Matt Hougan at IndexUniverse has been doing a series of posts on the continuing decline in ETF expenses. In these posts he calculates the cost to a broadly diversified ETF portfolio using the lowest cost funds in each category. Back in March 2012 this portfolio had all-in costs of 0.112%. Not too shabby. After today’s announcement by Charles Schwab ($SCHW) that they were again slashing the fees on their in-house line of broad-based ETFs this portfolio, but our quick calculation, now has an all-in cost of 0.0865%. This portfolio consists of all Schwab ETFs except for the commodity component.

I don’t know about you but I find this development astounding. Not all that long ago these types of expenses were reserved for the largest institutional investor. Now they are available to the smallest investor. As a bonus Schwab customers can trade these ETFs commission free as well.* I thought this development of ultra low cost ETFs was important enough to devote a chapter of my book to the topic. If anything this development highlights the fact broad-based, asset class exposure via ETFs is for all intents and purposes free. Schwab is now offering broad US equity and US fixed income exposure at 0.04% and 0.05% per annum. One could easily just round down to 0.00%.

A number of months ago I wrote a post about why there has never been a better time to be an individual investor. This downward trend in ETF expenses reinforces this argument. Incumbent money managers are going to push back against this trend by introducing actively managed ETFs. Most investors can simply ignore this ploy and focus on fact that these firms are offering to manage your money essentially for free. There ain’t no such thing as a free lunch in this world, but at least when it comes to a certain class of ETFs there are some very cheap lunches.

*Most major brokerage firms have some sort of no-commission ETF trading program.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.

Please see the Terms & Conditions page for a full disclaimer.