Tag Archives: Charles Schwab

Most Investors Don't Do Well. Some Do. What Sets Them Apart?

By Morgan Housel, The Motley Fool

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I shared a depressing chart last week using data from analytics firm Dalbar, showing how individual investors have fared against an index like the S&P 500 :

It’s sad.

But what explains it?

I asked Liz Ann Sonders, chief investment strategist at Charles Schwab, what she made of the data. Here’s what she had to say. (A transcript follows.)

Liz Ann Sonders: “Look, when you look at very generalized statistics on how individual investors have fared in terms of performance compared to either the market overall, or if you look at things like the Dalbar study that compares investors returns themselves in funds versus the returns of the funds themselves, the generalizations taking a mean or an average or a median, doesn’t put the individual investor in great light. It shows underperformance. Not all that different today than five years ago, 10 years ago, 15 years ago.

It’s the reason why looking at what individuals are doing en masse is now a contrarian indicator, was a contrarian indicator 10 years ago, was a contrarian indicator 27 years ago, when I started in the business, so that aspect hasn’t changed. What we have found, and as you said, we have some particularly unique insight into what individual investors are doing, having $2 trillion in client assets by individual investors, is what we find is there is a correlation in terms of returns and success with how disciplined you are around long-term plan and goals.

In many cases, if you have an advised relationship and you are going through an appropriate process of diversification and rebalancing, which is so important, staying disciplined, not reacting to whims or news and the ability to pull the trigger more quickly, but taking a very disciplined approach, the returns for that cohort of investors dramatically outshines the returns for investors who tend to be quicker with the trigger. And you’re right, access to information, the speed with which we get it, and then the ability to trade on that has grown exponentially. It’s just a question of what you do with that information.”

The article Most Investors Don’t Do Well. Some Do. What Sets Them Apart? originally appeared on Fool.com.

Fool contributor Morgan Housel and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance

Bond Bubble? Maybe Not. The "Lower and Longer" Argument

By Morgan Housel, The Motley Fool

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Is there a bond bubble? Maybe. Treasury yields are near record lows. The iShares iBoxx High Yield Corporate Bond ETF yields 6.4%. There’s little room for error. The big returns of the past are now almost certainly a thing of the past.

But the word “bubble” can be dangerous. It implies an imminent pop, which is never a sure thing. Investors thought Japanese bonds were in a bubble in the early 1990s. Twenty years later, interest rates are still stuck to the floor.

Last week I asked Charles Schwab chief investment strategist Liz Ann Sonders what she thought of the bond bubble talk. Here’s what she had to say (transcript follows):

Sonders: The view from our fixed-income group has been lower for longer. Yes, you are probably well past the major, major tailwind of a 30-year decline in inflation and interest rates, but that doesn’t necessarily mean it looks like a V on the upside, as long as we have the Fed in the position that it’s in, which is not only keeping rates low on the short end, but buying on the long end and very little reason in the very near term why they should stop that.

And the fact that we’ve got still a very wide output gap; we have very little velocity of money. We don’t have any upward pressure on wages. Those are the types of things you would tend to see kick in first before inflation took hold, which would be the condition under which rates would start to go up, probably more rapidly than what’s built into expectations.

That said, in general, we’re past probably the low, and that fixed-income investors need to be at least mindful of that, and there are certain things they can do within the fixed-income portion of their portfolio, which is a few steps shy of running for the hills because of some view that rates are going to spike from here.

The article Bond Bubble? Maybe Not. The “Lower and Longer” Argument originally appeared on Fool.com.

Fool contributor Morgan Housel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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From: http://www.dailyfinance.com/2013/04/18/bond-bubble-maybe-not-the-lower-and-longer-argumen/

Will Schwab's Recent Moves Pay Off?

By Dan Caplinger, The Motley Fool

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Earnings season has begun, and next Monday, Charles Schwab will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Schwab has been a longtime leader in the discount brokerage space, taking advantage of the rise of the Internet to offer a wide array of services to customers. Yet the market meltdown hurt its core business in several ways, and the company has had to work hard to recover ever since. Let’s take an early look at what’s been happening with Schwab over the past quarter and what we’re likely to see in its quarterly report.

