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NTF funds - OneSource (retail): typically 0.40%, can be as high as 0.45% - Retirement plans (e.g. 401k): usually 0.10% to 0.50%, can be as high as 1.10%
TF funds: typically 0.10%, can be as high as 0.25%
An increased transaction fee [currently $74.95] applies to purchases made by self-directed retail clients of funds from certain fund families that do not pay Schwab for recordkeeping, shareholder, and other administrative services on fund shares held by self-directed retail clients
Schwab's automatic investment plan, begun in 2023, allows one to buy additional shares of most mutual funds except those for which Schwab charges "an increased transaction fee". So you can't cheaply buy additional shares of Vanguard, D&C, or Fidelity funds at Schwab.
What is the law or rule that says an ETF is not allowed to close inflows?
There's no rule of law that gives ETFs an advantage over OEFs when it comes to taxes. In fact, the law that says a fund can make embedded gains vanish by offloading them onto investors was written many years before ETFs ever existed.
It's not a rule of law, but a rule of reality - pragmatism - that prevents OEFs from doing this. In order to dump cap gains onto an investor redeeming shares, a fund must redeem those shares in kind. A few OEFs are even known to do this, e.g. Sequoia. But generally only for larger redemptions.
Similarly, it's not that ETFs are prohibited by law from closing, but as others have explained above, pragmatically the chaos it would cause is an effective bar.
A provision in the 1940 Investment Company Act allows funds to pay redemptions in securities, rather than cash, but it's a provision that's rarely used, in part because in-kind redemptions could damage a fund's reputation. ... Under the law, the fund doesn't have to distribute in-kind redemptions in proportion to the fund's holdings.
• Unless otherwise prohibited by law, the Fund may pay the redemption price to you in cash or in portfolio securities, or partly in cash and partly in portfolio securities.
• The Fund has adopted a policy under which the Fund may limit cash payments in connection with redemption requests to $250,000 during any ninety (90) day period. As a result, the Fund may pay you in securities or partly in securities if the amount of Fund shares that you redeem is more than $250,000.
• It is highly likely that the Fund will pay you in securities or partly in securities if you make a redemption (or series of redemptions) in an amount greater than $250,000
@yogibb said: So, Fido and Schwab aren't providing their mutual fund platforms as public service. This is one lucrative area that remains for them that is untouched by the drive to zero commissions. Options are another area.
I understand there is no free lunch in brokerage business. Products, live agent, and IT support have to be paid for. By the way, these firms also serve as administrators on retirement and education (529 plan) accounts.
Even though ETF transaction are mostly free; sometime I see $0.05 chaged at selling. I now move toward ETF for both passive and active managed. Fees are lower. Are there other options for small investors?
When winning a conversation is more important than relevance and accuracy, it is unproductive and harmful to the uninformed reader / onlooker but that has been one of the themes of this forum.
On August 24, 2015, exchange traded products (ETPs) experienced a real life stress test.
Curiously, less than two months earlier there was another real life stress test albeit a much smaller one. On June 29, 2015, the Greek banks and stock market were shut down for several weeks.
Two different ETFs tracking the Greek market responded differently. GRE, a European ETF, was closed while GREK, a US ETF, remained open. Perhaps there are (rare) times when ETFs can close even when they don't absolutely have to.
Global markets have plunged into the red as the Greek government has shut its banks and stock exchange, sending its citizens into a panic. As a result, Lyxor has temporarily halted creations and redemptions of its Greek equity ETF [GRE], casting doubt over whether its price reflects the underlying assets. ... Lyxor has updated its website today to read: “Due to exceptional circumstances affecting the Greek market, including the closure of the Greek stock exchange, we have decided, in the unit holders’ interest, to temporarily suspend subscriptions and redemptions of the units of the Lyxor UCITS ETF FTSE ATHEX LARGE CAP […].”
Lyxor’s decision has come under particular scrutiny because Global X, a US manager, has allowed investors to continue to trade its $322 million Greek ETF [GREK]
Immediately after the markets closed in Athens, Global X issued a new prospectus update changing how they were going to deal with the market disruption. Here’s a quote.
“During the closure of the Athens Exchange, the Fund will fair value its security holdings for which current market valuations are not currently available using fair value pricing pursuant to the pricing policy and procedures approved by the Fund’s Board of Trustees.” ... GREK never officially closed for creations and redemptions (instead, moving the portfolio toward the best basket of liquid ADRs they could manage)
The platform fees at Schwab are negotiable, I think. This subject has been discussed on here repeatedly. I do not know how Schwab decides, but I have never paid them, as long as I ask beforehand. Then the rep actually does the trade and there is no fee. It could be because I am a customer from the days when Schwab advertised no fee on mutual fund purchases. Whatever, I bought DODIX last month and did not pay the 7495 platform fee.
Comments
NTF funds
- OneSource (retail): typically 0.40%, can be as high as 0.45%
- Retirement plans (e.g. 401k): usually 0.10% to 0.50%, can be as high as 1.10%
TF funds: typically 0.10%, can be as high as 0.25% Those families are Vanguard, D&C, and Fidelity.
Schwab's automatic investment plan, begun in 2023, allows one to buy additional shares of most mutual funds except those for which Schwab charges "an increased transaction fee". So you can't cheaply buy additional shares of Vanguard, D&C, or Fidelity funds at Schwab.
It's not a rule of law, but a rule of reality - pragmatism - that prevents OEFs from doing this. In order to dump cap gains onto an investor redeeming shares, a fund must redeem those shares in kind. A few OEFs are even known to do this, e.g. Sequoia. But generally only for larger redemptions.
Similarly, it's not that ETFs are prohibited by law from closing, but as others have explained above, pragmatically the chaos it would cause is an effective bar.
Sequoia fund gives departing shareholders stock instead of cash (Investment News 2016)
Sequoia prospectus, May 1, 2024
Even though ETF transaction are mostly free; sometime I see $0.05 chaged at selling. I now move toward ETF for both passive and active managed. Fees are lower. Are there other options for small investors?
https://www.morningstar.com/personal-finance/dont-know-about-cits-you-probably-should
Curiously, less than two months earlier there was another real life stress test albeit a much smaller one. On June 29, 2015, the Greek banks and stock market were shut down for several weeks.
Two different ETFs tracking the Greek market responded differently. GRE, a European ETF, was closed while GREK, a US ETF, remained open. Perhaps there are (rare) times when ETFs can close even when they don't absolutely have to. https://www.etf.com/sections/news/lyxor-suspends-activity-greek-etf-amid-turmoil https://www.cnbc.com/2015/07/05/lyxor-had-no-choice-in-closure-of-greek-etf.html https://www.etf.com/sections/etfcom-analysis/greece-etf-grek-shines-during-turmoil