Trade Free for Life with These New Securities


There may be no better word in the English language.

A new breed of exchange-traded fund offers accountholders at one of the world’s biggest discount brokerages free trades for life.

Cheap, liquid, and diversified, ETFs are popular investment vehicles. They’ve seen a +40% annual asset-growth rate during the past ten years, and their total assets under management is quickly approaching $1 trillion.

Investors can choose from nearly 2,000 ETFs around the globe. Given that intense, NBA-like competition, investment companies go to great lengths to draw attention to their products.

Charles Schwab has a novel approach. Schwab offers its account holders free trades on its ETF products. What’s more, these ETFs have the lowest fees in the industry. Their tiny expense ratios beat or match similar investments available from Vanguard, iShares and SPDR.

Take a look. This chart shows the category of investment in the left-hand column and the expense ratios from four matching ETFs. Schwab is the clear winner.

  Schwab Vanguard iShares SPDRs
U.S. Broad Market ETF 0.08% 0.09% 0.21% 0.20%
U.S. Large-Cap ETF 0.08% 0.13% 0.09% 0.09%
U.S. Large-Cap Growth ETF* 0.15% 0.15% 0.18% 0.20%
U.S. Large-Cap Value ETF* 0.15% 0.15% 0.18% 0.20%
U.S. Small-Cap ETF 0.15% 0.15% 0.20% 0.25%
International Equity ETF 0.15% 0.16% 0.34% 0.34%
International Small-Cap Equity ETF* 0.35% 0.38% 0.40% 0.59%
Emerging Markets ETF* 0.35% 0.27% 0.72% 0.59%
*Available in December 2009

Four of the eight planned Schwab ETFs are available today. They are the U.S. Broad Market ETF (NYSE: SCHB), the U.S. Large-Cap ETF (NYSE: SCHX), the U.S. Small-Cap ETF (NYSE: SCHA) and the International Equity ETF (NYSE: SCHF).

For investors who already hold comparable ETFs, Schwab’s low fees may mean dollars in their pocket. Investors who actively trade ETFs may also benefit. With the cheapest fees in the business and no trading fees, these ETFs will likely become very popular as they save investors a ton of cash.