Stats on Schwab

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$1.27 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Schwab benefit from market records this quarter?
Analysts have had mixed views on Schwab’s earnings lately. In the past month, they’ve cut their consensus for the just-ended quarter by $0.01 per share, but they boosted their full-year 2013 calls by a penny per share as well. Investors have gotten more optimistic lately, with the stock up 13% since early January.

Schwab has done its best to capitalize on increased interest in investing in light of the big run-up in the stock market. In January, the company topped $2 trillion in total client assets for the first time ever, and as of February, it had seen a 13% jump in assets. Yet trading activity remains muted, with just a 1% year-over-year increase in daily average trades.

In order to encourage greater investor participation, Schwab recently boosted its presence in the red-hot exchange-traded fund market. Schwab pioneered commission-free ETF investing more than three years ago, but since then, rivals had cut into Schwab’s minimalist lineup of proprietary ETFs with broader deals. TD AMERITRADE  had issued a lineup of more than 100 no-commission ETFs from various fund families, drawing investors interested in greater variety of funds. In response, Schwab came out with its ETF OneSource platform, topping TD Ameritrade with 105 ETFs.

The big potential for Schwab lies in going after 401(k) accounts. Currently, mutual funds dominate 401(k) plan investment options, but ETFs are making inroads into the multitrillion-dollar industry. Despite existing competition from TD AMERITRADE and Capital One‘s ShareBuilder — and with Fidelity’s recent expansion of its ETF partnership with BlackRock‘s iShares unit signaling another potential entrant to the space — Schwab’s plans to launch an all-ETF 401(k) plan next year could tap a larger part of a lucrative market.

In Schwab’s quarterly report, look for more

From: http://www.dailyfinance.com/2013/04/11/will-schwabs-recent-moves-pay-off/

Where to Turn for a Last-Minute IRA

By Nicole Seghetti, The Motley Fool

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We all procrastinate from time to time. That’s OK with relatively trivial things in life, like taking out the trash and unloading the dishwasher. But it’s not acceptable when it places your financial future in jeopardy.

The deadline for making a 2012 IRA contribution is April 15. So, with less than one week left, time is of the essence. Remedy the situation by opening an IRA and funding it today. Luckily for you, there are many online discount brokerage firms more than willing to help out. Several offer no annual maintenance fees, low-cost investing options, and a huge menu of stocks and mutual funds.

If you need a refresher, familiarize yourself with the ins and outs of IRAs, IRA rules, and a brief explanation of how to open an IRA. Then hop back over here.

Providers that can help you at the last minute
What you desire in an IRA provider may point you to one discount broker instead of another. Here are some things to keep in mind when deciding what firm is best for you.

Discount brokerages offer very inexpensive stock-trading fees. Scottrade boasts extremely low $7 online trading fees. Trades at Fidelity and Charles Schwab will cost you as little as about $8 and $9 each, respectively. And TD AMERITRADE‘s and E*TRADE‘s $10 fees are only a hair more. Vanguard charges $7 for the first 25 stock and non-Vanguard ETF trades in each calendar year, then $20 for each subsequent trade. If you need extra help placing trades, TD AMERITRADE and Scottrade have local offices and offer broker assistance. And if you open an IRA and fund it with $2,500, ShareBuilder, a part of Capital One Financial , will give you 25 free trades.

As exchange-traded funds have become increasingly popular retirement account options, brokerage firms have tailored their lineups accordingly. Schwab rolled out commission-free ETFs a few years ago, but recently expanded its menu of offerings with its OneSource platform.  Schwab’s OneSource boasts more than 100 different ETFs, including State Street‘s hugely popular SPDR ETFs. Fidelity’s recently expanded partnership with BlackRock now offers its customers the greatest number of commission-free ETFs online from iShares, including all 10 iShares Core ETFs. Not to be overlooked, TD AMERITRADE boasts over 100 commission-free, non-proprietary ETFs while Vanguard offers all of its Vanguard ETFs commission-free.

