The Personal Finance Index Card: Book Version Differences

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After rediscovering the young adult versions of fitting personal finance advice on an index card, I decided to go back and read the book The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen and Harold Pollack. (I was able to find it via library eBook.)

I noticed that the book version of the “index card” was slightly different. The original card had 9 items, but two of them were merged away into each other (401k/IRAs) and (Pay Attention to Fees/Buy Index Funds). I bolded the new additions below. (You can see all chapters on the Amazon page.)

  1. Strive to Save 10 to 20 Percent of Your Income
  2. Pay Your Credit Card Balance in Full Every Month
  3. Max Out Your 401(k) and Other Tax-Advantaged Savings Accounts
  4. Never Buy or Sell Individual Stocks
  5. Buy Inexpensive, Well-Diversified Indexed Mutual Funds and ETFs
  6. Make Your Financial Advisor Commit To a Fiduciary Standard
  7. Buy a Home When You Are Financially Ready
  8. Insurance – Make Sure You’re Protected
  9. Do What You Can To Support the Social Safety Net
  10. Remember The Index Card

Here again is the original:

Here are my notes on the newly-addressed topics of home-buying and insurance.

Home-buying. This will always be a hard topic because it mixes in emotion, personal history, peer pressure, and all that fuzzy stuff. If you want to own a home, you need to make sure the purchase won’t blow up your overall financial picture. Nothing really surprising, but still good advice.

  • Get your debt under control first.
  • Save up as close to a 20% down payment as you can.
  • Stick with a 15 or 30 year fixed-rate mortgage.
  • Prioritize what you really want and need in a home. Stay within your budget.
  • Location, location, location.

Insurance. There are low-probability events that can destroy decades of hard work, and that’s why humans invented insurance to spread the risk. Here are their cut-to-the-chase bullet points:

  • Emergency fund – Maintain one!
  • Life insurance – If you’re young(ish), just buy 30-year level term insurance.
  • Property insurance – Raise your deductible as high as you can handle.
  • Health insurance – Always sure you stay in-network.
  • Liability insurance – Coverage for at least twice your net worth.

I’m glad that this book still retained its “quick-and-dirty” nature. No single rule will cover every scenario, but it’s good to have a clear and concise collection of the big points along with just enough explanation that you understand the basic reasoning behind it.

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PeerStreet Review: Stats and Returns (IRR) After 2.5 Years

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Updated April 2019. I started investing in PeerStreet real-estate backed loans in July 2016. I’ve always like the idea of hard money loans, but I wanted more diversification as opposed to tying all my money up with one single property. For this type of lending, you have to be an accredited investor. Here are my overall numbers so far, with details below:

  • Total invested: $25,000
  • Total interest earned: $3,091
  • 43 loans made and paid off, 8 remaining active loans, and 2 are in foreclosure.
  • Internal rate of return (IRR) of 7.21% as of 4/18/19.

Short-term loans backed by real estate. Real estate equity investors want to take out short-term loans (6 to 24 months) and don’t fit the profile of a traditional mortgage borrower. They are professional investors with multiple properties, need bridge financing, or they are on a tight timeline. As a real-estate-backed loan investor, you lend them money at 6% to 12% and usually backed by a first lien on the property. The borrower stands to lose the equity in their property, so they are incentivized to avoid default. In the worst case, you would foreclose and liquidate the property in order to get your money back. However, this is better than Prosper or LendingClub where it is an unsecured loan and your only recourse is to lower their credit score.

What are PeerStreet strengths? Here are the reasons that I decided to put more a higher amount of money into PeerStreet as compared to other worthwhile real estate marketplace sites:

  • Debt-only focus. Other real estate (RE) sites will offer both equity and debt (and things in between). PeerStreet only focuses on debt, and I also prefer the simplicity of debt. There is limited upside but also less downside. Traditionally, this might be called “hard money lending”.
  • Lower $1,000 investment minimum. Many RE investment sites have minimums of $10,000 or $25,000. At PeerStreet, $25,000 will get me slices of loans from 25 different real estate properties. You can even reinvest your earnings with as little as $100.
  • Greater availability of investments. Amongst all the RE websites that I have joined, PeerStreet has the highest and most steady volume of loans that I’ve seen. I dislike having idle cash just sit there, waiting and not earning interest. They apparently have a unique process where they have a network of lenders that bring in loans for them. They don’t originate loans themselves, they basically buy loans from these partners if they fit their criteria. This steady volume allows the lower $1,000 minimums and more diversification, as well as easy reinvestment of matured loans.
  • Automated investing. The above two characteristics allow PeerStreet to run an automated investment program. You give them say $5,000 and they will invest it automatically amongst five $1,000 loans. You can set certain criteria (LTV ratio, term length, interest rate). When a loan matures, the software can automatically reinvest your available cash. I don’t even have to log in.
  • Consistent underwriting. You should perform your own due diligence in this area, as you can only feel comfortable with automated investing if you think every loan is underwritten fairly. The riskier loans get higher interest rates. The less-risky loans get lower interest rates. The shady borrowers are turned away. I want to just sit back and let them choose for me.
  • Strong venture capital backing. PeerStreet just closed a $30 million Series B round in April 2018. Andreessen Horowitz did a $15 million Series A round in November 2016. Michael Burry was an early seed investor, using $6.1 million of his own money according to TechCrunch. You may recognize this name from The Big Short.

Here’s a screenshot of the automated investing customizer tool:

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What are PeerStreet drawbacks? In my opinion, the main drawback is lower yields. This is just my limited understanding and I may be wrong, but PeerStreet has a network of lenders bringing in these deals and they also need to paid some sort of “finders fee”, so the net yield to the investor feels lower than other sites. You could argue that this is also their secret sauce that brings in the high loan volume (and ideally the ability to be more selective), but at some point the rate is too low to justify the risks being taken.

