ETF Price Wars Will Benefit Investors (BLK, SCHW, STT)
BlackRock, Inc. (BLK) announced on Wednesday that it is partnering up with Fidelity Investments to double the number of commission-free iShares ETFs that Fidelity offers to its customers.
According to its website, iShares, managed by BlackRock, is the largest ETF provider in the world with more than 500 funds and over $675 billion in assets.
Fidelity will now offer a total of 65 commission free iShares ETFs. Fidelity originally offered 25 commission free iShares ETFs to investors starting in 2010 and then added five more the following year.
This latest partnership adds to the growing number of ETFs issuers slashing fees to accommodate new investors. Companies like Charles Schwab (SCHW), State Street (STT) and investor-owned Vanguard are all joining the price cutting party.
If you are an ETF beginner, see What Is An ETF? at ETF Database.
ETF Wars Heat Up
The growing popularity of ETFs among investors is leading to a sort of price war among ETF issuing companies. As more investors move away from mutual funds and into the tax-friendly ETF space, issuers are searching to attract customers by slashing commission fees and expense ratios. This competition is leading to positive results for investors. Interested in more commission free ETFs? See ETFdb’s Commission Free ETFs.
Though most ETFs still have commission fees, these fees are falling. Moreover, the expense ratios of ETFs are on the decline as well as issuers keep up with the competition. See the 100 Lowest Expense Ratio ETFs.
Over the past year, BlackRock, Charles Schwab, and Vanguard have all been slashing expense ratio for a number of their ETFs. It may seem as though these expense ratio cuts are minimal–0.05% here and 0.08% there–but the pennies and dollars that the cuts save do add up.
ETF’s Growing Popularity
Many investors see the days of stock picking to see double digit growth as a thing of the past. As such, they are moving into the ETF space as a way to diversify holdings and move away from actively managed funds that tend not to beat averages. ETFs also own an advantage over mutual funds in that they are cheaper, easily traded, and usually offer better tax-benefits.
As issuers cut prices on ETFs, it seems as though the space will only grow in popularity.
Dividend investors do not have to miss out on the party, however. There are many ETFs that offer nice dividend yields to investors who are seeking income and not necessarily growth. See Dividend.com’s list of Dividend ETFs for more information.
The Bottom Line
Investing in stocks, especially dividend stocks, might be falling out of fashion for some investors, but that does not mean that they have no value. Dividend stocks have been and will always be a safe investment for individuals seeking constant returns. However, the growing popularity of ETFs can be a nice alternative for investors seeking other options in their investment needs. Adding different assets, like ETFs, to your portfolio can help you long-term strategies to build wealth. The current price war among ETF issuers will only benefit investors in the long-run. For more on ETF investing, check out ETF Database.
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