Most discount brokerage firms require no account minimums and charge no annual maintenance fees. Keep in mind that Schwab requires a $1,000 account minimum for an IRA, which is waived if you set up a direct deposit of at least $100 per month. Meanwhile, Fidelity obligates account holders to contribute $2,500 for an annual fee waiver, unless you direct deposit a monthly minimum of $200.

Before getting started, think about what you want from your IRA provider. Are you dead-set on iShares ETFs for your IRA? Are broker-assisted trades important to you? Do you intend to set up a monthly …read more

Source: FULL ARTICLE at DailyFinance

Is E*TRADE Destined for Greatness?

By Alex Planes, The Motley Fool

ETFC Total Return Price Chart

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Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does E*TRADE Financial fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell E*TRADE’s story, and we’ll be grading the quality of that story in several ways:

  • Growth: Are profits, margins, and free cash flow all increasing?
  • Valuation: Is share price growing in line with earnings per share?
  • Opportunities: Is return on equity increasing while debt to equity declines?
  • Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at E*TRADE’s key statistics:

ETFC Total Return Price data by YCharts.

Passing Criteria

3-Year* Change 


Revenue growth > 30%



Improving profit margin



Free cash flow growth > Net income growth

(126.9%) vs. 91.3%


Improving EPS



Stock growth (+ 15%) < EPS growth

(39.5%) vs. 96.7%


Source: YCharts. *Period begins at end of Q4 2009.

ETFC Return on Equity data by YCharts.

Passing Criteria

3-Year* Change


Improving return on equity



Declining debt to equity



Source: YCharts. *Period begins at end of Q4 2009.

How we got here and where we’re going
E*TRADE hasn’t been doing particularly well on most of its fundamentals — despite improving EPS, the company continues to post losses — but its momentum on equity metrics is enough to convert a middling two passing grades into a solid four out of nine passing grades. But what will it take to get the popular online portfolio platform moving in the right direction again on a revenue and free cash flow basis?

E*TRADE has been in positive territory before. The company’s 2012 was terrible, with profits becoming losses, unfavorable debt restructurings that resulted in big writedowns, and most worryingly, a diminished trading volume among retail investors. Competing brokerages Charles Schwab and TD Ameritrade are diversified in ways E*TRADE isn’t — Schwab has a solid asset management division, and Ameritrade has been growing its investment products revenue at a brisk pace for some time. However, that hasn’t insulated them from the trading decline, as Ameritrade’s profit slipped in its most recent fiscal quarter. A lower profit beats no profit, though, and E*TRADE’s floundering has put up a roadblock in the way of Ameritrade’s rumored acquisition.

E*TRADE is also losing the faith of some major shareholders. One of Citadel’s hedge fund affiliates recently dumped over 27 million shares in a secondary offering, which served to suppress shares that had been rising strongly into 2013 despite the bad earnings news. E*TRADE is also a bit behind the curve in the ETF game. It provides <a target=_blank …read more
Source: FULL ARTICLE at DailyFinance

Wealthy Workers Are Seriously Underestimating Their Retirement Needs

By Business Insider

Wealthy Workers underestimate

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A lot of wealthy workers could be missing a vital flaw in their plans for retirement, a new survey shows.

More than 80 percent of workers earning $115,000 say they are prepared for retirement — but they think they’ll only need $66,000 per year to live on, Charles Schwab (SCHW) found.

Sure, it’s possible to survive on $66,000 a year — plenty of people would be glad to earn half that much in a year — but chances are high-earners won’t be prepared for that kind of lifestyle change, let alone unexpected costs that could come up down the road.

Most experts agree consumers should plan on at least saving enough of a nest egg to maintain their current lifestyle in retirement. Otherwise, the only answer is to find ways to minimize costs and trim household budgets.

That starts with figuring out what age you plan to retire, and these days, workers are planning on working well past the typical 65th-birthday benchmark.

Couple that with the fact that we’re living longer than ever as well, and retirees could wind up spending 15 to 20 years living off just their nest egg alone.

The biggest hurdle retirees will almost certainly face is the rising cost of health care.

