There’s a price war in the financial industry that’s heating up like you wouldn’t believe. And we’re the beneficiaries.
Last week, Charles Schwab announced that on March 1st it was cutting transaction fees on over 500 ETFs to…get this…ZERO! An hour later Fidelity Investments joined in, eliminating commissions on that same number of ETFs. This came 7 months after Vanguard dumped fees on all ETF’s it sells, including competitors. I’m betting more will follow suit.
I recently noted that high yield online savings accounts can be quite profitable (A Hot Tip You Can Take to the Bank). Well funds without fees is cause for even greater celebration. Cutting costs can boost profits considerably.
I’ve long been a big fan of ETFs (Exchange Traded Funds) which mimic an index, are traded on an exchange (like stocks but unlike index mutual funds), have exceedingly low management fees and best of all, tend to consistently outperform actively managed funds.
Case in point: Back in 2007, legendary investor Warren Buffett made a $1 million dollar bet with a noted hedge fund manager that the Vanguard 500 Index Fund would outperform more sophisticated, high priced hedge funds over a 10-year period.
Guess who won? The index fund returned 7.1 percent while the basket of hedge funds returned 2.2 percent.
Of course, these investment firms aren’t suddenly turning altruistic. They’re out to win new customers who’ll hopefully purchase more lucrative products and services.
Nevertheless, they’re making us an offer that’s hard to refuse. I hope you’ll take advantage!
Have you found any unexpected ways to get a bigger return on your investments? Share in the comments below.
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