ETF Radio Show

ETF Game Changer from Schwab

Charles Schwab, in a move sure to ripple across the entire ETF industry, announced on Thursday the launch of Schwab ETF OneSource, described as “a new ETF platform that gives investors and advisors access to the most commission-free ETFs anywhere in the industry”.  For all of the potential benefits that ETFs can provide investors – from lower costs and greater tax efficiency, to more transparency and better diversification – one knock has always been trading commissions.  Since ETFs trade on the exchanges, just like individual stocks, investors typically must pay a trading commission when buying or selling shares.  With the rollout of Schwab’s ETF OneSource platform, investors can buy or sell shares of 105 ETFs – including all 15 of Schwab’s ETFs – without incurring trading commissions.

While Schwab isn’t the first to rollout such an offering (TD Ameritrade already offers 101 commission free ETFs), the introduction of Schwab ETF OneSource further signals the arrival of ETFs at a time when mutual funds continue to cede assets to ETFs.  Said Charles Schwab’s CEO Walt Bettinger, “Just as Schwab Mutual Fund OneSource changed the landscape for investors and advisors by providing convenient, affordable access to leading mutual funds when Chuck Schwab introduced it twenty years ago, we believe Schwab ETF OneSource will deliver enormous benefit and change the way our clients buy and sell ETFs”.  While mutual funds may have been the preferred way to go for investors 20 years ago, Schwab seems to be acknowledging that investors are now gravitating towards ETFs.

The reasons why investors are moving to ETFs are plentiful.  As Bettinger explained in Schwab’s announcement, “Today’s investors, and the advisors who serve them, want sophisticated, low-cost strategies and more control over their investment choices and outcomes”.  At The ETF Store, we believe ETFs provide us with the ability to offer more sophisticated, lower cost strategies to our clients while at the same time allowing a greater level of control over things such as active manager risk, buy/sell decisions, and taxable events.  As we discussed with Schwab’s Director of ETF Capital Markets back in October, investors continue to be the clear winners of the continued innovation and competition in the ETF space.  With Schwab’s ETF platform, it’s our belief that the benefits of ETFs for investors just keep getting better.

The Winner of ETF Price Wars? You!

Listen to The ETF Store Show every Tuesday at 9am on ESPN 1510 as we cover everything you need to know about Exchange Traded Funds and the world of investing.

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On our most recent radio broadcast, we discussed a Fortune Magazine article titled “The Great ETF Mega-War”, which included several noteworthy data points relating to ETF fund flows and fees.  Regarding fund flows for both mutual funds and ETFs, the article stated:  “The mutual fund industry has seen steady outflows from equity funds in the past few years — $122 billion in the first 11 months of 2012, according to ICI.  During the same period, $100.6 billion moved into equity ETFs”.  Pertaining to fees, the article examined the so-called ETF price war between Vanguard, State Street, and iShares:  “Vanguard isn’t just the cheapest of the three.  Its fees — 0.15% of assets for stock ETFs — are about a quarter of the average 0.56% for equity ETFs, according to data through September provided by Lipper.  (The equivalent figure for mutual funds is 1.29%)”.

We explored some of the key factors driving investors out of equity mutual funds and into equity ETFs, not the least of which is obviously the lower ETF fees highlighted in the second point above.  We further noted that the takeaway here is not so much that Vanguard ETFs are perhaps cheaper than some of the other ETFs, but that the Vanguard equity ETFs average almost 1.15% less than the average equity mutual fund.  We also explained how even with more investors turning bullish in January with the S&P 500 up over 6%, investors still preferred to access US equities through ETFs (with this additional food for thought from Reuters:  “ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor”).

In addition to covering the Fortune Magazine article, we also fielded several listener questions including an interesting one on the Health Care Select SPDR ETF (ticker XLV).  In our weekly market update, we discussed the Dow Jones Industrial Average finally crossing over the 14,000 mark for the first time since October 2007 and what that could mean for bonds.  Finally, in our ETF spotlight segment, we highlighted an extremely low cost, broad based US equity ETF, the Schwab U.S. Broad Market ETF (ticker SCHB), and compared this ETF to a mutual fund behemoth – the American Funds Growth Fund of America.

USCF CIO John Hyland on Commodity ETFs

Listen to The ETF Store Show every Tuesday at 9am on ESPN 1510 as we cover everything you need to know about Exchange Traded Funds and the world of investing.

Click here to listen to The ETF Store Show now.

On our most recent radio broadcast, John Hyland, Chief Investment Officer for United States Commodity Funds, joined us to discuss investing in commodities and commodity exchange traded products.  At The ETF Store, we believe commodities can play a very important role for most long-term investors as part of a well-diversified portfolio.  Commodities have traditionally served as an excellent inflation hedge and can potentially offer substantial portfolio diversification benefits.  ETFs have changed the game for investors by offering easy and cost effective access to commodity exposure that, in the past, would have typically been reserved for sophisticated, wealthy, and/or institutional investors.  ETFs have essentially “democratized” commodity investing.  John offered his thoughts on commodities as an investment and discussed the potential benefits of investing in commodities through exchange traded products.  John also delved into some specific commodity sectors that currently seem appealing.

In our weekly market update, we discussed the 35%+ decline in Apple (AAPL) and explained how an ETF such as the Powershares QQQ (QQQ) could be a better way to go for diversified exposure to Apple.  We also explained the so-called “earnings cliff” (no – not the “fiscal cliff”) and how it could potentially impact your investments.  Finally, in our ETF spotlight segment, we highlighted a particularly interesting broad based commodity ETF, the United States Commodity Index Fund (ticker USCI), and described how this ETF differs from some of the other broad based commodity exchange traded products.  We also compared this ETF to one of the largest commodity mutual funds.