iShares Enters World's Cheapest ETF Portfolio

November 10, 2015

Nothing I write about gets more attention than my “World’s Lowest-Cost ETF Portfolio.” It’s a simple portfolio, holding six ETFs offering the cheapest-available exposure to U.S. equities, international equities, emerging market equities, REITs, bonds and commodities.

When I started tracking the portfolio in 2008, the portfolio had a blended average expense ratio of just 0.16 percent a year. I thought that was amazing.

But it’s gotten cheaper every year, as the three-way fee war between iShares, Vanguard and Schwab for plain-vanilla exposure has pushed prices lower and lower.

iShares Undercuts Schwab

Earlier today, BlackRock lowered the fee on its iShares Core S&P Total U.S. Market ETF (ITOT | A-100) from 0.07 percent per year to just 0.03 percent, making it the cheapest U.S. equity ETF.

The move pushes ITOT into the portfolio, dislodging the Schwab U.S. Broad Market (SCHB | A-100), which charges 0.04 percent.

With the move, the all-in blended fee for the portfolio falls to just 0.079 percent per year—less than half of where it started more than six years ago.

Truly it is the best deal in the history of finance. Paying just $7.90 for every $10,000 invested, investors gain exposure to more than 4,000 stocks, 1,300-plus bonds, 40-plus countries, 17 commodities and a dozen currencies.

Here’s the portfolio in its current iteration:

Asset Class Weight Fund Ticker Expense Ratio
U.S. Equity 40% iShares Core S&P Total U.S. Market ETF ITOT 0.03%
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 E-TRACS DJ-UBS Commodity ETN DJCI 0.50%
Total 0.08%


Note to the ETF industry: If someone would just launch a commodity fund priced at 0.25 percent, we’d really be in business.

Despite representing just 5 percent of the total portfolio, the E-tracs DJ-Bloomberg Commodity Total Return (DJCI | C-48) accounts for the largest share of fees paid, totaling 30 percent of all fees in the portfolio.

Low-cost providers: Let’s get this done.

At the time this article was written, the author owned the following securities: IEMG, AGG, VTI, VEA. Contact Matt Hougan at [email protected].

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