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Schwab is Introducing ETFs That Trade Commission-Free
By JLP | November 5, 2009
Charles Schwab recently announced that they were getting into the exchange-traded funds game by introducing several new Schwab-branded ETFs. I have listed the new ETFs below, along with their expense ratio and the description as provided by Schwab. What makes these particular ETFs interesting is that they will trade commission-free to Schwab clients. Of course, free doesn’t mean that they won’t have spreads—the difference between the bid and ask price—but they won’t have the traditional brokerage commissions that are paid when buying or selling other ETFs.
The intial list is slim but I expect that new offerings will be added with time.
Domestic Equity ETFs
• Schwab U.S. Broad Market ETF™ SCHB – 0.08%
Offers diversified exposure across large-, mid- and small-cap U.S. stocks. Seeks investment results that track performance, before fees and expenses, of the approximately 2,500-stock Dow Jones U.S. Broad Stock Market Index(SM).
• Schwab U.S. Large-Cap ETF™ SCHX – 0.08%
Provides exposure to large-cap U.S. companies. Seeks investment results that track the performance, before fees and expenses, of the Dow Jones U.S. Large-Cap Total Stock Market Index(SM) made up of approximately the largest 750 U.S. stocks.
• Schwab U.S. Large-Cap Growth ETF™* SCHG – 0.15%
Provides exposure to large-cap U.S. stocks that exhibit growth style characteristics. Seeks investment results that track the performance, before fees and expenses, of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index(SM), representing approximately half of the market capitalization of stocks in the Dow Jones U.S. Large Cap Total Stock Market Index(SM).
• Schwab U.S. Large-Cap Value ETF™* SCHV – 0.15%
Provides broad exposure to large-cap U.S. stocks that exhibit value style characteristics. Seeks investment results that track the performance, before fees and expenses, of the Dow Jones U.S. Large-Cap Value Total Stock Market Index(SM), representing approximately half of the market capitalization of stocks in the Dow Jones U.S. Large Cap Total Stock Market Index(SM).
• Schwab U.S. Small-Cap ETF™ SCHA – 0.15%
Offers exposure to small-cap U.S. companies. Seeks investment results that track the performance, before fees and expenses, of the Dow Jones U.S. Small-Cap Total Stock Market Index(SM), made up of approximately 1,750 U.S. small cap stocks.
International Equity ETFs
• Schwab International Equity ETF™ SCHF – 0.15%
Provides broad exposure to international large-and mid-cap companies in over 20 developed international markets. Seeks investment returns that track the performance, before fees and expenses, of the FTSE Developed ex U.S. Index made up of approximately 1,400 international stocks.
• Schwab International Small-Cap Equity ETF™* SCHC – 0.35%
Offers diversified exposure to international small-cap companies in over 20 developed international markets and seeks investment results that track the performance, before fees and expenses, of the FTSE Developed Small Cap ex U.S. Liquid Index made up of approximately 1,800 international small cap stocks.
• Schwab Emerging Markets Equity ETF™* SCHE – 0.35%
Offers diversified exposure to large- and mid-cap companies in over 20 emerging markets. The ETF seeks investment results that track the performance, before fees and expenses, of the approximately 740-stock, FTSE All Emerging Index.
It will be interesting to see if Schwab puts pressure on the competition to lower their ETF fees. It will also be interesting to see if Schwab somehow integrates these ETFs into their 401(k) offerings.
Related:
*Available in December
Topics: Exchange-Traded Funds, Investing | 5 Comments »
November 5th, 2009 at 2:11 pm
“Of course, free doesn’t mean that they won’t have spreads—the difference between the bid and ask price”
Schwab will make their money like all the firms do, by hiding their profit through opaque products. I lost faith in these firms some time ago. Doing business with them is just giving them a license to steal from you. PT Barnum said it most famously.
November 5th, 2009 at 2:22 pm
I think it’s a great perk for Schwab account holders. Are there any brokerages that don’t have spreads? I’ve never heard of one. I would think they would have enough volume that the spread will be pertty small too. Sounds like I need to look into a Schwab account!
-Rick Francis
November 5th, 2009 at 2:27 pm
I mentioned the spreads because I knew if I didn’t that someone would and I would be criticized for not posting that information.
Lucas, firms have to make money, do they not?
November 5th, 2009 at 3:44 pm
They are in business to make money. This is just part of the cost of doing business. Not all firms are created equal. Just because of an issue with one firm you shouldnt loss faith. Simple research can solve most problems
November 5th, 2009 at 5:36 pm
OK. Read the prospectus.
The fund(s) will pay a 12b(1)fee of .25% starting a year from now which will far exceed the discount (online) brokerage commission rate. In addition trading (internal brokerage commissions) will reduce net assets. Let’s be honest. Schwab will have opportunities to make money at many, many points; advisory fees, brokerage fees, distribution fees, you name it. Smoke & mirrors at best.
@Collections:
They’re in business to make money by taking money out of your account. It’s the business model. Your loss is their gain.
PT Barnum.