December 30, 2009 at 6:00 am by Tom Lydon
One of the many appealing characteristics of exchange traded funds (ETFs) is that they are inexpensive relative to mutual funds, but some providers are taking this cost-effectiveness to a whole new level.
Providers like Charles Schwab have entered the ETF landscape with especially competitive pricing. Schwab, for example, unveiled diversified equity funds that can be traded for free on a Schwab platform [More on Scwab ETFs.] and Old Mutual has entered into the ETF market with a zero fee emerging market ETF. [More on this ETF.]
One could only wonder, is the ETF landscape getting so big that the only way to differentiate oneself is through expense ratios? According to Paul Justice at Morningstar, this is not the case. He states that there is still plenty of room to differentiate when it comes to ETF innovation.
Some areas that haven’t been touched include the corporate credit space, alternative investments, unique factor concepts, and long-short commodity strategies. But lower and more competitive fees are certainly an added benefit to the growing ETF space – increased competition benefits investors.
In a nutshell, ETFs continue to bring the benefits of extremely low costs from broadly diversified passive indexing strategies and investors are reaping the rewards of competitive pricing wars. [More benefits of ETFs.]
For more on ETFs, visit our ETF 101 category.
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