As of mid-2018, it is also my opinion that too many crowdfunding sites are chasing too few loans, which has been driving down the interest rates offered. I started out being able to find a lot of loans in the 8% to 9% range, but now the more conservative notes are in the 7%-7.5% range. In the current yield environment, my target is an 8% return while also maintaining a loan-to-value ratio of 70% or less.

Here’s the 1-minute video pitch from PeerStreet:

How does PeerStreet make money? As with other real estate marketplace lenders, they charge a servicing fee. PeerStreet charges between 0.25% and 1%, taken out from the interest payments. This way, PeerStreet only gets paid when you get paid. When you invest, you see the fee and net interest rate that you’ll earn. In exchange, they help source the investments, set up all the required legal structures, service the loans, and coordinate the foreclosure process in case of default. In some cases, the originating lenders retains a partial interest in the loan (“skin in the game”). Here’s a partial screenshot:

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What if PeerStreet goes bankrupt? This is the same question posed to LendingClub and Prosper, and their solution is also the same. The loans are held in a bankruptcy-remote entity and will continue to be serviced by a third-party even in a bankruptcy event. From their FAQ:

PeerStreet also holds loans in a bankruptcy-remote entity that is separate from our primary corporate entity. In the event PeerStreet no longer remains in business, a third-party “special member” will step in to manage loan investments and ensure that investors continue to receive interest and principal payments. Additionally, investor funds are held in an Investors Trust Account with City National Bank and FDIC insured up to $250,000.

Tax forms? For tax year 2018, I received both a 1099-INT and a 1099-OID. Basically, both include your gains that will be taxed at ordinary income rates (like bank account interest). Here’s what PeerStreet says:

PeerStreet investors will be issued a consolidated Form 1099 for the income distributed from their investment positions. Investors may receive one or more of the following types of 1099 form:

1099-OID for notes with terms longer than one year (at the time of issue)
1099-INT for notes with terms less than one year (at the time of issue)
1099-MISC for incentives, late fees or other income, if more than $600.

My personal performance. I started with a $10,000 investment in 2016 and then added another $15,000 in 2017 for a total of $25,000. This way, each of my loans was less than 5% of the total portfolio. Everything was set for automatic reinvestment whenever a loan in paid back or the interest adds up to $1,000. Starting in June 2018, I stopped reinvesting my proceeds as I felt that the rates being offered were starting to become too low when considering the gap between other bond alternatives. (For example, I think a 7% rate at a 75% LTV is not good enough.) If the rate premium improves, I will deposit more money back into the account.

Here is a screenshot of my account:

As of this writing 4/18/2019, my internal rate of return (IRR) is 7.21% annualized net of all fees and taking into account the short periods where my cash was idle. However, 2 out of my 51 total loans (works out to about 4%) are in some phase of the foreclosure process. These loans are all less than 70% LTV, but I don’t know what the final recovery amount will be. I expect my final IRR to be in the 6% to 7% range. In my experience, this is a critical difference with private real estate loans. You can’t make a few clicks and get your money back. I may have to wait a year or longer if the loan requires a property takeover and sale. This is why it’s a good idea to diversify across many $1,000 loans.

Bottom line. PeerStreet offers high-yield, short-term loans backed by private real estate. As compared to traditional “hard money lending”, accredited investors can diversify with $1,000 minimum investment per property, automated reinvestment, and steady nationwide loan volume. In exchange, PeerStreet charges a servicing fee between 0.25% and 1%, taken out of the interest charged to the borrower. The returns you see in the listing are net of their fees.

If you are interested and are an accredited investor, you can sign up and browse investments at PeerStreet for free before depositing any funds or making any investments.

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M1 Finance $100 Brokerage Transfer Bonus

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As noted in my post on best online brokers, my favorite option in the now-crowded “robo-advisor” category is now M1 Finance. Here’s a quick rundown of what makes them different:

  • Fully customizable. You pick your own ETF asset allocation “pie”. (You can add individual stocks too.) You can simply copy one of the many model portfolios out there, or tweak it as you like. You have full control! Here is my pie which I named the My Money Blog Portfolio.
  • No commissions. Free stock/ETF trades with a low $100 minimum account size for taxable accounts and a $500 minimum for retirement accounts.
  • No management fee. Most robo-advisors charge an annual management fee of 0.25% to 0.50% of assets (or force you to own something bad, like artificially low-interest cash).
  • Automatic rebalancing. M1 will rebalance your portfolio back to the target allocation for you automatically (for free). You don’t need to do any math or maintain any spreadsheets.
  • Fractional share ownership. For example, you can just set it to automatically invest $100 a month, and your full amount will be spread across multiple ETFs. Dollar-based transactions were one of the good things about buying a mutual fund, but it seems that ETFs are the future due to their lower costs and tax-efficient structure. Fractional shares solve this problem.

Short version: Free and DIY, of course I like it!

How do they make money? Here’s how M1 makes money. As commissions shrink, this is the business model for pretty much all online brokers now:

1) Interest on idle cash (can be minimized as you can auto-invest all idle cash in the investment account)
2) M1 Borrow (margin loan interest)
3) M1 Spending (debit card generates fees for them)
4) Payment for order flow (same as Robinhood and TD Ameritrade)
5) M1 Plus (premium subscription that gets you higher interest rates and debit card cash back).

