Schwab ETFs are a great choice for beginning investors. In fact, you’ll often see Charles Schwab mentioned as ideal for beginning investors. Even better, if you’re seeking commission-free ETFs, then Schwab ETFs are the way to go.
Therefore, if you’ve already done basic investing into savings and retirement accounts, and you’re ready to take things to the next level, you might want to learn more about ETFs in general and Schwab ETFs specifically.
What Are ETFs?
Exchange-traded funds (ETFs) are a type of investment fund, combining stocks, bonds, and commodities. Therefore, they provide one of the easiest ways to start diversifying your investment portfolio.
ETFs vs. Mutual Funds
If you are familiar with mutual funds, then you’ll find it pretty easy to understand ETFs. However, whereas classic mutual funds are bought and sold once a day, ETF trading happens several times per day. Furthermore, the fees are usually lower than they are with mutual funds. Plus ETFs are more tax-friendly.
Another difference is that as a new investor you’ll have a lot more insight into your investment than you do with mutual funds. ETFs publish their holdings every day. Therefore, you can see exactly what your investment is each day. In contrast, mutual funds only publish their holdings on a quarterly basis. If you’re concerned about where your money is invested, you might want more transparency than that.
Schwab ETFs Offer Commission-Free Trading
ETFs trade like stocks, which means that there’s typically a fee each time that you make a trade. The fee is often low, but if you trade frequently, then it can add up. Therefore, it’s important for you to be very aware of that fee.
More importantly, you should be aware of the option to avoid that fee. Commission-free ETFs give you that option. If you’re just starting to invest in ETFs then you definitely want to look for a place that will give you this option.
One of the most-mentioned benefits of Schwab ETFs is that they are commission-free. Most brokerage companies offer some commission-free ETFs. However, each has their own terms, conditions, and number of available options. Charles Schwab currently offers 500+ commission-free ETFs. This is a large number compared to many other brokerage firms.
In fact, when Schwab launched their commission-free ETF program in 2013, they were one of the first companies to offer this now-popular service. They had about 100 commission-free ETFs at the time of launch, and they’ve just grown larger since. They don’t charge any fees for early redemption or assessing activity, so costs stay low.
Schwab ETF OneSource vs. Schwab ETFs
Charles Schwab offers a range of different products. If you’re interested in commission-free ETFs then you want to learn more about the Schwab ETF OneSource program. It’s through this program that you get access to those 500+ commission-free ETFs.
However, as Motley Fool and others have pointed out, you can also invest in Schwab’s own ETFs. There aren’t nearly as many as these (about two dozen). However, in some cases, they may be financially the smarter choice. That’s because each ETF has an expense ratio. If an ETF is very specialized, the expense ratio is higher. Therefore, you might actually benefit from paying a smaller commission than getting a commission-free ETF through Schwab ETF OneSource.
That said, if you already have an account with Schwab then you can get access to commission-free options even on regular Schwab ETFs. In other words, it pays to do your research. Luckily, Schwab offers a lot of online resources to help you better understand all of your choices and the benefits or ramifications of each choice.
Getting Guidance and Support
As a new investor, you may find ETFs overwhelming. That’s where Schwab’s tools and support system can really help. They have set things up in such a way that makes it easy to understand how to invest in ETFs. If you’re still confused, they have 24/7 support to answer your questions via phone or chat. Moreover, if you live near a branch office, then you can meet with an advisor in person and attend free educational workshops to improve your understanding of these investments.
Use Schwab’s ETF Select List
One important tool is the Schwab ETF Select List. The company launched this original tool in 2011 to help make it easier to see which ETFs are best for you. You can sort the list by various features, including the expense ratio. In other words, it’s easy to see what your trading cost will be when you use this list. The list is updated quarterly.
Use Schwab’s Personalized Portfolio Builder
The Personalized Portfolio Builder is another important tool that you can use to improve your Schwab ETF trading decisions. You provide information about your financial goals, your investment time period, and your tolerance for risk. Then you work with the tool to see the best recommendations for your ETFs. This helps you create a diverse portfolio that meets your unique needs.
Or Use a Robo-Advisor
If you like the idea of ETFs but don’t want to deal with managing them yourself, that’s okay. Schwab offers Schwab Intelligent Portfolios. In other words, they have a robo-advisor tool that will manage your investments for you.
Benefits of a Schwab ETF
According to a study of the Schwab ETFs review available online, here are the benefits that investors appreciate most:
- In addition to no-commission ETFs, the ETFs that have commission fees are low-cost.
- Expense ratios are comparable to or lower than competitors.
- It’s relatively easy to navigate Schwab ETFs, and especially ideal for beginners.
- Schwab ranks among the best when it comes to the detail and transparency of their research.
Furthermore, Schwab ETFs regularly rank as the best in the industry. In mid-2018, Forbes listed Charles Schwab as number one for ETFs, followed closely by Vanguard in second place. They specifically noted that Schwab has the cheapest ETF, recommending the Schwab U.S. Small-Cap (SCHA) as the most inexpensive option overall.