Tuesday, January 18, 2011

Lower fees for ETF

 
 
 
A price war is cutting expenses to the bone on index-tracking exchange-traded funds and mutual funds. And that suits Harold Evensky fine.
"It's great," said the Coral Gables, Fla., financial adviser, who makes those funds a mainstay in his portfolios. "My clients get the benefit."
For a long time, traditional index funds were the vehicle of choice for cost-conscious investors, but now the ETF marketplace holds the lowest fees and most intense cost competition. Industry giants including Vanguard Group, BlackRock Inc., Charles Schwab Corp. and State Street Corp. are racing to see who can cut expenses the fastest, vying for ...
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2 comments:

AC said...

As an investor in ETF, its nice to see such trend, but the question is : would the Singapore market follow ? Personnaly I don't think so. Please prove me wrong.

January 19, 2011 1:28 PM
Spur said...

This trend is in the US becoz of huge competition and huge interest by consumers. There are thousands of ETFs in US and consumers there have been abandoning mutual funds (unit trusts) for ETFs in the past few years. Some portion of the ETF industry there are also kinda like cowboy town with funny synthetic ETFs, ETNs, use of lots of derivatives, counter-party risks, going into weird and niche asset classes, etc etc.

Even ETFs on London stock exchange are much higher in expense ratios -- similar to S'pore's or just slightly lower. But definitely more variety.

Some people in S'pore buy into ETFs traded on US stock exchanges becoz of the extremely low cost and variety of ETFs (some of them are the tried and true ones like Vanguard and Blackrock iShares). However you face 2 risks --- brokerage risk of going bankrupt or fraud, and the huge US estate tax if you mati.

Others buy those traded in London, but similarly got brokerage risk, and the commissions tend to be higher.

January 19, 2011 2:20 PM

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