Read and review commentaries written by Morningstar experts. These observations and insights are specific to Exchange Traded Funds.
Investors Win with Schwab's Entry into ETFs
Chuck's decision to waive ETF commissions could be the "shot heard around the world."
by Scott Burns | 2009-11-05 05:00:00
I have to admit, Schwab's Nov. 2 announcement that it would not charge trading commissions to clients purchasing Schwab ETFs on its online trading platforms was a bit of a shock to me.
I have long theorized that it was only a matter of time until one trading platform or discount brokerage launched its own line of ETFs and used subsidized trading costs to fuel asset growth. I had initially figured that said company would offer discounted trades--say, $3 a trade instead of $12 a trade. It was hard for me to see a scenario where a for-profit group of firms would offer its funds with a $0 trading cost. So, it was a huge surprise when Schwab not only came out with what can only be described as ultracheap offerings from an expense-ratio perspective but also dropped trading costs to $0.
Another month in ETF land, and another fund runs into high-profile problems. PowerShares DB US Dollar Bullish stopped issuing new shares today, November 5, and even ceased trading for 45 minutes of the afternoon. These developments may start alarm bells ringing for those who paid attention to the troubles with commodity ETFs earlier this year, or short financial ETFs last year, but this time it really is different (and we say this with all due respect to the late Sir John Templeton). We're not especially concerned about this temporary fund closure, and neither should you be whether you are an investor in UUP or just wondering what it might imply for the broader market.
Previous ETF closures and trading halts have been caused by massive market dislocations and regulation. As the underlying investments faced severe res… Full Story
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Investors Win with Schwab's Entry into ETFs
Chuck's decision to waive ETF commissions could be the "shot heard around the world."
I have long theorized that it was only a matter of time until one trading platform or discount brokerage launched its own line of ETFs and used subsidized trading costs to fuel asset growth. I had initially figured that said company would offer discounted trades--say, $3 a trade instead of $12 a trade. It was hard for me to see a scenario where a for-profit group of firms would offer its funds with a $0 trading cost. So, it was a huge surprise when Schwab not only came out with what can only be described as ultracheap offerings from an expense-ratio perspective but also dropped trading costs to $0.
Overall, this is an i… Full Story