$100 account transfer bonus. Now through April 30th, they will give you a $100 cash bonus if you perform a brokerage account transfer of $20,000+ over to M1. Works with both taxable and IRA accounts. Via their post on account transfer myths, this bonus should basically cover the cost of any outgoing fee. The most common transfers come from Vanguard, Betterment, Wealthfront, Robinhood, E*Trade, TD Ameritrade, Fidelity and Schwab.

Here is a PDF with detailed transfer directions. Here are the main steps:

  • First, you’ll need to open a new M1 Finance account. For a smooth transfer, your M1 account type should match your current account type. For example, a Joint account should be transferred to a Joint account and a Roth IRA should be transferred to a Roth IRA. If you choose to change account type in a transfer, it will require additional paperwork.
  • Email them at “transfers@m1finance.com” with your most recent account statement and any additional instructions, including directions on which securities you do and do not want transferred.
  • Transfers typically take 7-10 days. The $100 bonus will appear in your M1 account on July 15.

Bottom line. M1 is a new brokerage account that acts like a free, customizable robo-advisor with automatic rebalancing into a target portfolio. I am trying them out with my 2019 IRA contribution. Right now, there is also a transfer bonus if you move $20,000+ over to them from another broker.

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Vanguard to Launch Low-Cost Commodity Strategy Fund

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Vanguard announced in a press release that it is creating a new actively-managed mutual fund using the Bloomberg Commodity Total Return Index as a benchmark. The Vanguard Commodity Strategy Fund will have an estimated 0.20% expense ratio and June 2019 launch date.

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The fund will at least initially not be directly targeted at retail investors, as it will only be available as Admiral Shares with a $50,000 investment minimum. Considering that commodities are usually only included in portfolio as a hedge at around 5% allocation, you would need a $1 million portfolio to justify putting $50,000 into commodities.

The direct competition is the PIMCO Commodity Real Return Strategy Fund (PCRIX) which has a 1.24% expense ratio and about $5 billion in assets. GraniteShares also released some low-cost commodity ETFs in 2017, including the GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (COMB) with a 0.25% expense ratio. This means that the new Vanguard fund will become the lowest-cost commodity fund available by a small margin.

Here’s a quick summary of the Bloomberg Commodity Total Return index:

The Bloomberg Commodity Total Return index is composed of futures contracts and reflects the returns on a fully collateralized investment in the BCOM. This combines the returns of the BCOM with the returns on cash collateral invested in 13 week (3 Month) U.S. Treasury Bills.

BCOM is the Bloomberg Commodity Index, which incudes aluminum, coffee, copper, corn, cotton, crude oil, gold, diesel, lean hogs, live cattle, natural gas, nickel, silver, soybeans, sugar, unleaded gas, wheat, and zinc (image source).

There is active debate as to whether commodities should be included in your portfolio. My take is that commodities futures may offer the draw of being a diversification and/or inflation hedge, but I don’t want to pay the price of possibly lower returns, higher volatility, and higher complexity. As in other areas of life, sometimes the “insurance” is worth the cost, and sometimes it isn’t.

Bottom line. Vanguard is launching a commodities fund. If you like low-cost access to the commodities asset class, this looks to be a positive development even though right now it has a $50,000 investment minimum. Where will Vanguard expand to next with its growing appetite for assets?

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Fundrise Starter Portfolio eREIT vs. Vanguard REIT ETF Review – Updated April 2019

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Updated April 2019. This post tracks my experiment comparing a Fundrise eREIT portfolio and the Vanguard REIT ETF. In Fundrise, we have a start-up that bought a concentrated basket of roughly 20 properties chosen from the private market. In Vanguard, we have a one of the largest real estate ETFs in the world that owns a passive slice of 184 public-traded REITs. I invested $1,000 into both in October 2017 and plan to let them run for 5 years.

Fundrise Starter Portfolio background. Despite the name, the Fundrise Starter Portfolio is actually a simple 50/50 mix of two eREITs: the Fundrise Income eREIT and the Fundrise Growth eREIT*. This private eREIT works within recent crowdfunding legislation that allows all investors to own a basket of individual real estate properties (not just accredited investors with high net worth). The minimum deposit is $500. You must buy shares directly from Fundrise, and there are liquidity restrictions as this is meant to be a long-term investment. Here’s a recent map of locations for the holdings. Most are apartment complexes, condominiums, and hotels.

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* Due to increasing popularity and the limited nature of this product, Fundrise has created the Income REIT II/III funds and Growth REIT II/III funds. My portfolio is invested in the REIT I and REIT II series of funds, but new investors will get the REIT II and REIT III series. Thus, your returns may look somewhat different than mine.

Vanguard REIT ETF background. The Vanguard REIT ETF (VNQ) is one of the largest index funds to invest in publicly-traded real estate investment trusts (REITs). You can purchase it via any brokerage account. You have the liquidity of being to sell on any day the stock market is open. A single share currently costs about $88, not including an trade commission. You are holding a tiny slice of (tens of?) thousands of office buildings, hotels, nursing homes, shopping centers, apartment complexes, and so on. Here are the recent top 10 holdings:

Expenses. The Fundrise Starter Portfolio has an 0.85% annual asset management fee and a 0.15% annual investment advisory fee (1% “all-in” total). The Vanguard REIT ETF has an expense ratio of 0.12%, but each public REIT also has their own internal costs to manage their properties. Due to scale, I would expect the net effect of fees to be significantly higher for the Fundrise assets than for the Vanguard ETF. We will see if Fundrise can provide higher net returns for this concentrated holding.

