Zero Fee Trades Likely Means Lower Fee ETFs - Part 1

The investment world was flipped upside-down recently when Charles Schwab eliminated trading commissions on stocks, ETFs, and options last month. The move prompted TD Ameritrade, E*TRADE, and other players in the industry to follow suit quickly or risk losing clients. The move is not the first time we have seen trading commissions reduced, but never before have retail investors been able to trade literally for free.

Most people would claim that the late Jack Bogle started this ‘war on fee’s’ decades ago when he introduced the low-cost index fund at Vanguard. The first low-cost mutual funds offered investors an inexpensive, at the time, option for investors. The low fee option Vanguard introduced proved to be a good move as Vanguard grew its asset base into what is now more than $5.5 trillion. Over the years, other firms began to fight back by cutting their fees, but the war had already started, and investors began to see the value in low-cost options.

Jack Bogle himself would often talk about how fees cost investors hundreds of thousands of dollars over their investing lifetime. The simple idea of paying lower fees equates to higher account balances over time makes perfect sense, especially to anyone who understands the power of compounding returns.

Zero fees on trading commissions will leave millions of dollars in investors' hands. It has been estimated that Charles Schwab alone will lose out on somewhere between $90 and $100 million in quarterly revenue now that they cut their trading fee to zero. That is just $100 million for one firm and one quarter. Based on those figures only of Schwab, we could easily see somewhere close to $1 billion is left in the hands of investors over the course of a year.

Now that we have hit zero fees on trading commissions and investors continue to learn how low-cost investing helps their overall returns, it's likely we will see more fee-cutting throughout the investing industry. The high fee’s on mutual funds have already begun pushing investors to ETFs. And the ETF industry has already started fighting the battle to cut costs. Continue reading "Zero Fee Trades Likely Means Lower Fee ETFs - Part 1"

Befriend The December Volatility!

Matt Thalman - INO.com Contributor - ETFs


As we roll through the second week of December, the markets seem to be going a little crazy as the year comes to an end. From January 1st until November 28th of this year, the Dow Jones Industrial Average had gained 7.02% while the S&P 500 was up 10.6%. But, over the first week and a half of December, the Dow has lost 1.68% while the broader S&P 500 has fallen 2.04%.

Furthermore, the bulk of those declines came earlier this week when the markets closed lower Monday, Tuesday and Wednesday. And not only did the major indexes end the sessions off the mark, but their intraday lows put the indexes down by more than 1.25% on two of the three trading sessions.

The downward pressure being felt earlier this week could easily be blamed on a number of things which I am sure they were by many of the pundits out there; oil prices falling, oil prices rising, issues in Europe and Draghi not doing enough, slowing growth in Asia, weak growth numbers here at home, a poor start to the holiday shopping season, the list could go on and on. But, I personally don't believe any of those reasons are why the market has recently been falling.

The December Dive

Continue reading "Befriend The December Volatility!"

The Perfect ETF Portfolio Results For 2013

Today, I will be examining the Perfect ETF Portfolio and what it has achieved for investors over the past several years. This portfolio is specifically designed to avoid risk and provide a modest return. It is appropriate for IRAs and Roth retirement portfolios using ETFs. This portfolio is our most conservative portfolio and is designed to steadily plod along and protect capital with less risk than an outright position in the S&P 500 index.

With the Perfect ETF Portfolio, we track just four ETFs in non-correlating markets. You would divide your capital into four parts and trade equal dollar amounts in each of the ETFs.

GLD - SPDR Gold Shares Trust

This investment seeks to replicate the performance and net of expenses of the price of gold bullion. The trust holds gold and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the trust terminates and liquidates its assets, or as otherwise required by law or regulation.

USO - United States Oil

This investment seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The fund will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil. Continue reading "The Perfect ETF Portfolio Results For 2013"

Key Week For Stocks

This past weekend was an interesting one as it marked the five year anniversary of the bull trend for the stock market here in the US. Looking back on March 9, 2009, we've come a long way on the upside. According to the popular ETF SPY (PACF:SPY), we are up over 181% from the bear market low.

Over in China this weekend, their stock market collapsed to a five year low because of poor demand for their exports. So, on one side of the ledger you have the US market making new highs and in China we are witnessing their market make five year lows.

Can we see these two trends continue? Can the US continue going higher after five years? Is the economy so bad in China that it means that their exports will drop off even more than the recent decline of 18%? Being their number one trading partner, we put ourselves in a bind. If we can't sell the imported goods, then it would appear our economy really isn't that great either.

Seldom do you see such dichotomies in economic trends between two powerhouse economies. Something has to give.

Last week I talked about the US market reaching a tipping point, you can read that post here. What I did not mention is that margin debt, or the money investors borrow from their brokers for stock trading, has reached a new all-time high. This normally indicates that an excessive amount of speculation is going into stocks, especially low-priced stocks. Could this be a warning sign of what's ahead? Continue reading "Key Week For Stocks"