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Cheapest ETF Portfolio Now Cheaper

By
Matt Hougan
March 18, 2014
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With Charles Schwab cutting fees on its emerging market ETF, my ultra-low-cost ETF portfolio has gotten even cheaper.

Six years ago, I started tracking “The World’s Cheapest ETF Portfolio.” It was an aggressive portfolio holding the lowest-cost ETF in each of six asset categories:

  • 40 percent Broad Market U.S. Equities
  • 35 percent Foreign Equities
  • 15 percent Fixed Income (broadly diversified)
  • 5 percent REITs
  • 5 percent Commodities

At the time, you could gain exposure to that portfolio for just 0.16 percent a year in annual fees. I thought that was pretty good. But over the years, it’s gotten cheaper and cheaper. And with Charles Schwab recently lowering the fee on its emerging market ETF, it has hit a new low.

You can now gain exposure to a diversified, broad-based portfolio for a blended fee of 0.086 percent. That means you pay $8.60 for every $10,000 invested.

It’s the cheapest diversified ETF portfolio in the world, and it looks like this:

The World's Lowest Cost ETF Portfolio
Asset Class Weight Fund Ticker Expense
Ratio
U.S. Equity 40% Schwab U.S. Broad Equity ETF SCHB 0.04%
Developed Markets Equity 30% Schwab International Equity ETF SCHF 0.09%
Emerging Markets Equity 5% Schwab Emerging Markets Equity SCHE 0.14%
Fixed Income 15% Schwab U.S. Aggregate Bond SCHZ 0.05%
REITs 5% Schwab U.S. REIT ETF SCHH 0.07%
Commodities 5% UBS E-TRACS DJ-UBS Commodity TR ETN DJCI 0.50%
Blended Expense Ratio 0.09%

For 8.6 basis points, you get exposure to 3,776 stocks, 1390 bonds and 19 commodities, covering more than 40 countries and more than a dozen currencies. Aside from the commodities fund (DJCI | B-30), you can trade, rebalance and manage this portfolio, commission free, if you have a Schwab account. It’s one of the best deals in investing history.

If you want to replace DJCI with a commodities fund you can trade commission free, you can sub in the US Commodity Index Fund (USCI | A-47). Your blended expense ratio rises to 0.113 percent.

Schwab Lowest-Cost ETF Portfolio
Asset Class Weight Fund Ticker Expense
Ratio
U.S. Equity 40% Schwab U.S. Broad Equity ETF SCHB 0.04%
Developed Markets Equity 30% Schwab International Equity ETF SCHF 0.09%
Emerging Markets Equity 5% Schwab Emerging Markets Equity SCHE 0.14%
Fixed Income 15% Schwab U.S. Aggregate Bond SCHZ 0.05%
REITs 5% Schwab U.S. REIT ETF SCHH 0.07%
Commodities 5% US Commodity Index Funds USCI 1.03%
Blended Expense Ratio 0.11%

 

ETF DAILY DATA

The small-cap fund 'IWM' added money on Thursday, Jan. 22, as net inflows and markets stoked higher by eurozone QE news lifted total U.S.-listed ETF assets above $2 trillion.

A slew of iShares funds, including the eurozone-focused 'EZU,' paced the firm's issuer-leading inflows on Thursday, Jan. 22. The ECB's announcement about aggressive QE in the eurozone stoked markets and lifted total U.S.-listed ETF assets to more than $2 trillion.

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