Five-year time horizon. Both Fundrise and VNQ usually announce dividend distributions on a quarterly basis. Vanguard updates the NAV daily, but Fundrise only updates their NAV quarterly. Fundrise NAVs are only estimates as there is no daily market value available (similar to your house). Therefore, I plan on holding onto this investment for 5 years at the minimum. This will allow the investments to “play out” and also avoid any early redemption fees. I will withhold final judgement until both investments are cashed out, but will provide quarterly updates.

Fundrise Portfolio performance updates. Screenshot of my most recent statement:

  • 10/20/17: $1,000 initial investment – 50 shares @ $10.00/share Income eREIT and 48.78 shares @ $10.25/share Growth eREIT.
  • 1/9/18: 2017 Q4 dividends of $17.98 received and reinvested.
  • 4/11/18: 2018 Q1 dividends of $16.13 received and reinvested.
  • 7/11/18: 2018 Q2 dividends of $17.60 received and reinvested.
  • 10/10/18: 2018 Q3 dividends of $19.10 received and reinvested.
  • 1/10/19: 2018 Q4 dividends of $20.08 received and reinvested.
  • 3/31/18: Total Fundrise value $1,147 (includes reinvested dividends).

(2019 Q4 dividend of $18.34 was announced on April 10, 2019 but I haven’t received the month-end statement yet, so I’m just going with the March statement numbers.)

Vanguard REIT ETF performance updates. I own VNQ and the mutual fund equivalent VGSLX (same underlying holdings) in my retirement portfolio, but will be using Morningstar tools to track the performance of a $1,000 investment bought on the same date of 10/20/17.

  • 10/20/17: $1,000 initial investment – 11.9545 shares at $83.65/share.
  • 12/27/17, VNQ distributed a gain of $0.012 per share, return of capital of $0.37 per share, and a dividend of $0.88 per share.
  • 3/26/18: VNQ dividend of $0.71 per share.
  • 6/18/18: VNQ dividend of $0.73 per share.
  • 9/24/18: VNQ dividend of $1.14 per share.
  • 12/14/18, VNQ distributed return of capital of $0.23 per share, and a dividend of $0.72 per share.
  • 3/29/18: VNQ dividend of $0.62 per share.
  • 3/31/19: Total VNQ value $1,105 (includes reinvested dividends).

Here is the historical chart with monthly data points. Again, I wouldn’t put too much stock into the short-term movements as the accuracy of the Fundrise NAV is inherently limited, but this is the best information that I have available.

Every month or so, Fundrise sends me an e-mail with an update on a new property that they have acquired, or a property where they have exited. Both Fundrise and the ETF are completely passive holdings, meaning I have no control over what they buy or sell.

Bottom line. I’m doing a buy-and-hold-and-watch experiment where I compare investing in real estate via Fundrise direct investment and the largest REIT index ETF from Vanguard. I’ll provide occasional updates, but more important is what happens over 5+ years.

You can learn more about all Fundrise eREIT options here. This is the second time I have invested with Fundrise. Last time I decided to test out a withdrawal in my Fundrise Liquidity and Redemption review.

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Savings I Bonds May 2019 Interest Rate: 1.40% Inflation Rate

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Savings I Bonds are a unique, low-risk investment backed by the US Treasury that pay out a variable interest rate linked to inflation. You could own them as an alternative to bank certificates of deposit (they are liquid after 12 months) or bonds in your portfolio.

New inflation numbers were just announced at BLS.gov, which allows us to make an early prediction of the May 2019 savings bond rates a couple of weeks before the official announcement on the 1st. This also allows the opportunity to know exactly what a April 2019 savings bond purchase will yield over the next 12 months, instead of just 6 months.

New inflation rate prediction. September 2018 CPI-U was 252.439. March 2019 CPI-U was 254.202, for a semi-annual increase of 1.16%. Using the official formula, the variable component of interest rate for the next 6 month cycle will be 1.40%. You add the fixed and variable rates to get the total interest rate. If you have an older savings bond, your fixed rate may be very different than one from recent years.

Tips on purchase and redemption. You can’t redeem until 12 months have gone by, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time. If you miss the cutoff, your effective purchase date will be bumped into the next month.

Buying in April 2019. If you buy before the end of April, the fixed rate portion of I-Bonds will be 0.50%. You will be guaranteed a total interest rate of 2.82% for the next 6 months (0.50 + 2.32). For the 6 months after that, the total rate will be 0.50 + 1.40 = 1.90%.

Let’s look at a worst-case scenario, where you hold for the minimum of one year and pay the 3-month interest penalty. If you theoretically buy on April 30th, 2019 and sell on April 1, 2020, you’ll earn a ~2.06% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. Comparing with the best interest rates as of April 2019, you can see that this is lower than a current saving rate or 12-month CD.

Buying in May 2019. If you buy in May 2019, you will get 1.40% plus a newly-set fixed rate for the first 6 months. The new fixed rate is unknown, but is loosely linked to the real yield of short-term TIPS. In the past 6 months, the 5-year TIPS yield has dropped from 1% to about 0.5%. My best guess is that it will be 0.20%. Every six months, your rate will adjust to your fixed rate (set at purchase) plus a variable rate based on inflation.

If you have an existing I-Bond, the rates reset every 6 months depending on your purchase month. Your bond rate = your specific fixed rate (set at purchase) + variable rate (minimum floor of 0%).

Buy now or wait? In the short-term, these I bond rates will definitely not beat a top 12-month CD rate if bought in April, and most likely won’t if bought in May either unless inflation skyrockets. Thus, if you just want to beat the current bank rates, I Bonds are not a good short-term buy right now.

If you intend to be a long-term holder, then another factor to consider is that the April fixed rate is 0.5% and that it will likely drop at least a little in May in my opinion. You may want to lock in that higher fixed rate now.

