{"id":1223,"date":"2012-04-20T20:41:16","date_gmt":"2012-04-21T03:41:16","guid":{"rendered":"http:\/\/www.marketriders.com\/blog\/?p=1223"},"modified":"2016-12-21T07:34:26","modified_gmt":"2016-12-21T15:34:26","slug":"schwab-could-be-etf-investors-new-vanguard","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/schwab-could-be-etf-investors-new-vanguard\/","title":{"rendered":"Schwab could be ETF investors\u2019 new Vanguard"},"content":{"rendered":"

Like-minded rivals battle to be king of low costs<\/h2>\n

Vanguard Group has become the world\u2019s largest fund company, with more than $1.7 trillion under management. Founder John Bogle discovered that indexing markets outperformed active managers after fees, and the firm has become a champion for low-cost investment products.<\/p>\n

Now there\u2019s another formidable player in this penny-a-point game.<\/p>\n

Charles Schwab Corp. SCHW +0.29%<\/a> has aggressively entered the exchange-traded fund market with products that compete with both Vanguard and BlackRock Inc.\u2019sBLK -0.10%<\/a> iShares lineup.<\/p>\n

Schwab has ETFs covering all of the major asset classes, including Schwab U.S. Broad Market ETF SCHB +0.15%<\/a> to compete with Vanguard Total Stock Market ETFVTI +0.16%<\/a> .<\/p>\n

Schwab\u2019s four bond ETFs include Schwab US Aggregate Bond ETF SCHZ -0.04%<\/a> , which competes with Vanguard Total Bond Market ETF BND -0.01%<\/a> and iShares Barclays Aggregate Bond Fund AGG +0.02%<\/a> . It also offers emerging markets and foreign developed-country ETFs, such as Schwab Emerging Markets Equity ETF SCHE +0.71%<\/a> that competes with Vanguard MSCI Emerging Markets ETFVWO +0.64%<\/a> and iShares Inc. MSCI Emerging Markets Index Fund EEM +0.67%<\/a> .<\/p>\n

Rebel, rebel<\/h3>\n

But here\u2019s the clincher: Schwab is pricing several of its domestic-stock ETFs lower than Vanguard.<\/p>\n

What\u2019s the deal? When other ETF sponsors are looking for niches like a double-leveraged short on gold, why would Schwab go after the biggest and most entrenched products? Sure, Schwab has tremendous reach with millions of investors, but anyone can buy any ETF at Schwab because they trade like stocks.<\/p>\n

Charles Schwab started his firm around the same time as Bogle started Vanguard. Leveraging new regulation in the 1970\u2019s, Schwab launched the first discount brokerage and drove down broker commissions.<\/p>\n

Once a rebel, always a rebel. Since Schwab took back control of his namesake firm, it seems that he sees an opportunity to disrupt the retirement industry, particularly 401(k)s. ETFs will enable him to do so and most important, leave a positive legacy for Schwab.<\/p>\n

For Schwab, ETFs are not \u201cfunds\u201d but rather tools for building precisely allocated, sophisticated retirement portfolios more akin to how endowments and pensions invest. Unlike the mutual fund world, where one active manager is pitted against another like jockeys in a horse race, ETFs are tools for getting market exposure. Markets are the ingredients of successful diversification \u2014 the more you have, the better.<\/p>\n

U.S. stocks and counterparts in other developed countries tend to move independently from each other. So allocating money to both markets creates instant diversification. Emerging markets also move to the beat of a different drummer. Bonds and real estate are further afield from stocks, so adding these markets provides excellent diversification. Every year, some market wins and others lose and no expert can predict the future. So own them all! ETFs enable an investor to do so.<\/p>\n

With a proper mix of ETFs tracking many markets, it\u2019s possible for any investor with any amount of savings to build a low-cost, diversified portfolio including shares of U.S. companies, stocks in foreign developed countries and emerging markets, U.S. government bonds, real estate, and commodities. This wasn\u2019t possible just a few years ago.<\/p>\n

Schwab\u2019s plan is to become a dominant player the 401(k) market, leveraging its ETFs and its broad platform. Because new Department of Labor laws require fee disclosure, corporations are going to wake up and realize that they are allowing their employees to be ripped off on a grand scale by many traditional 401(k) plans.<\/p>\n

Enter Schwab with low fee 401(k) plans using ETFs. This is going to be highly disruptive. Today\u2019s 401(k) platforms only accommodate mutual funds and that\u2019s why employers can\u2019t offer low cost ETFs to employees. Schwab\u2019s new \u201cIndex Advantage\u201d retirement plan will leverage the new changes in fee disclosure laws, its ETF roster, and a new 401(k) platform that accommodates them.<\/p>\n

In this way, Charles Schwab, like Bogle, will cement his legacy as an advocate for working Americans and an investment industry leader who helped keep billions of dollars in people\u2019s pockets.<\/p>\n","protected":false},"excerpt":{"rendered":"

Like-minded rivals battle to be king of low costs Vanguard Group has become the world\u2019s largest fund company, with more than $1.7 trillion under management. Founder John Bogle discovered that … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":1377,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[23],"tags":[],"yoast_head":"\nSchwab could be ETF investors\u2019 new Vanguard<\/title>\n<meta name=\"description\" content=\"Discount Brokers: Try MarketRiders investment software Free for 30 days & get a Free Investment eBook at MarketRiders.com. 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