ETF Trends
ETF Trends

Investors have displayed a preference for large-cap exchange traded funds, a theme that was on full display last year when three of the top asset-gathering ETFs were S&P 500 funds, including the SPDR S&P 500 ETF (NYSEArca: SPY).

Beyond S&P 500 funds, investors have a dizzying array of large-cap ETFs, many of which feature paltry fees, from which to choose. However, it pays to remember that an ETF’s annual fee is just one component of total cost of ownership.

“The expense ratio is just one aspect of cost. Trading costs also have an impact on total return. While the underlying stocks in each of these indexes are mostly the same and are all liquid, some of the ETFs with fewer assets trade less and have wider bid-ask spreads,” according to Morningstar.

Still, investors, both retail and professional, readily embrace ETFs with the lowest fees. Reputations for highly liquid, low-cost ETFs in large part explain Vanguard’s asset-gathering proficiency and the ascent of Charles Schwab (NYSE: SCHW) up the ETF industry ladder.

The $3.8 billion Schwab U.S. Large-Cap ETF (NYSEArca: SCHX) is one of Schwab’s bread and butter equity ETFs and is an alternative to standard S&P 500 funds. In 2014, SCHX performed inline with the S&P 500 with a comparable level of volatility. Over the past three years, the Schwab ETF has slightly outpaced the benchmark U.S. index. [Low-Cost, Diversified ETFs]

SCHX tracks the Dow Jones US Large Cap Total Stock Market Index.

“This index tracks approximately the 750 largest U.S. stocks and is available through SCHX. Schwab offers a suite of ETFs based on Dow Jones indexes. The Dow Jones Small Cap Total Stock Market Index includes the next largest 1,750 stocks, while the mid-cap index encompass 501st to 1,000th largest stocks. S&P acquired the Dow Jones indexes business in 2010. Schwab’s size segment funds have the lowest expense ratios in their respective categories, and liquidity has improved as these funds have gained assets,” notes Morningstar.

Not only is SCHX’s 0.04% expense ratio among the lowest for U.S. equity ETFs, Schwab advisor and retail clients can trade the ETF commission-free on Schwab’s ETF OneSource platform. Following a recent expansion, Schwab ETF OneSource is now home to nearly 200 ETFs.

OneSource, the largest commission-free ETF platform on the market today, has been a significant driver of ETF asset growth for Schwab. Last year, ETF assets custodied at Schwab surged 18% to $231 billion, according to the firm’s fourth-quarter and 2014 snapshot released. [ETF Assets Continue Flowing to Schwab]

“Schwab ETF OneSource has $38 billion in assets under management as of December 31, 2014. Flows into ETFs in the program were over $10 billion in 2014, representing 43 percent of the total ETF flows at Schwab,” the company said in the statement.

Schwab U.S. Large-Cap ETF