How To Get An Almost Free ETF Portfolio

April 29, 2014

The World’s Cheapest ETF Portfolio just got cheaper; here’s how to get an even better deal.

Charles Schwab has been doing great things for the ETF community. Its commitment to being the lowest-cost ETF provider in the world has put sustained downward pressure on ETF fees.

I know, because for the past six years, I’ve been monitoring The World’s Cheapest ETF Portfolio. It’s a broadly diversified portfolio holding the lowest-cost ETF in six different asset classes, including stocks, bonds, REITs and commodities.

When I started monitoring the portfolio, the all-in costs were just 0.16 percent per year, and the portfolio was made up mostly of Vanguard ETFs. Today, thanks to a series of fee cuts—including, most recently, Schwab cutting fees on the Schwab International Equity ETF (SCHF | B-96) from 0.09 to 0.08 percent per year—the portfolio’s costs have been cut in half to just 0.08 percent (0.083 percent if you’re being exact), and it’s Schwab almost all the way.

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 0.08%
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 Etracs DJ-UBS Commodity TR ETN DJCI 0.50%
Blended Expense Ratio 0.08%

 

The portfolio is an amazing bargain. For just $8.30/year for every $10,000 invested, you get exposure to nearly 4,000 stocks, 1,400 bonds and 19 commodities stretched across 40 different countries and a dozen different currencies. It’s one of the best deals in the history of investing.

But what if I told you that you could get a better deal? What if I told you that you could get a diversified ETF portfolio almost for free?

Lowest ‘Realized Cost’

Expense ratios are a critical factor when evaluating ETFs. But in the end, what really matters is not what you pay, but what you get.

Here’s what I mean.

 

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