Charles Schwab’s recent decision to slash fees in its ETFs is expected to save investors nearly $4 million a year, based on back-of-the-envelope calculations.
Investors are saving from the cheaper expense ratios as the ETF price war rages on. While the fee cuts are only a fraction of a percent, those pennies add up.
With Schwab joining the fee fray, the expense ratios on 15 ETFs have been reduced, which translate to a hefty sum when considering the total investor assets in the funds. [Schwab Takes the Lead in ETF Price War]
For instance, we can take the total assets under management, and the new and old expense ratios to roughly calculate how much investors will save annually:
- Schwab U.S. Broad Market ETF (NYSEArca: SCHB): old 0.06% expense ratio, new 0.04% expense ratio, $1.1 billion assets under management. The old cost to investors is $660,000 and the new cost to investors is $440,000, which comes to $220,000 saved.
- Schwab U.S. Large-Cap ETF (NYSEArca: SCHX): old 0.06% expense ratio, new 0.04% expense ratio, $887.5 million assets under management. The old cost to investors is $532,500 and the new cost to investors is $355,000, which comes to $177,500 saved.
- Schwab U.S. Large-Cap Growth ETF (NYSEArca: SCHG): old 0.13% expense ratio, new 0.07% expense ratio, $475.1 million assets under management. The old cost to investors is $617,630 million and the new cost to investors is $332,570, which comes to $285,060 saved.
- Schwab U.S. Large-Cap Value ETF (NYSEArca: SCHV): old 0.13% expense ratio, new 0.07% expense ratio, $385.8 million assets under management. The old cost to investors is $501,540 and the new cost to investors is $270,060, which comes to $231,480 saved.
- Schwab U.S. Dividend Equity ETF (NYSEArca: SCHD): old 0.17% expense ratio, new 0.07% expense ratio, $507.3 million assets under management. The old cost to investors is $862,410 and the new cost to investors is $355,110, which comes to $507,300 saved.
- Schwab U.S. Mid-Cap ETF (NYSEArca: SCHM): old 0.13% expense ratio, new 0.07% expense ratio, $204.5 million assets under management. The old cost to investors is $265,850 and the new cost to investors is $143,150, which comes to $122,700 saved.
- Schwab U.S. Small-Cap ETF (NYSEArca: SCHA): old 0.13% expense ratio, new 0.10% expense ratio, $641.5 million assets under management. The old cost to investors is $833,950 and the new cost to investors is $641,500, which comes to $192,450 saved.
- Schwab US REIT ETF (NYSEArca: SCHH): old 0.13% expense ratio, new 0.07% expense ratio, $374.6 million assets under management. The old cost to investors is $486,980 and the new cost to investors is $262,220, which comes to $224,760 saved.
- Schwab International Equity ETF (NYSEArca: SCHF): old 0.13% expense ratio, new 0.09% expense ratio, $768.6 million assets under management. The old cost to investors is $999,180 and the new cost to investors is $691,740, which comes to $307,440 saved.
- Schwab Emerging Markets Equity ETF (NYSEArca: SCHE): old 0.25% expense ratio, new 0.15% expense ratio, $515.5 million assets under management. The old cost to investors is $1.3 million and the new cost to investors is $773,250, which comes to $526,750 saved.
- Schwab International Small-Cap Equity ETF (NYSEArca: SCHC): old 0.35% expense ratio, new 0.20% expense ratio, $159.6 million assets under management. The old cost to investors is $558,600 and the new cost to investors is $319,200, which comes to $239,400 saved.
- Schwab U.S. Aggregate Bond ETF (NYSEArca: SCHZ): old 0.10% expense ratio, new 0.05% expense ratio, $318.5 million assets under management. The old cost to investors is $318,500 and the new cost to investors is $159,250, which comes to $159,250 saved.
- Schwab Short-Term U.S. Treasury ETF (NYSEArca: SCHO): old 0.12% expense ratio, new 0.08% expense ratio, $232.6 million assets under management; $279,120 and the new cost to investors is $186,080, which comes to $93,040 saved.
- Schwab Intermediate-Term U.S. Treasury ETF (NYSEArca: SCHR): old 0.12% expense ratio, new 0.10% expense ratio, $190.6 million assets under management. The old cost to investors is $228,720 and the new cost to investors is $190,600, which comes to $38,120 saved.
- Schwab U.S. TIPS ETF (NYSEArca: SCHP): old 0.14% expense ratio, new 0.07% expense ratio, $498.9 million assets under management. The old cost to investors is $698,460 and the new cost to investors is $349,230, which comes to $349,230 saved.
All in all, Schwab ETF investors are saving about $3.7 million a year under the new fee structure and the current assets under management, based on these back-of-the-envelope calculations.
Moreover, some investors save on commission as Schwab ETF trades are commission free when bought or sold on the Schwab platform.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.