Charles Schwab today unveiled a new system that dumbs down the exchange traded fund (ETF) selection process for investors who are overwhelmed by the sheer number of choices available these days.
The ETF Select List gives investors a choice of low-cost, pre-screened ETFs that represent 48 asset classes, making it far easier for investors to find ETFs that track certain market segments.
Schwab highlights just one ETF in each category, chosen based on specific criteria including expense ratio, risk, structure and how well it fits into its category. To make the first round of selection, an ETF has to meet minimum criteria that include assets under management, track record, trading volume, bid-ask spread, tracking error and the number of competitive market makers.
The brokerage cautions that the list isn’t an exhaustive one and that there are many high-quality ETFs out there that would be a good fit for investors.
Schwab’s move is a smart one, given that a recent Cogent Study showed that 7 out of 10 investors don’t even know what an ETF is. For those getting their first exposure to the market, the list of more than 1,000 funds could overwhelm even the most savvy investor.