Honestly, I am not too excited to buy either in April or May, but if I really liked the long-term advantages of savings bonds (see below), I would consider buying now in April rather than May due to my guess of a higher fixed rate. You could also wait, as things might change again during the next update in mid-October. For my own accounts, as I am now semi-retired and thus no longer a big saver looking for any tax-deferred space possible, I will probably just buy TIPS in other accounts instead since the real yield is similar.

Unique features. I have a separate post on reasons to own Series I Savings Bonds, including inflation protection, tax deferral, exemption from state income taxes, and educational tax benefits.

Over the years, I have accumulated a nice pile of I-Bonds and now consider it part of the inflation-linked bond allocation inside my long-term investment portfolio.

Annual purchase limits. The annual purchase limit is now $10,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year. Buy online at TreasuryDirect.gov, after making sure you’re okay with their security protocols and user-friendliness. You can also buy an additional $5,000 in paper bonds using your tax refund with IRS Form 8888. If you have children, you may be able to buy additional savings bonds by using a minor’s Social Security Number.

For more background, see the rest of my posts on savings bonds.

[Image: 1946 Savings Bond poster from US Treasury – source]

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Buying The Haystack: Sleeping Well Because I’ll Own The Winners

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Vanguard has a new research paper on How to increase the odds of owning the few stocks that drive returns [pdf], found via How Concentration Affects Portfolio Performance by Michael Batnick. Inside, there is a chart that sorts the individual returns of the US stock market (Rusell 3000) over the last 30 years (1987-2017) into total performance buckets. What happens to the stock prices of individual companies over 30 years? Lots of big losers. A few huge winners.

The whitepaper has a lot of math and investment jargon that you can read for yourself. Let’s skip to the conclusion here:

Historical cumulative returns of individual stocks are skewed whereby overall market returns are determined by a small minority of stocks. Therefore, all else being equal, a more diversified portfolio is more likely to hold these outperforming stocks while displaying a lower dispersion of portfolio returns. We conducted simulations of various portfolio sizes and showed that those portfolios with fewer holdings underperformed those with more holdings, leading to a higher return hurdle to overcome.

As the late Jack Bogle told us: “Don’t look for the needle in the haystack. Just buy the haystack.”

I don’t know which will be the most successful US companies in the future, but I know that I will own them via the total US index fund in my portfolio. I will own the next Amazon, Google, Facebook, Apple, or Visa. I’ll also own whoever disrupts them after that. Since I own a big chunk of global stocks inside the Vanguard Total International Stock Index fund, I’ll be covered if they come from the other side of the world.

Now, when you own the entire haystack, you will get the losers as well as the winners. Also, I won’t be as rich as if I invested in them when operated out of a dorm room. It just turns out that in this capitalist structure, owning them all still works out pretty darn well. I will own shares of all these businesses in proportion to their market value, and by extension a share of their profits. Some of those profits will be reinvested for future growth, and some will be sent to me as cash dividends every three months. I’ll happily spend those dividends, and the let rest grow into more dividends in the future.

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Schwab Commission-Free ETF List Review (Updated 2019)

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ETFs are surpassing mutual funds as the standard building blocks of stock and bond portfolios. Here’s a closer look at the latest updates to the Charles Schwab commission-free ETF list. While the commercials often focus on quantity instead of quality, I will do the opposite. Here are the factors that I think are important:

  • Total Assets. This is a measure of popularity and reputation. A more popular ETF will have a smaller bid/ask spread and won’t have to liquidate in a bear market. A more reputably ETF manager will have lower index tracking error. However, ETF size isn’t everything.
  • Index/Asset Class. What index does it track? Does that index cover an asset class that I want to include??
  • Cost. What is the expense ratio? Low costs are important.

Schwab Commission-Free ETF full list. This Schwab ETF OneSource page includes a full list of their 503 commission-free ETFs.

Brief history of changes. In early February 2019, Schwab announced that it would increase the number of commission-free ETFs on their list to 503 as of March 1st, 2019, including no early redemption fees (no minimum holding period). Here is the list of 246 added ETFs, including 90 iShares ETFs.

Schwab’s ETF OneSource started in February 2013 with 103 commission-free ETFs including many in-house ETFs. Schwab has become very competitive with Vanguard and iShares by developing their own brand of low-cost, index ETFs. Outside providers now include: Aberdeen Standard Investments, ALPS Advisors, DWS Group, Direxion, Global X ETFs, IndexIQ, Invesco, iShares ETFs, John Hancock Investments, J.P. Morgan Asset Management, OppenheimerFunds, PIMCO, State Street Global Advisors SPDR® ETFs, USCF, WisdomTree and Charles Schwab Investment Management.

In March 2017, Schwab dropped their standard stock commission to $4.95 per trade + $0.65 per options contract. In addition, expenses for the Schwab market cap-weighted index mutual funds were lowered to match their Schwab ETF equivalents. Schwab Index mutual funds now have no investment minimum.

Largest ETFs on Schwab Commission-Free ETF list. Here are the top 20 most popular ETFs on their list, sorted by largest total assets. Also listed are the asset class and expense ratios.

