Vanguard Announces Free Trading Of Its 46 ETFs
Vanguard Becomes Latest ETF Issuer To Offer Commission-Free Trades
When Charles Schwab (NYSE: SCHW) announced commission-free trades on its ETFs in November, the move was viewed a shot across the bow to other ETF issuers. After all, Schwab was new on the ETF scene at the time and the investment community wondered what the ramifications would be from Schwab’s offer.
Schwab’s offer applies only to ETF it issues and that includes eight ETFs right now though the firm plans to issue several more later this year.
Fidelity responded soon thereafter, announcing it would offer commission-free trades on 25 iShares ETFs, but Vanguard, the third largest U.S. ETF issuer, has both Schwab and Fidelity after announcing Vanguard account holders will be able to trade ALL 46 of the firm’s ETFs free of charge.
What’s really interesting about Vanguard’s offer is that it has the potential to fan the flames of a curious rivalry that exists between the Vanguard Emerging Markets Stock ETF (NYSE: VWO) and the iShares Emerging Markets Index (NYSE: EEM).
EEM has been one of the most popular emerging markets ETFs since its inception and it is also one of the most liquid. EEM’s average daily volume is more than five times that of VWO.
However, VWO has a lower expense ratio at 0.27% compared to 0.72% for EEM. VWO has been stealing assets from EEM for a while now.
In the first quarter of this year, VWO gained $8 billion in new investments while EEM lost $4.4 billion in assets, huge totals for a single quarter.
It wouldn’t be surprising to see that trend continue now that VWO can be traded free of charge.