iShares
SPDRs



U.S. BROAD MARKET
0.06%
SCHB

0.07%
VTI

0.21%
IWV

0.21%
TMW




U.S. LARGE-CAP
0.08%
SCHX

0.12%
VV

0.09%
IVV

0.09%
SPY




U.S. LARGE-CAP GROWTH
0.13%
SCHG

0.14%
VUG

0.18%
IVW

0.20%
ELG




U.S. LARGE-CAP VALUE
0.13%
SCHV

0.14%
VTV

0.18%
IVE

0.21%
ELV




U.S. SMALL-CAP
0.13%
SCHA

0.14%
VB

0.20%
IJR

0.32%
DSC




International Equity ETFs
Schwab
Vanguard
iShares
SPDRs



INTERNATIONAL EQUITY
0.13%
SCHF

0.15%
VEA

0.35%
EFA

0.34%
CWI




INTERNATIONAL SMALL-CAP
EQUITY

0.35%
SCHC

0.40%
VSS

0.40%
SCZ

0.59%
GWX




EMERGING MARKETS EQUITY
0.25%
SCHE

0.27%
VWO

0.72%
EEM

0.59%
GMM




Source: Charles Schwab & Co

In the end, all three brokerage firms have ample low-cost offerings and the differences are negligible.  I wouldn't move my money to Schwab simply because they currently have slightly lower expenses (which are subject to change and aren't significant to begin with, except for perhaps the SCHE / EEM difference).  But it's certainly good news that the firms are continually trying to get our business by providing more low-cost offerings.  The more competition, the better.

The bigger news to me that dropped back in April is that three Schwab bond ETFs are in the worksSchwab's largest obstacle in my mind for getting individual investors to have the entirety of their portfolio with them was the lack of diversified and inexpensive bond funds.  Supposedly, they'll be offering a TIPS ETF, a short-term US Treasury fund, and an intermediate-term US Treasury fund.  While those three pale in comparison to what Vanguard offers, most people could make a decent portfolio with them.  You certainly could do much worse.

3 comments:

  1. I'd like to see a short-term, investment grade corporate portfolio at 0 transactions cost and low expense ratio for retirees to use as a funding vehicle for distributions.
    I love the competitive pressures pushing fees lower.

    ReplyDelete
  2. Agreed, that would be nice. It seems that there aren't many ETFs in the short-term investment grade asset class. Vanguard just started VCSH at the beginning of this year (no transaction cost, but a 0.25% purchase fee). CSJ (from iShares, but not commission free at Fidelity) and SCPB (SPDRs) are the only other two that I know of. Any that I'm missing? There certainly are mutual funds to choose from, though.

    ReplyDelete

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