ETF Name (Ticker) Asset Class Expense Ratio
iShares Core U.S. Aggregate Bond ETF (AGG) US Total Bond 0.05%
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) US Corporate Bonds 0.15%
iShares Edge MSCI Min Vol USA ETF (USMV) US Low Volatility 0.15%
iShares TIPS Bond ETF (TIP) US Inflation-Protected Bond 0.19%
iShares 1-3 Year Treasury Bond ETF (SHY) Short-Term Treasury Bond 0.15%
iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) Emerging Markets Bond 0.39%
Schwab International Equity ETF (SCHF) International Developed 0.06%
iShares MBS ETF (MBB) US Mortage-Backed Bonds 0.09%
iShares MSCI Japan ETF (EWJ) International Country Stock 0.47%
iShares iBoxx $ High Yield Corporate Bond ETF (HYG) US High-Yield Corporate Bond 0.49%
Invesco S&P 500® Equal Weight ETF (RSP) US Large-Capk 0.20%
Schwab U.S. Large-Cap ETF (SCHX) US Large Cap Blend 0.03%
Schwab U.S. Broad Market ETF (SCHB) US Total Stock 0.03%
iShares 7-10 Year Treasury Bond ETF (IEF) Interm-Term Treasury Bond 0.15%
iShares National AMT-Free Muni Bond ETF (MUB) Municipal Bond 0.07%
iShares 20+ Year Treasury Bond ETF (TLT) Long-Term Treasury Bond 0.15%
iShares Edge MSCI Min Vol EAFE ETF (EFAV) International Developed Stock 0.20%
iShares Short-Term Corporate Bond ETF (IGSB) US Short-Term Corporate Bond 0.06%
Invesco S&P 500® Low Volatility ETF (SPLV) US Large-Cap Stock 0.25%
iShares Edge MSCI USA Quality Factor ETF (QUAL) US Large-Cap Stock 0.15%

 

Lowest Expense Ratio ETFs on Schwab Commission-Free ETF list. Here are the top 20 cheapest ETFs on their list, sorted by lowest expense ratio.

ETF Name (Ticker) Asset Class Expense Ratio
Schwab U.S. Broad Market ETF (SCHB) US Total Stock 0.03%
Schwab U.S. Large-Cap ETF (SCHX) US Large Cap Blend 0.03%
SPDR Portfolio Large Cap ETF (SPLG) US Large Cap Blend 0.03%
SPDR Portfolio Total Stock Market ETF (SPTM) US Total Stock 0.03%
SPDR Portfolio Developed World ex-US ETF (SPDW) International Developed Stock 0.04%
Schwab U.S. Aggregate Bond ETF (SCHZ) International Developed Large Cap Blend 0.04%
SPDR Portfolio Aggregate Bond ETF (SPAB) US Total Bond 0.04%
Schwab U.S. Large-Cap Growth ETF (SCHG) US Large-Cap Growth 0.04%
SPDR Portfolio S&P 500 Growth ETF (SPYG) US Large-Cap Growth 0.04%
Schwab U.S. Large-Cap Value ETF (SCHV) US Large-Cap Value 0.04%
SPDR Portfolio S&P 500 Value ETF (SPYV) US Large-Cap Value 0.04%
Schwab U.S. Mid-Cap ETF (SCHM) US Mid-Cap 0.04%
Schwab U.S. Small-Cap ETF (SCHA) US Small-Cap 0.04%
Schwab U.S. TIPS ETF (SCHP) US Inflation-Protected Bond 0.05%
Schwab 1000 Index ETF (SCHK) US Large-Cap Blend 0.05%
SPDR Portfolio Mid Cap ETF (SPMD) US Mid-Cap 0.05%
SPDR Portfolio Small Cap ETF (SPSM) US Small-Cap 0.05%
SPDR Bloomberg Barclays Corporate Bond ETF (CBND) US Corporate Bond 0.06%
Schwab International Equity ETF (SCHF) International Developed 0.06%
Schwab Intermediate-Term U.S. Treasury (SCHR) US Treasury Bond 0.06%

 

Commentary. Overall, Schwab’s OneSource ETF list does include a good mix of Schwab ETFs with good management, low costs, and low bid/ask spreads. There are also a few good iShares and SPDR ETFs that could be potential ETF pairs for tax-loss harvesting. A DIY investor should find it easy create a diversified portfolio of ETFs according to their desired asset allocation, if you know what you are looking for. With 500+ ETFs, many will be short-lived duds, while still others are ETFs that track a very similar index but are much more expensive than the competition.

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Best Interest Rates on Cash – April 2019

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Here’s my monthly roundup of the best interest rates on cash for April 2019, roughly sorted from shortest to longest maturities. The big news is that we are starting to see some slight rate drops in CDs! Folks who locked in at 4% APY may end up pleased they did. Check out my Ultimate Rate-Chaser Calculator to get an idea of how much extra interest you’d earn if you are moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 4/3/19.

High-yield savings accounts
While the huge megabanks like to get away with 0.01% APY, it’s easy to open a new “piggy-back” savings account and simply move some funds over from your existing checking account. The interest rates on savings accounts can drop at any time, so I prioritize banks with a history of competitive rates. Some banks will bait you and then lower the rates in the hopes that you are too lazy to leave.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Purepoint Financial has a 13-month No Penalty CD at 2.50% APY with a $10,000 minimum deposit. Marcus Bank 13-month No Penalty CD at 2.35% APY with a $500 minimum deposit, Ally Bank 11-month No Penalty CD at 2.30% APY with a $25k+ minimum, and CIT Bank 11-month No Penalty CD at 2.05% APY with a $1,000 minimum. You may wish to open multiple CDs in smaller increments for more flexibility.
  • Colorado Federal Savings Bank has a 12-month CD at 2.86% APY ($5,000 minimum) with an early withdrawal penalty of 3 months of interest.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, beware that many brokers pay out very little interest on their default cash sweep funds (and keep the difference for themselves). The following money market and ultra-short bond funds are not FDIC-insured, but may be a good option if you have idle cash and cheap/free commissions.

