We understand that today, more than ever, value is of great importance to you.
That’s why I’m pleased to share with you significant steps we’ve taken to reduce expenses and simplify the share classes in our Schwab Equity Index Funds. Now, everyone will enjoy:
Reduced fund expenses for all Schwab Equity Index Funds—as low as 0.09%. They’re now among the most affordable index funds available anywhere. The same low expense ratio in a fund regardless of the amount you invest—no need to worry about whether you are invested in a “special” share class to get our lowest fund expenses.
Making investing easier and more affordable for everyone is at the heart of Schwab’s philosophy. These improvements reflect our commitment to turning that philosophy into meaningful benefits for you and all our clients.
Thank you for investing with Schwab and for allowing us to help you reach your financial goals.
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This may not seem like it, but its big news if true. I have to check it out. Currently Vanguard is the lowest on domestic index funds with 0.15% and then something around 0.10% on Admiral class ($100k minimum). Since Schwab also now holds my 2% credit card and pretty good checking account, it might make my life simplier to move my VG assets to Schwab - at least the IRA holdings that I can essentially liquidate without tax consequences and move over. I would have to lose market exposure for that time frame though of a few weeks for the transfer.
Also I heard that Schwab used to be very personal consumer friendly and then shifted towards larger clients and bumped up fees and has only recently been coming back after the home investor. I would hate to move everything to Schwab only to get pissed off with new fees in a few years if they decide to shift their client-base again.
oopsz said:Well, good for schwab, but how does it compare to the ratio on Fidelity and Vanguard funds?
I assume schwab funds are no load, no fee if you use a schwab brokerage account?
Its about 50% cheaper.
Vanguard International index is 0.40% compared to 0.19% on the new Schwab one.
VG TSM is 0.15% compared to 0.09% on Schwab.
In all fairness the actual operating costs of the Schwab funds are the same as they always were but they are not offering a 70% waiver - from 0.38% down to 0.09%. Who knows how long this will last.
This is a very good thing, lets hope it turns into a trend.
Schwab Equity Index Fund Expense ratio Fund1 Industry average2 Schwab S&P 500 Index Fund (SWPPX) 0.09% 0.47% Schwab Total Stock Market Index Fund® (SWTSX) 0.09% 0.47% Schwab 1000 Index Fund® (SNXFX) 0.29% 0.47% Schwab Small-Cap Index Fund® (SWSSX) 0.19% 0.77% Schwab International Index Fund® (SWISX) 0.19% 0.56%
Message edited by: wilkinru on 2009-05-06 16:59:17 CDT
A quick comparison of total stock market index fund minimums and expense ratios (sorted by their minimums):
$100 Min, 0.09% ER - SWTIX - Schwab Total Market Index
$3,000 Min, 0.15% ER - VTSMX - Vanguard Total Stock Market Index (Investor)
$10,000 Min, 0.10% ER - FSTMX - Fidelity Spartan Total Market Index
$100,000 Min, 0.07% ER - VTSAX - Vanguard Total Stock Market (Admiral)
$100,000 Min, 0.07% ER - FSTVX - Fidelity Spartan Total Market Index (Advantage)
I don't know if I expect this to last forever, but this is a great deal for people who are just starting out. With Vanguard, if you want just a simple three fund balanced portfolio (US Stock/Int Stock/Bonds), you'd need to either hope they have one with the exact ratios you want, or you need $12,000 to start. With Schwab, you'd just need $300.
mike.... I would like to thank you for the post. I know you don't believe that low cost total funds do better than managed funds. Thanks for posting this for those of us who believe otherwise and that this will help out.
umcsom said:mike.... I would like to thank you for the post. I know you don't believe that low cost total funds do better than managed funds. Thanks for posting this for those of us who believe otherwise and that this will help out.
I think most low cost index funds destroy most managed funds. I do think there are some decent fund families on the managed side which I choose to own. I plan to diversify by holding both managed and index funds.
Schwab actually has an EXCELLENT "total package" of financial services , for those people who like everything at one place...and with competent customer service to boot.
From their 2% credit card, decent interest checking account, no fee IRAs, and now these expense cuts, they may not be the "absolute best" in every area, but overall their products are pretty good choices.
Effective May 5, 2009, the net operating expense ratios of the Schwab S&P 500 Index Fund and the Schwab Total Stock Market Index Fund® are limited to 0.09%. Net operating expenses of other Equity Index Funds are also limited and will range from 0.19% to 0.29%. Equity Index Funds do not include the Schwab Fundamental Index Funds. (Fundamental Index is a registered trademark of Research Affiliates, LLC.) See a fund’s prospectus for more information on expense limitations.
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robobert said:A quick comparison of total stock market index fund minimums and expense ratios (sorted by their minimums):
$100 Min, 0.09% ER - SWTIX - Schwab Total Market Index
$3,000 Min, 0.15% ER - VTSMX - Vanguard Total Stock Market Index (Investor)
$10,000 Min, 0.10% ER - FSTMX - Fidelity Spartan Total Market Index
$100,000 Min, 0.07% ER - VTSAX - Vanguard Total Stock Market (Admiral)
$100,000 Min, 0.07% ER - FSTVX - Fidelity Spartan Total Market Index (Advantage)
I don't know if I expect this to last forever, but this is a great deal for people who are just starting out. With Vanguard, if you want just a simple three fund balanced portfolio (US Stock/Int Stock/Bonds), you'd need to either hope they have one with the exact ratios you want, or you need $12,000 to start. With Schwab, you'd just need $300.
This is exactly what I was looking for. Thank you!
The comparisons between Schwab and Vanguard are wrong as of 4/29/2009. The Vanguard expense ratios have gone up. For example, the ER for VTSMX is now 0.18%. Third party sites such as Yahoo still show the old ratios. For updated information look at the fund page on Vanguard. So now that makes that ER for SWTIX exactly half of the same fund for Vanguard. That really translates to about $9 cheaper per year per $10,000. Even Admiral is up to 0.09% same as Schwab. Hmmmm $100 for Schwab or $100,000 for the same fund at Vanguard?
Message edited by: demku on 2009-05-08 10:39:45 CDT
This is exciting news. Thanks for the post. Plus the low $100 initial investment (and $1! subsequent investement) minimum is excellent! With all the volatility right now, I want to dollar cost average into a position, and the $3000 initial investment minimums at Vanguard would be a substantial chunk of what I have to invest right now (and with the low subsquent investment minimums, I can just sweep my 2% Schwab visa card CashBack into an index fund. Every little bit helps!).
Let's just hope they keep the waivers/reductions in fees at this level for a few years. And I wonder if Vanguard, Fidelity, et. al., will match? Regardless, Schwab was the first mover and they're gonna get my cash!
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