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“Even with Medicare benefits, a 65-year-old couple could need nearly $400,000 to cover out-of-pocket health care costs during retirement, according to research by the Employee Benefit Research Institute,” noted Carrie Schwab-Pomerantz, Charles Schwab senior vice president. “The bottom line for everyone is that health care costs need to be carefully factored into retirement plans.”

No one can predict whether they’ll need long-term medical care in the future, but there are steps people should take now to mitigate those issues as early as possible.

First, review your retirement goals with your spouse or partner and think about running it over with a financial advisor. Fee-only financial planners have a fiduciary duty to work in the best interest of clients, and you won’t have to worry about commissions or other hidden fees that could sneak up on you.

Just half of Americans said they’re saving through a retirement plan like a 401(k) or IRA, according to a recent survey by the EBRI. While not everyone might be able to max out a retirement plan contribution each year, even contributing a small portion of each paycheck to a retirement account could be a big difference in the long run.

“Especially for those looking to catch up on savings, we recommend maximizing contributions in a 401(k) at least up to the employer match, considering other tax-advantaged retirement accounts such as an IRA, and finding ways to automate savings,” Schwab-Pomerantz says.

Permalink | <a target=_blank href="http://www.dailyfinance.com/forward/20497312/" title="Send …read more
Source: FULL ARTICLE at DailyFinance

Charles Schwab to Host Live Online Educational Event for Active Traders

By Business Wirevia The Motley Fool

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Charles Schwab to Host Live Online Educational Event for Active Traders

Workshops on key trading topics to be streamed live on March 28th

SAN FRANCISCO–(BUSINESS WIRE)– Charles Schwab is making it even easier for investors to sharpen their trading skills. As part of its continuing commitment to investor education, Schwab will host a virtual education event for active traders on Thursday, March 28, 2013. Workshops on essential trading topics such as navigating today’s markets, stock selection and chart pattern recognition will be streamed live and free of charge, over the internet.

“With the stock market hovering around all-time highs, our active trader clients tell us they want a better understanding of the current trading landscape and are seeking new strategies for success,” said Kelli Keough, Senior Vice President for Client Experience at Charles Schwab. “By offering this type of guidance in a virtual online environment, we are giving traders a chance to gain valuable market insight without having to leave the comfort of their home or office.”

Schwab’s latest virtual trader event will stream live from Denver, Colorado, on Thursday, March 28, 2013. Anyone interested in joining this free virtual event can visit www.schwab.com/traderevent to register. The educational workshops include:

  • 5:00 – 6:00 PM MDT: “Trading in Today’s Markets with a Focus on Q1 2013,” with Randy Frederick, Managing Director of Active Trading and Derivatives at the Schwab Center for Financial Research.
  • 6:15 – 7:15 PM MDT: “Stock Selection for Traders.”
  • 7:30 – 8:30 PM MDT: “Chart Pattern Recognition in StreetSmart Edge®.”

Between workshops, online participants can download event materials from the Resource Library and visit the virtual Exhibit Hall to chat with Schwab representatives.

Schwab’s virtual trader events are the latest enhancement to the robust educational resources available to Schwab clients. Schwab also offers live in-branch educational workshops, live online workshops and on-demand online webinars. The Schwab Learning Center provides clients with access to a broad range of educational content for various skill levels—including articles and pre-recorded seminars, as well as live events and webcasts—all in a central location. The Learning Center also offers clients an Active Trader catalog, which provides educational resources on a …read more
Source: FULL ARTICLE at DailyFinance

How an ETF Deal May Impact Our Retirement Accounts

By Nicole Seghetti, The Motley Fool

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Earlier this week, I took a look at how the recently expanded exchange-traded fund partnership between Fidelity and BlackRock affects investors today.  However, the deal may have several broader, longer-term implications for the ETF industry, one of which relates to the huge retirement-account industry. Let’s quickly take a look at the overall retirement-account market. Then we’ll dive into what this expanded partnership may mean for the industry.

A 30,000-foot view
Last summer the Department of Labor enacted a ruling mandating employers to provide more extensive fee information to their 401(k) plan participants. The fee disclosures show what workers pay on various investment options in their employer-sponsored retirement plans. This new transparency has employers seeking lower-cost plan options. According to an October 2012 Plan Sponsor Council of America survey, more than 15% of plan sponsors sent out a request for proposal after the fee disclosure regulations went into effect, signaling heightened awareness on their parts.

