Vanguard Action To Make ETF Investing More Affordable

Since the launch of the first ETF almost 25 years back, the exchange-traded fund industry has attained great heights. There are currently about 2,153 exchange-traded products listed in the United States, with almost $3.54 trillion in assets under management.

Investors can get access to several asset classes through ETFs that are basically a pool of securities, almost like mutual funds. The difference is that unlike mutual funds, ETFs trade throughout the day like a stock. Also, ETFs are considered less expensive and more tax efficient than mutual funds.

However, ETF issuers have been trying to make this less-priced investing medium even cheaper. In a bid to gain market share, they are lately engaged in a fee war of late and have been slashing expense ratios for some of their products aggressively.

So long, the war was primarily within the asset management space, but industry behemoth Vanguard now extended it to the brokerage level. Let’s delve a little deeper.

Vanguard Cuts ETF Commissions

On Jul 3, Vanguard said it will no longer charge commissions for online trades of most of its competitors' ETFs. Vanguard already allows customers perform online trades of 77 of its own ETFs without commissions, but it now intends to broaden that horizon. It will now deploy this practice to about 1,800 ETFs from BlackRock's iShares, Charles Schwab, State Street Global Advisors and other rivals from August.

Per an article published on Associated Press, commission-free ETF trading is not a new concept, but some of Vanguard's competitors are blamed of offering this privilege to products only from certain issuers.

In any case, Vanguard is famous for offering low-cost products. Now, its latest move will likely take the industry-wide price war to a different level. However, Vanguard will not allow commission-free access to leveraged or inverse ETFs due to "their speculative nature”.

Will Other Brokerage Houses Follow the Move?

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