While there have been a lot of new innovative investment styles hitting the exchange traded fund market, investors should not overlook core strategies to build out the foundations of their investment portfolio.
For example, Charles Schwab has dabbled with fundamental or alternative index-based ETFs to tap into the rising smart beta trend, the ETF provider is more known for its cheap broad market cap-weighted index ETFs.
“We do a lot of thinking per products,” Jonathan de St Paer, Head of Strategy and Product Development at Charles Schwab Investment Management, said at the Charles Schwab Impact Conference. “We focus on having a limited number of products that are going to serve most of our clients’ needs, so [we] do a lot of research and a lot of vetting before we do anything new.”
Schwab has not forgotten its roots, providing investors with cheap, core options to fill out an investment portfolio. For instance, in 2017, Charles Schwab came out with the Schwab 1000 Index ETF (SCHK), which has a dirt cheap 0.05% expense ratio.
The Schwab 1000 Index ETF tries to reflect the performance of the Schwab 1000 Index, which was launched back in 1991. The Schwab 1000 Index provides exposure to America’s largest 1,000 stocks, a collection of large- and mid-cap companies representing 90% of the entire U.S. equity market. The index also acts as the underlying benchmark for the Schwab 1000 Index Fund (SNXFX). The index has outperformed the S&P 500 on an annualized basis since its inception.
“It’s our first ETF that follows a proprietary index, but it’s an ETF or an index with about 25 year track record. We know exactly what it looks like and how it’s behaved over time,” de St Paer said.
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