Since I want to add $100/month of exposure to the S&P 500 each month, SPY doesn't make sense--trading costs, even at $9/trade, will eat that up and more than make up for the difference in expense ratio between SPy and the Vanguard 500 index fund. However, I saw that the Schwab U.S. Large-Cap ETF, which is Schwab's version of the SPY, has zero trading fees from a Schwab brokerage account. It's expense ratio is much lower than the Vanguard index fund, at 0.04%. Is there some sort of catch with the Schwab ETF? If it does as good a job at tracking the market as the SPY or Vanguard, it seems like the perfect solution.
Several discount brokers advertize no commissions on ETF trades. I don't know the details, but presumably its a loss leader program intended to attract your account, in hopes that you buy other services as your account grows.
Is there some sort of catch with the Schwab ETF? If it does as good a job at tracking the market as the SPY or Vanguard, it seems like the perfect solution.The 'catch' --if you want call it that-- is that if you sell shares sooner than the mandatory holding-period --which will vary from broker to broker among those who offer commish-free ETFs -- you will have have to pay the commish that would have otherwise been charged to you. Scottrade, AmeriTrade, Fidelity, and Schwab all offer a selection of commish-free ETFs, and maybe other brokers as well. So shop around.
Here's a chart showing the performance of the fund you are looking at (I think, SCHX), versus the SPY ETF, as well as the S&P 500 itself. Looks pretty close. http://finance.yahoo.com/echarts?s=SPY#symbol=spy;range=2y;c...
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