Most 401(k) providers already offer a smattering of low-cost index funds, but ETFs represent another inexpensive option for employer-sponsored plans. And if the criteria for 401(k) fund selections focus more on holistic plan costs, then ETFs may prove very hard to beat for their one-two punch of low costs and accessibility. Even though ETFs have soared to more than $2 trillion in assets in their 20-year tenure, they’ve yet to infiltrate the 401(k) market.

Due to the way ETFs trade (intraday, like stocks, as opposed to once a day, like traditional mutual funds), there exist technical limitations for offering them in 401(k) plans. But firms are trying to break this barrier, and those with brokerage arms are best positioned to do so. This is because brokerages make the trades themselves and don’t have to pay a third-party entity to do so, which keeps expenses down.

Some brokerage firms like Charles Schwab already offer ETFs in 401(k)s. In fact, Schwab plans to launch an all-ETF 401(k) next year. ING Direct ShareBuilder, which is now part of Capital One Financial , already provides an ETF-only 401(k) plan, with annual fees for several of its portfolios ranging between 15 and 20 basis points annually. TD Ameritrade also offers ETFs in its 401(k) platform. Fidelity does not — but this extended deal with BlackRock may change that.

Sea change
Low-cost options are becoming more desirable than ever in the 401(k) market, but so is control over our own accounts. These factors have led to the increased availability of self-directed 401(k)s, which allow plan participants to invest some of their contributions outside of the employer-set menu. An employer deems whether or not its 401(k) plan offers this option.

The number of plans offering these accounts has increased. Aon , one of the nation’s largest 401(k) plan administrators, shows that 29% of 401(k) plans offered a self-directed option in 2011, up from 18% in 2008. However, the number of participants taking advantage of them is minimal. Fidelity claims 38% of …read more
Source: FULL ARTICLE at DailyFinance

Jody Bilney Appointed Humana's Chief Consumer Officer

By Business Wirevia The Motley Fool

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Jody Bilney Appointed Humana’s Chief Consumer Officer

LOUISVILLE, Ky.–(BUSINESS WIRE)– Humana Inc. (NYS: HUM) , one of the nation’s leading health and well-being companies, announced today that Jody Bilney has been appointed Senior Vice President and Chief Consumer Officer, effective April 15. She will serve on the company’s Executive Team and report to President and Chief Executive Officer Bruce Broussard.

“We believe the new Chief Consumer Officer role will be vital to Humana’s future growth and success, and Jody is the ideal person to fill it,” Broussard said. “She is a strong, driven leader who brings a varied background of successful brand and business transformation to Humana.”

Bilney is currently Executive Vice President and Chief Brand Officer for Bloomin’ Brands, Inc., a Tampa-based upscale-casual restaurant company with Outback Steakhouse as its flagship chain. At Bloomin’ Brands, Bilney is responsible for strategy, brand, and business development across the enterprise. Previously, she led brand-transformation initiatives at Charles Schwab and Verizon.

“Jody’s broad brand and marketing experience with leading brands as they transitioned through periods of significant industry change will be a great complement to Humana’s Centers of Excellence in consumer experience and data analytics,” Broussard added.

“Humana pioneered the concept of putting the consumer at the center of health care, and I’m honored to be chosen to help take that powerful idea to the next level,” Bilney said. “I look forward to working for a company that is not only an industry leader, but is also dedicated to a dream – helping people achieve lifelong well-being.”

Bilney earned a Bachelor of Science degree in Economics, with a minor in Marketing, from Clemson University in Clemson, S.C.

About Humana

Humana Inc., headquartered in Louisville, Ky., is a leading health-care company that offers a wide range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being. By leveraging the strengths of its core businesses, Humana believes it can better explore opportunities for existing and emerging adjacencies in health care that can further enhance wellness opportunities for the millions of people across the nation with whom the company has relationships.