  • Vanguard Prime Money Market Fund currently pays an 2.46% SEC yield. The default sweep option is the Vanguard Federal Money Market Fund, which has an SEC yield of 2.36%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 2.71% SEC Yield ($3,000 min) and 2.81% SEC Yield ($50,000 min). The average duration is ~1 year, so there is more interest rate risk.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 2.84% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 2.80% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 4/3/19, a 4-week T-Bill had the equivalent of 2.42% annualized interest and a 52-week T-Bill had the equivalent of 2.41% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a 2.30% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 2.25% SEC yield. GBIL appears to have a slightly longer average maturity than BIL.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between November 2018 and April 2019 will earn a 2.82% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More info here.
  • In mid-April 2019, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). Some folks don’t mind the extra work and attention required, while others do. There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend or use any of these anymore.

  • The only notable card left in this category is Mango Money at 6% APY on up to $2,500, but there are many hoops to jump through. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Some folks don’t mind the extra work and attention required, while others do. Rates can also drop to near-zero quickly, leaving a “bait-and-switch” feeling. I don’t use any of these anymore, either.

  • The best one right now is Orion FCU Premium Checking at 4.00% APY on balances up to $30,000 if you meet make $500+ in direct deposits and 8 debit card “signature” purchases each month. The APY goes down to 0.05% APY and they charge you a $5 monthly fee if you miss out on the requirements. Find a local rewards checking account at DepositAccounts.
  • If you’re looking for a high-interest checking account without debit card transaction requirements then the rate won’t be as high, but take a look at MemoryBank at 1.60% APY.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going.

  • Hanscom Federal Credit UnionBank has a 19-month CD special at 3.00% APY ($1,000 minimum) with an early withdrawal penalty of 6 months of interest. If you have a military relationship, Navy Federal Credit Union has a 6-month special at 3.00% APY and 17-month special at 3.25% APY.
  • 5-year CD rates have been dropping at many banks and credit unions, following the overall interest rate curve. A good rate is now about 3.25% APY, with The Federal Savings Bank offering 3.30% APY on a 5-year CD.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable fixed early withdrawal penalties. As of this writing, Vanguard is showing a 2-year non-callable CD at 2.45% APY and a 5-year non-callable CD at 2.80% APY. Watch out for higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable fixed early withdrawal penalties. As of this writing, Vanguard is showing a 10-year non-callable CD at 3.10% APY. Watch out for higher rates from callable CDs from Fidelity. Matching the overall yield curve, current CD rates do not rise much higher as you extend beyond a 5-year maturity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). I view this as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years. As of 4/3/19, the 20-year Treasury Bond rate was 2.75%.

All rates were checked as of 4/3/19.



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Barron’s Best Online Broker Rankings 2019

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Each year, Barron’s releases their list of top online brokers. I like read and share it, hoping to find deeper insights into industry trends and specific broker features. However, this year their 2019 rankings article is firmly behind a paywall. That is certainly their right, but it also discourages sharing and discussion. (I am a paying subscriber to the NY Times, WSJ, and Bloomberg Businessweek, but not Barron’s.)

However, hidden in a Merill Edge press release, I found that Merrill paid for a full article reprint which lets anyone read the main article for free. I could not find a way to view the their secondary rankings, i.e. “Top 5 for Long-Term Investors” or “Top 5 for Occasional Traders”.

Their rankings only include 14 brokers this year, which means several are being left out. Firstrade and Vanguard were mentioned only to state that they both declined to participate. Robinhood wasn’t ranked, just quickly dismissed with an offhand “they take payment for order flow”, even though many other brokers on their list like E-Trade and TD Ameritrade also take payment for order flow. I mean, TD Ameritrade made $320 million from order flow in 2017 alone! WeBull wasn’t even mentioned.

Commentary. Here is my own list of brokers that I think are worth considering, along with their pros and cons. If a family or friend asked me what I thought were the best online brokers, this would be my reply.

Interactive Brokers

  • Pros: Best for active traders. Low average commissions for active traders. Best trading interface for active traders. Proof: Their average account makes ~500 trades a year. Good interest rate on cash sweep.
  • Cons: Minimum commission of $10 a month for accounts under $100,000, or a minimum commission of $20/month under $2,000. This means you must pay them $120/$240 a year no matter what. Not set up for newbies.

Fidelity

  • Pros: Good all-around broker. Best customer service in my experience. Free ETF list. No more mutual fund minimums. Good index fund selection.
  • Cons: $4.95/trade for stocks and ETFs not on their list. Average cash sweep options.

Vanguard

  • Pros: The classic broker for low-cost index fund lovers. $0 trades on all ETFs, both Vanguard and non-Vanguard (iShares, Schwab, etc). Free trades on Vanguard index and active mutual funds. Excellent index fund selection. Excellent cash sweep options. No direct profit motive.
  • Cons: Not good for active traders. They’ve had some struggles with customer service due to their huge growth.

Merrill Edge

  • Pros: Best for those with a Bank of America checking account. 30+ free trades/month when you move over $50,000+ in assets across Bank of America and Merrill (Preferred Rewards program), even if just moving over a bunch of low-cost ETFs. Good customer service.
  • Cons: Below-average cash sweep options. $6.95 trades without Preferred Rewards relationship.

