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An Inside Look at the Two Cheapest ETFs on the Market

Friday, October 7, 2016 10:57
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PenniesToday we performed a simple screen on the U.S. listed ETF landscape based on “Lowest Expense Ratio,” generating the “cheapest ETFs” listed. The results may surprise some folks.

It is not Vanguard or iShares ETFs with the absolute cheapest ETFs in terms of expense ratio, but rather two offerings from Schwab that we have only marginally covered here in the past.

The Schwab U.S. Broad Market ETF (NYSE:SCHB), with an expense ratio of 0.03%, is presently the cheapest listed ETF. SCHB debuted back in early November of 2009, and has grown nicely, raising nearly $7 billion in assets under management to date. SCHB tracks the “Dow Jones U.S. Broad Stock Market Total Return Index,” which when we lift up the hood and check the oil on, we see nearly 2,000 individual equities (1,996 presently) inside of this fund.


The index offer rather broad diversification across the portfolio basket, since less than 15% of the overall assets in the fund are spread across the top ten holdings. This index has a similar look to say the S&P 500 in terms of the top index membership, as we see the top five holdings rounding out as follows: 1) AAPL (2.66%), 2) MSFT (1.96%), 3) XOM (1.58%), 4) AMZN (1.44%), and JNJ (1.41%). Other than “weightings” differences due to the dilution across the basket, being there are nearly 2,000 securities within this Dow Jones U.S. Broad Stock Market index, as opposed to the 500 member S&P 500 Index and trackers like SPY (SPDR S&P 500, Expense Ratio 0.09%), the top five holdings from a name standpoint within SCHB mimic that of SPY or IVV (iShares Core S&P 500, Expense Ratio 0.07%) for example.

Another ETF from Schwab known as SCHX (Schwab U.S. Large Cap, Expense Ratio 0.04%) is actually the “next cheapest ETF” in terms of expense ratio, also at 0.03%, and this fund like SCHB, also tracks a Dow Jones Index known as the DJ U.S. Large-Cap Total Stock Market Index. SCHX is nearly as large as SCHB, with $6.3 billion in assets under management presently, and like SCHB debuted back in early November of 2009.

Both of these Schwab funds will soon be celebrating their seventh year of live performance history. Speaking of performance history, both SCHB and SCHB currently have 4-star ratings from Morningstar, according to data obtained from the Morningstar website.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.

Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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