More information regarding Humana is available to investors via the Investor Relations page of the company’s web …read more
Source: FULL ARTICLE at DailyFinance

3 Ways an Expanded ETF Deal Affects Investors Today

By Nicole Seghetti, The Motley Fool

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The multitrillion-dollar exchange-traded fund (ETF) market has brokerage firms fighting tooth and nail for your business. Just last week, Fidelity and BlackRock expanded their partnership, which will provide even more ETF offerings. Let’s briefly review the deal and then look at what it means for investors.

Partnership details
The deal  effectively extends a three-year-old contact between Fidelity and BlackRock that was due to expire. The partnership will give Fidelity customers increased and broader access to BlackRock’s passively managed and extremely popular iShares ETFs.

Known for its active management prowess, Fidelity has faced criticism for not diving into the passive ETF market. But being a huge financial services provider with access to millions of individuals and institutions puts Fidelity in an advantageous position. According to BlackRock, the company sees this expanded deal as creating an “ETF manufacturing and distribution powerhouse.” It also seals the likelihood of a long-term strategic alliance with broader implications for the active ETF, retirement, and managed accounts markets in the future. But let’s not get ahead of ourselves.

So what does the deal mean for ETF investors today?

1. More choices
Fidelity’s fund extension announcement comes nearly one month after Charles Schwab unveiled its new ETF OneSource program, which offers 105 commission-free ETFs. Fidelity will more than double its current lineup of commission-free ETFs, offering 65 funds including all 10 iShares Core ETFs.

But Fidelity’s expanded offerings are still fewer in number than most competitors’. TD Ameritrade  and E*TRADE Financial each present more than 100 and 80 commission-free ETFs, respectively. Researched and hand-selected by Morningstar, most of TD Ameritrade’s offerings are iShares, Vanguard, or State Street‘s SPDR ETFs. Meanwhile, most of E*TRADE’s lineup is managed by Deutsche Bank  and Wisdom Tree.

Even though Fidelity offers fewer ETFs in its program versus its rivals, iShares still dominate the market. According to The Wall Street Journal’s MarketWatch, the 65 iShares ETFs in Fidelity’s program hold an impressive 18% of all assets in ETFs. By comparison, Schwab’s OneSource ETFs hold less than 4% of all ETF assets.  

Without a doubt, an increased number of ETF choices give investors more opportunities and latitude when crafting their portfolios. But extra choices come at a cost. When we’re faced with an abundance of options, we sometimes have a tendency to feel overwhelmed, which can lead to indecision.

2. Lower costs
The $2 trillion ETF market has grown leaps and bounds during its 20-year tenure. And as the market has grown, competition has heated up, driving fees down for investors. Because ETFs are based on indexes, that really cuts down on their cost structure. Studies have shown that minor improvements in fees can pay off substantially, leaving you more money in your account. So getting your hands on a high-quality, low cost ETF is really beneficial to helping you meet your financial goals.

Vying for a bigger slice of the ETF market, brokers are both revisiting the underlying index they track and …read more
Source: FULL ARTICLE at DailyFinance

Why Fidelity Wants You to Replace These ETFs

By Dan Caplinger, The Motley Fool

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Brokerage companies want your money, and they know that the key to investors’ hearts right now is in providing exchange-traded funds at no commission. Yesterday, Fidelity and ETF partner BlackRock greatly expanded their commission-free ETF lineup, answering previous moves from rival brokers. But in doing so, Fidelity and BlackRock made life a little more difficult for their existing clients, pressuring them to replace ETFs that are already in their portfolios. Let’s take a closer look at the deal and the history behind it.

Answering the call
Fidelity’s move comes in response to heightened competition among its industry peers. Just last month, Charles Schwab made a big expansion of its own free-ETF line, going beyond its own proprietary ETFs to pull in a number of funds from No. 2 provider State Street and its popular SPDR line of ETFs, as well as several other ETF providers. With a lineup of 105 commission-free ETFs, Schwab moved itself ahead of TD AMERITRADE and its 101-member roster of no-fee ETFs.

