“We encourage you to look closely at the expense ratios of the ETF you are considering, but also other factors related to performance and risk,” he wrote in a note.
Schwab’s recent fee reductions are intended to help the firm gain market share with ETF investors looking for broad, diversified exposure to equities and fixed income.
“This move is unlikely to resonate with ETF investors that act more tactically, shifting from one sector or country to another based on macroeconomic and secular trends,” Rosenbluth said.
His outlook reflects the fact that ETF investors are a diverse group, including rapid-fire traders as well as long-term, buy-and-hold investors.
One attractive feature of the ETF structure is that short-term traders and long-term investors can peacefully coexist, unlike mutual funds. [Why Traders and Investors Can Coexist in ETFs]
“We have found that smaller providers … have tried to gather assets while targeting investors with a special focus,” Rosenbluth observed.