Schwab ETFs Just Got Better

September 26, 2012

Sometimes price markdowns are applied to substandard goods, like overripe fruit or last season’s fashions. Not so with Schwab’s ETFs.

Schwab’s 15 ETFs were already attractive as low-fee, viable investment products even before this recent fee cut.

That’s in part because they’ve already cleared the all-important hurdle of investor interest.

The ETFs from Schwab for the most part have decent assets and can be traded without excessive cost. What’s more, they deliver representative coverage of their respective target markets.

Does that mean that each Schwab fund has the highest asset base, strongest daily trading volume and tightest spread in each market segment? Or that its basket perfectly captures the market in each case?

No, but these funds are ready to step out from under the shadow of giant funds from other issuers.

Here’s a quick look at the Schwab suite along the lines of assets, tradability and exposure to the market.

Assets

Schwab launched its first of its 15 funds about three years ago in late 2009 and rolled out more in 2010 and 2011.

All of the funds have over $100 million in assets. The range is from about $1.1 billion for the Schwab U.S. Broad Market ETF (NYSESArca: SCHB) to $167 million for the Schwab International Small-Cap Equity ETF (NYSEArca: SCHC).

Schwab AUM

We’ve seen many fund closures in 2012, but in my view there’s little risk of that happening to any of these funds, judging from these solid assets under management.

Spreads

Expense ratios don’t tell the full story on costs. They’re just the easiest and most obvious costs to talk about.

The cost to buy and sell the fund matters too, of course. One measure of this cost is the bid/ask spread, which is the difference between highest price someone is willing to buy and the lowest price someone is willing to sell.

The following table shows the spread as a percent—the spread in cents divided by the midpoint, which levels the playing field for $10 shares and $50 shares.

 

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