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Exchange-Traded Funds (ETFs)

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WHAT YOU SHOULD KNOW

    

Consider expense ratios, commissions, and bid/ask spreads.

The most obvious ETF fees are commissions and operating expenses. Many investors overlook bid/ask spreads, which represent the difference between the price at which an ETF can be bought and the price at which it is being sold. The more you trade ETFs, the more important commissions and bid/ask spreads become. The expense ratio becomes more important the longer you hold an ETF position.

 

Impact of ETF fees

Hypothetical bid/ask spread and expense ratio on a $10,000 trade.

Despite a lower expense ratio, the bid/ask spread of 1.32% on ETF B increases the cost by $106 in the first year.

$200 $100 $0 ETF A ETF B Total Cost After One Year Bid/Ask Spread0.03% $85 $191 Expense Ratio: 0.29% Expense Ratio: 0.52% Bid/Ask Spread: 1.32% Commissions: $30 Commissions: $30 $200 $100 $0 ETF A ETF B Total Cost After One Year Bid/AskSpread0.03% $85 $191 Expense Ratio: 0.29% Expense Ratio: 0.52% Bid/Ask Spread: 1.32% Commissions: $30 Commissions: $30

What can I do about this?

Consider the many ETFs that offer commission-free online trading and low expense ratios. And when you get a quote, be sure to look at the bid/ask spread as well. Wondering which ETFs might be a good fit for you?

Check out Schwab ETF OneSource™ to access the most commission-free ETFs.1

Get clear on fees.

How are fees impacting your returns?

Find out by asking these key questions.

Questions? We’re ready to help.


Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling 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).