Launching on the NYSE Arca Tuesday are the first four ETFs, which are available to both individual investors and through independent investment advisers:
- Schwab U.S. Broad Market ETF (SCHB)—tracks the Dow Jones U.S. Broad Market Index; expense ratio: 0.09%;
- Schwab U.S. Large-Cap ETF (SCHX)—tracks the Dow Jones U.S. Large-Cap Total Stock Market Index; expense ratio: 0.08%;
- Schwab U.S. Small-Cap ETF (SCHA)—tracks the Dow Jones U.S. Small-Cap Total Stock Market Index; expense ratio: 0.15%;
- Schwab International Equity ETF (SCHF)—tracks the FTSE All-Emerging Index; expense ratio: 0.35%.
In December, Charles Schwab will launch four more ETFs: Schwab U.S. Large-Cap Growth ETF, Schwab U.S. Large-Cap Value ETF, Schwab International Small-Cap Equity ETF, and Schwab Emerging Markets Equity ETF.
Schwab pointed out that the operating expense ratios match, or are lower than, competitors. For instance, the Schwab U.S. Broad Market ETF expense ratio of 0.08% is just under Vanguard’s 0.09%.
The firms also said that the ETFs can be bought and sold without commissions in Schwab accounts online. ETFs sold through brokers still have a commission.
In announcing the ETFs at a press event today in New York City, Peter Crawford, senior vice president at Schwab, said the new move toward lower fees does not represent a tradeoff of better service but rather an “expansion.”
Crawford said the popularity of ETFs has grown because the instruments offer liquid, low-cost, tax-efficient exposure to entire segments of the market. “The popularity of ETFs has exploded and investors have gone with them for very valid reasons,” he said.
Advisers are also more interested in ETFs, Crawford noted. According to the semiannual Schwab survey of advisers, 80% of advisers have at least some client assets invested in ETFs. The latest survey also found that about 40% of independent advisers planned to invest more in ETFs in the next six months (see “Independent Advisers Report More Optimism”).
Crawford does anticipate the new low-cost offerings will be attractive to institutions. On the defined contribution front, Schwab does not currently offer ETFs to 401(k) plans (unless using a brokerage account).