Schwab Commission-Free ETFs

I searched FWF and didn't see this mentioned. Has anyone looked into this? I thought it looked good, but I'm worried that I'm missing something.

They are new ETFs that are owned by Schwab (just introduced)....if you have a Schwab Brokerage, they will let you trade them for no fee...This only applies to these new Schwab owned ETFs...not ETFs from other companies...Of course, if someone wants to trade these ETFs through other Brokerage Houses, they certainly can do so...but at the same fees they always pay for trading ETFs at that other Brokerage...

So those with Schwab accounts get a break if they want to trade specifically the Schwab Owned ETFs.....No fees at all...

Yeah, and more thinly-traded ETFs often suffer from more slippage on transactions. Saving 1 bp a year on an ETF doesn't help much if you lose an additional 20 bp on slippage.

ThePessimist said: Saving 1 bp a year on an ETF doesn't help much if you lose an additional 20 bp on slippage.

I hate slippage.

Thanks for the heads up, OP. I've been looking to increase my small cap holdings, which right now are in VB, Vanguard's small cap index ETF. The new Schwab SCHA has the same expense ratio (0.15%) although it follows a different (but comparable) index.

Right now, I only use Schwab for the Visa cc, and use their checking account to hold funds for ATM withdrawals when traveling outside the US. My Schwab brokerage account is only used to receive the cc 2% rebate. Maybe if I held some SCHA in the brokerage they would look favorably upon me if/when they tighten up the rules or terms on their cc.

CC is FIA, brokerage is Charles Schwab Corp (SCHW)

UncaMikey said: Thanks for the heads up, OP. I've been looking to increase my small cap holdings, which right now are in VB, Vanguard's small cap index ETF. The new Schwab SCHA has the same expense ratio (0.15%) although it follows a different (but comparable) index.

Right now, I only use Schwab for the Visa cc, and use their checking account to hold funds for ATM withdrawals when traveling outside the US. My Schwab brokerage account is only used to receive the cc 2% rebate. Maybe if I held some SCHA in the brokerage they would look favorably upon me if/when they tighten up the rules or terms on their cc.

I'm totally with ThePessimist. Think about this question, what determines the current price of ETF -- is it supply & demand of the ETF itself, or the NAV of the underlying securities? By what mechanism do the two meet? The answer is that there's someone constantly trading against you with guaranteed profit that brings the two together. The analog with regular stock is if there were someone who knew for sure what the stock is worth that were trading to make sure that's what it was selling for, deriving profit from each trade. Except that with stocks it's insider trading and is illegal.

Not so sure that it's true that etfs are only good for constant trading and not for buy and hold...for example: The Vanguard Total Stock Market Fund is up like 21% year to date and so is the Vanguard Total Stock Market ETF (also 21%)..performance is virtually identical....

As far as losing money when you cash out..well firstly a buy and holder isn't continually making trades and secondly..when you sell, especially with a heavily traded etf like this...you tend to be able to get out within a penny or two of the current NAV....

Etfs are become so popular (even for buy and holders) and since their expenses are lower then mutual funds and mostly do as well as the actively managed mutual funds, there is probably a good chance that Mutual Funds will eventually get totally replaced by ETFs....

craig10x said: Not so sure that it's true that etfs are only good for constant trading and not for buy and hold...for example: The Vanguard Total Stock Market Fund is up like 21% year to date and so is the Vanguard Total Stock Market ETF (also 21%)..performance is virtually identical....

As far as losing money when you cash out..well firstly a buy and holder isn't continually making trades and secondly..when you sell, especially with a heavily traded etf like this...you tend to be able to get out within a penny or two of the current NAV....
I think you missed my point - go back and read my earlier post.

The fact that Vanguard's ETF and open-ended fund had similar performance based on NAV isn't surprising - they're based on the same index. But, if you qualify for Admiral shares or instead buy Fidelity's equivalent fund, there's no expense ratio savings. And the cost of slippage still applies. You have to buy the shares, and you or your heirs have to sell them. Being within a penny of NAV is still a serious expense compared to any expense ratio savings you may get. And, as I pointed out, ETFs often don't trade at NAV, and it's not unusual to see them 1% off. 1% can easily swamp years of difference on expense ratio.

Etfs are become so popular (even for buy and holders) and since their expenses are lower then mutual funds and mostly do as well as the actively managed mutual funds, there is probably a good chance that Mutual Funds will eventually get totally replaced by ETFs....
As I pointed out, their expenses aren't lower than mutual funds. Plus, you're looking at Vanguard, which has some of the cheapest ETFs in the business. Most ETFs are much more expensive than similar open-ended index funds from the likes of Fidelity and Vanguard. You can't compare an index ETF with an actively-managed open-ended fund; it's apples and oranges. You have to compare index ETFs with index open-ended funds, and in most cases the open-ended funds are better choices. Open-ended funds will never be totally replaced by ETFs.

Trojan35 said: Mutual funds cost more than ETF's for a very similar service. If you're paying more for it, you should have a good reason (and there are some, but it means you must want something other than just diversification within that market segment).
As ThePessimist said, it's not universally true that ETFs are cheaper than regular MFs, even by just looking at the expense ratios. But, one of the reasons ETF expense ratios are low is because the issuing company gets another income stream besides the explicitly stated expense. That's the trading that happens to bring ETF price in line with NAV. To put it another way, you're always losing on slippage. Who wins what you lost? The issuer of the ETF. This is a totally hidden cost of ETFs. Put it third way, there's historical return of any instrument that you can look up. Some traders got better returns than that, some worse. With ETFs you're much more likely to end up in the worse pool than the better one. With regular MFs, it's more balanced. You can't see this from looking at historical returns.

good deal . can i buy these fee free in ROTH ira ? . Will wait couple of month for volume and market cap to reach a higher value .

If you plan to buy and hold for an extended period in a taxable account, the capital gains tax advantages of an ETF could outweigh the slippage losses when buying and selling the ETF. The major advantage ETFs have in this area is that they only distribute capital gains when the makeup of the fund changes, whereas regular mutual funds also distribute them when redemptions exceed purchases. The ETF doesn't incur any capital gains during normal trading because you are simply buying from/selling to another market participant. When creation units are destroyed, the entity destroying the unit incurs the capital gains rather than the ETF.

*I believe that this advantage does not apply to many Vanguard ETFs as they are another share class of the same underlying fund, so they share in capital gains incurred by the equivalent regular mutual fund.

tripleB said: ThePessimist said: Saving 1 bp a year on an ETF doesn't help much if you lose an additional 20 bp on slippage.

I hate slippage.
Limit In……..Stop Out.