Fidelity didn’t go quite as far as Schwab, expanding the number of commission-free offerings from 30 to 65. But with the power of BlackRock’s industry-leading iShares unit, the ETFs made available to Fidelity investors will allow them to do a much better job of filling out their diversified portfolios than the previous offerings did.

Before and after
Before the switch, the 30 ETFs that Fidelity offered were heavily concentrated in domestic stocks, with 17 funds for every combination of market cap and investing style, including growth, value, and dividend investing. Six international funds, six fixed-income funds, and one real-estate fund rounded out the list.

Now, though, the offerings are more well-rounded. There are only 16 domestic stock funds, but they eliminate duplications and have more specialty funds, including the S&P US Preferred Stock ETF , which gives exposure to income-producing preferred shares. International funds have gotten beefed up considerably, with 20 ETFs in both developed and emerging markets along with some specialty funds. On the fixed-income side, 25 ETFs now give exposure to Treasuries, corporates, municipals, and international bonds. Four commodity-oriented funds that include mining and agriculture stocks round out the list.

An annoying task for existing Fidelity customers
These new ETFs will make it possible for investors to tailor their ETF portfolio a lot more closely to their overall needs. But for me, the most surprising thing about the move is the fact that some ETFs that were previously offered commission-free are not on the list of 65 ETFs going forward. Among the funds being replaced are the highly popular iShares MSCI EAFE , iShares MSCI Emerging Markets , and iShares Russell 2000 ETFs.

It’s not that these funds don’t have replacements among the 65; they do. Moreover, the replacements are largely cheaper than the funds they replace, which is a good thing for investors. But the shift also forces investors who’ve already taken …read more
Source: FULL ARTICLE at DailyFinance

Even More Options for Apple, Amazon, and Google Investors

By Evan Niu, CFA, The Motley Fool

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There is a time and a place for options trading. For investors looking for a little bit more oomph to their portfolios, options inherently offer greater risk and return propositions — for better or for worse. One of the challenges with trading options beyond the leveraged profit and loss scenarios is that standard contracts represent round lots of 100 shares.

When considering high-priced stocks, that can be a little too much oomph in some cases. For example, Apple trades in the ballpark of $430 right now, but shares were as high as over $700 just six months ago. Search giant Google has taken Apple’s place as the current tech stock darling of Wall Street, since Big G continues to tap fresh all-time highs of upwards of $840. Meanwhile, e-tail titan Amazon.com is also just a stone’s throw away from its own all-time highs near $285. A derivative that represents 100 shares of any of those stocks can rack up quite the bill.

That’s precisely why CBOE Holdings is announcing the introduction of mini-options that will launch later this month. Starting March 18, mini-options will being trading that are only one-tenth the size of standard contracts, or 10 shares instead of the usual 100. These new contracts will be available for Apple, Google, Amazon, SPDR Gold Trust, and SPDR S&P 500 ETF Trust.

Those three stocks and two ETFs are among the most popular trading vehicles in the market today.

What it means for exchanges and brokers
The new mini-options are a positive for numerous financial services companies, including CBOE and brokerage firms, as both benefit from increased trading activity. The smaller contract size is more approachable, so options trading will inevitably increase. Brokerage options commissions typically carry a per-contract fee in addition to a base rate, which means the higher quantity of contracts trading directly translates into additional revenue.

Here are the online option commission schedules for some of the major brokers.


Base Rate

Additional Fee-Per Contract



$0.75 per contract

Charles Schwab


$0.75 per contract


$7.99 to $9.99*

$0.75 per contract



$0.75 per contract

Source: Brokerage web sites. *Depending on trading activity.

The CBOE saw total options volume decline from 1.2 billion in 2011 to 1.11 billion in 2012, so any move that can increase that figure will be welcome there. Within the total, equities contracts have declined significantly in the wake of the financial crisis. Equities contract volume topped out at 634.7 million in 2009, but was just 494.3 million in 2012.

What it means for you
Investors also stand to benefit in the form of increased flexibility. Not only will investors soon be able to purchase contracts that don’t break the bank, but the mini-options will also provide new choices with hedging risk.

Covered calls are probably the most commonly used form of hedging for a long stock position, …read more
Source: FULL ARTICLE at DailyFinance