The first Charles Schwab-branded exchange-traded funds launch tomorrow, Nov. 3, and Schwab is offering free, uncapped trading to its customers who buy in online—essentially creating a platform that enables retail investors to dollar cost average with ETFs.
At a press conference in New York today, Schwab chief executive officer Walter W. Bettinger II described the move as “game-changing.” Previously, investing a fixed dollar amount at regular intervals into ETFs would have incurred steep trading costs: Investors who execute fewer than 120 trades per year pay a hefty $12.95 per trade.
The four ETFs that debut tomorrow are designed to track the following broad indexes: Dow Jones U.S. Broad Stock Market Index, Dow Jones U.S. Large-Cap Total Stock Market Index, Dow Jones U.S. Small-Cap Total Stock Market Index, and FTSE Developed ex-U.S. Index. Schwab also said it will launch four additional ETFs—tracking U.S. large-cap growth and value stocks, international small-cap stocks, and emerging markets stocks—later this year. The stated expense ratios for all but the emerging markets ETF are below those for comparable funds from the three biggest players in the ETF market: Vanguard, Barclays Global Investors, and SSGA.
Vanguard spokesperson John Woerth told BusinessWeek that Vanguard will continue to introduce new ETFs, including seven new bond funds over the coming new weeks, but “has no plans to offer commission-free ETFs.” Woerth did note that investors should evaluate the “all-in” costs of any product, which would include a fund’s expense ratio, trading fees, and other expenses.
For more information about the new Scwab ETFs, click here.