heavy concentration >
In a remarkably short period,
the playing field for the lowest-cost
ETFs has changed dramatically.
By Allan S. Roth
Not too long ago, there was an obvious way to con- struct a broad, low-cost ETF portfolio for clients: Turn
to Vanguard. Then Schwab and iShares
entered the fray — possibly because
Vanguard was collecting 32.4% of all
new investor money into ETFs. One of
the two giants lowered expense ratios;
the other launched new ETFs to compete with Vanguard. Although the fee
war has been great for clients, selecting
the right ETFs isn’t just about expense
ratios. Here’s what you need to know.
Schwab made the first move in Sep-
tember when it filed with the SEC to
lower the expense ratios of its ETFs
dramatically. Suddenly, Vanguard no
longer had the lowest expense ratios for
diversified stock and bond portfolios.
Schwab’s new annual expense ratio for
the U.S. broad market fund (SCHB) is
only 0.04%, for instance, besting Van-
guard’s 0.06%. Its international index
fund (SCHF) expense ratio of 0.09% is
also lower than Vanguard’s, while the
Schwab U.S. aggregate bond market
ETF (SCHZ) expense ratio of 0.05% is
half Vanguard’s 0.1% expense ratio.