Charles Schwab has begun offering a new line of exchange traded funds that do not require the buyer to pay any sort of commission.
Exchange traded funds work essentially the same way that mutual funds do, in that you and other individuals are getting together and mutually funding an investment, but you can buy and sell share of an exchange traded fund just as you would with a stock. The primary benefit of exchange traded funds is that they have all of the advantages of index funds with very low management costs.
A typical mutual fund might have an expense ratio of 1.5%. Schwab’s ETFs have management fees of 0.08% to 0.35% per year. This means that your investment will perform better than comparable investments with higher expense ratios, because more of your money is going toward the principal investment each year and less of it is being eaten up by fees and commissions.
Schwab’s new ETF offerings include a number of different types of funds with different investment objectives. With a Schwab investment account you are now able to buy or sell Schwab ETFs without paying any fees or commissions.
