Scottrade lower cost ETFs

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timsgonefishing
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Scottrade lower cost ETFs

Post by timsgonefishing » Mon Apr 11, 2011 8:26 pm

Hi All,

I'm new to the forum but already consider myself a Boglehead. Just wondering if anyone else out there has considered some of the new Scottrade ETFs? I don't have an account with them and have never done any business with them; however, they have 15 new ETFs that are the lowest cost in the industry across the board. Their US Market Index Fund is at .05%. Any thoughts?

Tim

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beyou
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Post by beyou » Mon Apr 11, 2011 8:52 pm

Had an acct there years ago. Thought they had bad service/technology
and closed my acct after a short while. I use etrade now.
That said, things may have improved, it was years ago.

The other problem with the ETF business as a whole.
New funds take time to build up trading volume.
Look at VTI vs FMU trading volume.
This impacts tax efficiency (sales offset by purchases)
and bid/ask spread.
Recovered day trader.

exeunt
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Post by exeunt » Mon Apr 11, 2011 9:29 pm

I'd wait until the Scottrade ETFs gain a few hundred million each in assets before buying them.

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tetractys
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Re: Scottrade lower cost ETFs

Post by tetractys » Mon Apr 11, 2011 9:40 pm

timsgonefishing wrote:... they have 15 new ETFs that are the lowest cost in the industry across the board. Their US Market Index Fund is at .05%. Any thoughts?
My first though is, WOW! My second thought is that as competition heats up, E/Rs will possibly continue to drop at Vanguard and other places as well.

So already being in a pretty good position E/R wise, while this is good news, it's no reason to jump up off the couch. -- Tet
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assurancefp
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Post by assurancefp » Mon Apr 11, 2011 9:41 pm

timsgonefishing,

Welcome to the forum. I also looked at the Scottrade free ETF's, but there is far too low of a trading volume at this time.

Your best bet if you want free ETF's is to go with TD Ameritrade.

Geoff

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tetractys
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Post by tetractys » Mon Apr 11, 2011 10:01 pm

It's interesting how Morningstar(R) and Scottrade have affiliated, and are competing with these ETFs by shaving of a few hundredths E/R more or less, in each case. (http://www.focusshares.com/etf/comparison-tool/)

The funds in question are Morningstar(R) Focus Shares. Scottrade offers free trades on these, at least for the time being. (http://www.scottrade.com/investment_services/etf.asp)

Best regards, Tet
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bh
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Post by bh » Mon Apr 11, 2011 10:31 pm

I would suppose that these will ramp up pretty quickly with scott's existing customer base not to mention the new openings related to these offerings

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anthau
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Post by anthau » Tue Apr 12, 2011 10:13 am

While waiting to see if the volume picks up on these ETFs, Scottrade offers the following Bogleheady (indexed or index-like, ER <= 0.5%) mutual funds:

S&P 500 index funds: NINDX, BTIEX (among others);
Total-market index fund: TINRX;
Total-bond index funds: DBMIX, BONSX;
Intm Treasury index fund: IUTIX;
TIPS funds: ACITX, TCILX;
Junk fund: SAMHX.

Scottrade's weakness shows up in the international space (DIISX & NOEMX, with ERs of 0.6% & 0.7%) and in real estate (NGREX--0.65%). For now, one faces the choice between these higher ERs and paying $7 per ETF transaction.

This is what disappoints me about the initial lineup of commission-free ETFs from Scottrade: I could care less about a "consumer defensive" ETF; rather, I hope they expand the offerings to plug the holes above.

Edit: I missed that there's a real estate ETF in the mix (FRL). But I also forgot to gripe that Scottrade still doesn't offer a dividend reinvestment option for ETFs.
Best, | | Anth

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timsgonefishing
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Post by timsgonefishing » Tue Apr 12, 2011 11:04 am

Thanks for the feedback. I would certainly wait for volume to pick up but I would expect it to do so quite quickly with the number of customers who use Scottrade. No dividend reinvestment on the ETFs? That's a big downside for me.

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Rick Ferri
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Post by Rick Ferri » Tue Apr 12, 2011 11:08 am

The first problem is that all 15 Scottrate ETFs are US equity funds. There are no international funds and no bond funds. Second, the funds are new and that means spreads will be higher than Vanguard funds.

Rick Ferri
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anthau
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Post by anthau » Tue Apr 12, 2011 3:13 pm

timsgonefishing wrote:No dividend reinvestment on the ETFs? That's a big downside for me.
With threshold rebalancing it shouldn't be much of an issue, as one is periodically checking up on balances anyway. For a calendar rebalancer, though, it's probably a deal breaker.
Best, | | Anth

bh
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Post by bh » Wed Apr 13, 2011 10:56 pm

anthau wrote:
timsgonefishing wrote:No dividend reinvestment on the ETFs? That's a big downside for me.
With threshold rebalancing it shouldn't be much of an issue, as one is periodically checking up on balances anyway. For a calendar rebalancer, though, it's probably a deal breaker.
I'm not following what the big issue would be regarding no div re-invest?................as long as they are commission-free seems to me that you could reinvest as frequently as want to

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anthau
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Post by anthau » Thu Apr 14, 2011 8:22 am

There's some evidence out there that the less frequently one checks one's portfolio, the better one does, for behavioral reasons. See, e.g., The Oblivious Investor. For someone who decided that they will only look at their portfolio once a year, to rebalance, this presents a bit of a Hobson's choice, though I agree that if volume picks up on these commission-free ETFs, it's less of a hassle than what to do with $7 commission ETFs at Scottrade.
Best, | | Anth

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Post by grabiner » Thu Apr 14, 2011 7:10 pm

anthau wrote:
timsgonefishing wrote:No dividend reinvestment on the ETFs? That's a big downside for me.
With threshold rebalancing it shouldn't be much of an issue, as one is periodically checking up on balances anyway. For a calendar rebalancer, though, it's probably a deal breaker.
Depending on the ETFs, you may get most of your dividends in December anyway, so you may only have enough to be worth reinvesting once a year. (If you have a bond ETF which pays dividends monthly, you'll have to reinvest more often, both because you get monthly dividends and because bond dividends are larger than stock dividends.)
Wiki David Grabiner

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