The World’s Cheapest ETF Portfolio Just Got Cheaper

My “World’s Cheapest ETF Portfolio”  tracks the lowest-cost ETF in each of six different asset classes: U.S. stocks, international stocks, emerging market stocks, bonds, REITs and commodities...[and it just got cheaper!]

Written by Matt Hougan (

...On Friday, ETF Securities launched...the ETF Bloomberg All Commodity Strategy K-1 Free ETF (BCI) and the ETF Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (BCD) which both track diversified portfolios of 22 commodities and use an offshore structure to avoid issuing K-1s - and only have 0.29% per year in fees.

Further-Out Futures Contracts

Between the two, I’m choosing the longer-dated BCD for the portfolio. Rather than holding front-month futures as BCI does, BCD holds futures dated out four to six months in an effort to combat contango. I generally think this is a better approach for long-term investors.

In addition to the commodity swap, there’s big news in the developed-markets space. The iShares Core MSCI International Developed Markets ETF (IDEV) launched just 10 days ago and instantly took over the mantle as the cheapest developed-market ETF, with an expense ratio of just 0.07% a year.

The next-cheapest product—the iShares Core MSCI EAFE ETF (IEFA)—charges 0.08% a year, but notably excludes Canada from its portfolio. To get all-inclusive international developed-market exposure, you have to turn to the Vanguard FTSE Developed Markets ETF (VEA), priced at 0.09%.

Be Careful Trading New Funds

It’s worth noting that, as new funds, both BCD and IDEV barely trade. That will probably change over time as money tilts toward low-cost products, but for now, anyone trading those funds should do so using limit orders and extreme care. The portfolios are intended as a proof of concept, and the fees only capture the funds’ expense ratios, not the total cost of ownership. Still, what a proof of concept it is!

With the addition of BCD and IDEV to the portfolio—plus a number of expense ratio reductions for other products in the portfolio—the new blended expense ratio is just 0.06%. That’s down from 0.08% in 2015 and 0.16% when I started tracking it in 2008, an incredible deal for such a massively diversified, institutional-quality portfolio. It’s one of the greatest deals in financial history, and a symbol of the power of the ETF revolution.

The World’s Cheapest ETF Portfolio
Asset Class Weight Fund Ticker Expense Ratio
U.S. Equity 40% iShares Core S&P Total U.S. Market ETF ITOT 0.03%
Developed Markets Equity 30% iShares Core MSCI International Developed Markets ETF IDEV 0.07%
Emerging Markets Equity 5% Schwab Emerging Markets Equity SCHE 0.13%
Fixed Income 15% Schwab U.S. Aggregate Bond SCHZ 0.04%
REITs 5% Schwab U.S. REIT ETF SCHH 0.07%
Commodities 5% ETFS Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF BCD 0.29%

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