Exchange-traded funds (ETFs)
Hello-3. An ETF, or exchange traded fund, is a marketable security that tracks an index, commodities, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.
Save on ETFs.
- Schwab ETF OneSource™ offers over 200 commission-free ETFs from leading providers including Charles Schwab Investment Management, State Street SPDR®, Guggenheim Investments, PowerShares, ETF Securities, United States Commodity Funds, Direxion Investments, Global X Management Company, LLC, IndexIQ, ProShares, WisdomTree, PIMCO, ALPS Advisors, Inc. and J.P. Morgan Asset Management, Inc., Deutsche Asset Management and John Hancock Investments.
- Schwab ETFs™ include both Market-Cap Index ETFs and Fundamental Index® ETFs, two different ETF methodologies that can work well together. For broader diversification, consider using both when building your portfolio.
Research and find ETFs.
- Compare and select ETFs using our extensive ETF research and helpful screeners.
- See our experts' top ETF picks with the ETF Select List®.
- Use our ETF Portfolio Builder® to create a diversified ETF portfolio based on your selected risk profile.
Consider a professionally managed ETF portfolio.
Get professional advice at a competitive price with Schwab Managed Portfolios™—ETFs, a broadly diversified portfolio of ETFs. Or learn more about our professionally managed ETF strategies from Windhaven®.
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Want to learn more about choosing an ETF?
Here are the top five questions to ask yourself.
Learn More About Choosing an ETFSo you're thinking about investing in an exchanged-traded fund. You've decided on the asset class you want to invest in, and you found a few ETFs that could be right for your portfolio, but how do you know which of those ETFs is the right ETF for you? Start by asking yourself these five important questions about any ETF you're considering. Let's take them one-by-one.
First, what's the expense ratio? When you're choosing an ETF cost is an important factor. The expense ratio is the percentage of fund assets that are deducted every year to cover management fees. Check to make sure that your ETF has an expense ratio that's low compared to other funds in the same category.
Question 2: What will you pay in trade commission? Trade commission is the second part of the cost equation. It's the fee you pay every time you buy or sell an ETF. Look for a low commission or no commission at all, if possible.
Question 3: What's the bid/ask spread? The bid/ask spread is another cost. This is the difference between the ETF's bid price, which is the price a buyer is willing to pay for a share, and its ask price, which is the price a seller is willing to accept for a share. Often, the more an ETF is traded, the smaller the bid/ask spread, and the smaller the bid/ask spread, the more of your money goes to the actual investment, which is better for you. Look for a spread of just a few pennies.
Question 4: What are the fund's total assets under management? You've considered the cost of your ETF. Now, look at the quality. Assets under management refers to the amount of money that's already been invested in the ETF. It's a pretty good indicator of the fund's viability. Schwab's experts prefer ETFs that have at least $20 million in assets, and, preferably, much more. In general, the more assets under management, the better.
Question 5: How do the ETF's returns compare to its benchmarks' returns? What you want to see is the ETFs performance tracking closely to the performance of its benchmark over time. If there are significant differences between the two sets of returns, it could mean that you're looking at a potentially riskier investment.
So those are our five questions. Let's see how asking them can help you decide between two similar ETFs from the same asset class. We'll take two hypothetical ETFs and ask what's the expense ratio, the trade commission, the bid/ask spread, what are the assets under management, and how well do its returns track to the benchmark? While this is a simple example, working through these five questions really can help you see which ETF might be a better pick.
Ready to find the ETF that's right for your portfolio? Schwab's ETF evaluation tools are a great place to start. You'll find them at Schwab.com/ETFTools. And if you need help as you choose the right ETF for you, just call us at 877-769-8003.
1. Conditions Apply: Trades in ETFs available through Schwab ETF OneSource™ (including Schwab ETFs™) are available without commissions when placed online in a Schwab account. Service charges apply for trade orders placed through a broker ($25) or by automated phone ($5). An exchange processing fee applies to sell transactions. Certain types of Schwab ETF OneSource transactions are not eligible for the commission waiver, such as short sells and buys to cover (not including Schwab ETFs). Schwab reserves the right to change the ETFs we make available without commissions. All ETFs are subject to management fees and expenses. Please see Charles Schwab Pricing Guide for additional information.
Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully before investing.
Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV).
Charles Schwab & Co., Inc. receives remuneration from third-party ETF companies participating in Schwab ETF OneSource™ for record keeping, shareholder services and other administrative services, including program development and maintenance.
Diversification does not eliminate the risk of investment losses.
Schwab ETFs are distributed by SEI Investments Distribution Co. (SIDCO). SIDCO is not affiliated with Charles Schwab & Co., Inc. Learn more at schwab.com/SchwabETFs.
Charles Schwab Investment Management, Inc. is the investment advisor for Schwab ETFs and an affiliate of the Charles Schwab Corporation.
Standard & Poor’s®, S&P® and SPDR® are registered trademarks of Standard & Poor’s Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation’s financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
ProShares® is a registered trademark of ProShares Advisors LLC. ProShares makes no representation or warranty regarding the advisability of, nor bears any liability with respect to, investing in ProShares ETFs.
"ETF Securities" is a registered trademark of ETF Securities Limited. The "ETF Securities" logo is a registered trademark of ETF Securities Limited.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc.
PowerShares® is a registered trademark of Invesco PowerShares Capital Management LLC (Invesco PowerShares). Invesco PowerShares and Invesco Distributors, Inc. are indirect, wholly owned subsidiaries of Invesco Ltd.
USCF® and the United States Commodity Funds® are registered trademarks of United States Commodity Funds LLC. All rights reserved.
Deutsche X-trackers ETFs ("ETFs") are managed by DBX Advisors LLC (the "Adviser"), and distributed by ALPS Distributors, Inc. ("ALPS") . The Adviser is a subsidiary of Deutsche Bank AG, and is not affiliated with ALPS. Deutsche X-trackers ETFs are not FDIC insured and there is no bank guarantee and they may lose value. MSCI and MSCI Index are servicemarks of MSCI Inc. (MSCI) and have been licensed for use by DBX. The ETFs are not sponsored, endorsed, issued, sold or promoted by MSCI Inc. nor does this company make any representation regarding the advisability of investing in the ETFs.
WisdomTree Funds are distributed by Foreside Fund Services, Inc. in the U.S. only. WisdomTree is a registered trademark of WisdomTree Investments, Inc.
No disclosure is required for John Hancock Investments.
Schwab is a registered trademark of Charles Schwab & Co., Inc. Fundamental Index is a registered trademark of Research Affiliates, LLC.
Portfolio management provided by Windhaven Investment Management, Inc. Windhaven Investment Management, Inc. ("Windhaven"), is a registered investment advisor and an affiliate of Charles Schwab & Co., Inc. ("Schwab").