Read Zacks_Analysts' blog in RSS
August 11, 2010
Share ThisCharles Schwab Corp. (SCHW), a big player in the fast-growing exchange traded fund (ETF) market, does not intend to change its commission-free trading policy on its ETFs, Reuters reported on Tuesday.
This commission-free trading along with low expense ratio-based core assets will continue to benefit Schwab over its peers as the popularity of these ETFs will continue to attract more investors. A segment of investors who invest regularly – such as by dollar-cost-averaging – will not have to pay commissions every time they buy.
Schwab started offering commission-free ETFs in November 2009. Initially the company had eight ETFs that had low expense ratios. Also, these ETFs cost nothing to trade online.
Last week, Schwab announced the launch of three new commission-free bond ETFs. This increases the tally of Schwab’s total ETFs to 11. The new bond ETFs are expected to offer coverage to short-term, intermediate-term and inflation-protected securities.
The recently launched ETFs are some of the cheapest funds available in the financial markets and sync well with the company’s strategy of providing low cost financial products to the investors.
Schwab has been doing exceptionally well in the ETFs industry. As of July 30, 2010, its eight ETFs had accumulated $1.4 billion assets under management, up 300% from December 31, 2009.
Many other retail brokerage companies including TD Ameritrade Holding Corp. (AMTD) are trying to increase market share by reducing fees on ETF trading.
Though Schwab is attracting investors by offering commission-free ETF trading, it has a long way to go before it can match market leaders such as BlackRock Inc. (BLK) and State Street Corp. (STT).
Though we suspect that Schwab will be further impacted by the challenging market conditions and volatile interest rate environment, its focus on lower-cost capital structure and aggressive cost control efforts will facilitate the company in the upcoming quarters.
Schwab currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining our long-term Neutral recommendation on the stock.
Read the full analyst report on "SCHW"
Read the full analyst report on "AMTD"
Read the full analyst report on "BLK"
Read the full analyst report on "STT"
Zacks Investment Research