M1 Finance

  • Pros: My favorite amongst the new crowd of app-centric brokers and robo-advisors. Free stock and ETF trades. Fractional share ownership means full investment of any dollar amount. You can fully customize an asset allocation “pie” using stocks or ETFs, and it will automatically rebalance for free with no management fees. Basically a free robo-advisor that is fully-customizable.
  • Cons: Newer startup. If you really want to add banking features, that will cost extra. (I’d just skip it.)
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Schwab Intelligent Portfolios Premium Feature Review: $30 a Month For Unlimited CFP Access

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Schwab has revamped their Intelligent Portfolios “robo-advisor” service, renaming the upper tier to Schwab Intelligent Portfolios Premium and adding an in-depth financial plan and unlimited advice from a Certified Financial Planner for an additional upfront fee of $300 plus an ongoing $30 a month. Bloomberg compares this to a Netflix subscription:

Current users won’t have to pay the $300 fee, and they’ll be transitioned to the new pricing model as early as Thursday, but only once they have enough assets to make it more cost-efficient for them, at around the $125,000 level. The free version of the service, Schwab Intelligent Portfolios, which automatically builds and rebalances exchange-traded fund portfolios as well as offering more limited guidance, will continue charging no advisory fee.

Feature comparison. The base Intelligent Portfolios product including the following features:

  • Design and choose an appropriate asset allocation.
  • Construct and maintain (rebalance) portfolio using ETFs.
  • Tax-loss harvesting.
  • No advisory fee*.
  • No commissions.
  • $5,000 minimum balance.

* You might see this referred to as a “free” (as it is by Bloomberg above) in that it charges no advisory fee on top of the underlying fees of the portfolio components. I’ll argue below that is it not really “free”.

Schwab Intelligent Portfolios Premium adds the following:

  • Unlimited 1:1 guidance from a Certified Financial Planner (CFP).
  • Personalized Action Plan and portfolio review with a CFP® professional.
  • One-time $300 initial planning fee and $30/month for unlimited guidance.
  • $25,000 minimum balance.

I agree that is a big shift in the portfolio management industry. A major player now offers unlimited access to a CFP for a flat fee of $30/month. CFP access is becoming a commodity. If you pay $15 a month for Netflix and $50 a month for unlimited cell phone data, why not pony up $30 a month for unlimited financial advice? I have pointed out previously that an overlooked feature of Blooom 401k advisory services was that they include unlimited CFP access in their $10/month fee.

I really like the idea of paying a flat fee instead of an asset-based fee for financial advice. I think this move from a big name like Schwab will attract some large portfolios from DIY investors. If you had a $500,000 portfolio, this would only be 0.07% of assets annually. I really hope Vanguard comes out with a flat-fee pricing option while still keeping their ability to work with your existing portfolio. Most robo-advisors, including Schwab Intelligent Portfolios, make you sell out of all your current positions and rebuy using their model portfolios. I have a lot of capital gains already such that selling would cause tax issues.

Schwab Intelligent Portfolios still has the same “catch” in their fine print, however. Every Schwab Intelligent Portfolios client is forced to hold a cash position of about 8% of the total portfolio in cash. More importantly, you also don’t have a choice in how they define “cash”. Here’s the fine print:

The portfolios include a cash allocation to a deposit account at Schwab Bank. Our affiliated bank earns income on the deposits, and earns more the larger the cash allocation is. The lower the interest rate Schwab Bank pays on the cash, the lower the yield. Some cash alternatives outside of Schwab Intelligent Portfolios Solutions pay a higher yield.

My primary concern is NOT that holding 8% cash is bad. It’s that the Schwab cash component that they force you to use is bad. As of 3/31/19, Schwab cash pays only 0.70% APY while the Vanguard Prime Money Market fund earns 2.46% SEC yield and a one-month Treasury Bill has a 2.43% yield. This gap may narrow or widen in the future.

If you assume a 1.50% drag on a 8% cash allocation, that’s the equivalent paying a 0.12% fee because you are losing that much in potential interest. As you grow older and/or become more conservative, the cash allocation grows as well. It is a guaranteed profit source for Schwab, and thus a guaranteed loss for you (not free!). This loss is not “cash drag”. If you wanted to argue that the return on cash is worse than a bond fund, “cash drag” would be an additional cost on top of this issue.

This is the equivalent of them making you hold an S&P 500 ETF with a 1.50% expense ratio instead of an equally-available S&P 500 ETF with an 0.03% expense ratio. People would be up in arms about that, so why not put up a fuss about this? The net fee may be still be a reasonable size, but this is not the type of behavior I am looking for in a service that I am supposed to entrust with my life savings. Just be upfront and charge me a fee. If Schwab replaces their cash component with a competitive money market fund or a simple allocation to Treasury Bills (make your own ETF, Schwab!) then I would get much more excited about this product.

Bottom line. Schwab is adding the ability to get unlimited human advice from a Certified Financial Planner (CFP) for $300 upfront + a flat $30 a month. I think this is a bold move that will affect the overall industry, but I still have concerns about their overall robo-advisor product that includes a low-interest cash component.

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Fidelity Commission-Free ETF List Review (Updated 2019)

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ETFs are surpassing mutual funds as the standard building blocks of stock and bond portfolios. Therefore, I’m taking a closer look at the latest commission-free ETF lists from the major brokers. Unfortunately, the marketing often focuses on quantity instead of quality. Who cares if they offer 500+ ETFs, if I only need six good ones? Here are the factors that I think are important:

  • Total Assets. This is a measure of popularity and reputation. A more popular ETF will have a smaller bid/ask spread and won’t have to liquidate in a bear market. A more reputably ETF manager will have lower index tracking error. However, ETF size isn’t everything.
  • Index/Asset Class. What index does it track? Does that index cover an asset class that I want to include?
  • Cost. What is the expense ratio? Low costs are important.

Fidelity Commission-Free ETF full list. The main Fidelity ETF page currently advertises 357 commission-free ETFs (28 from Fidelity and 329 from iShares). The full list requires a log-in. Here is an outdated PDF which lists the 240 iShares ETFs (89 more have since been added). There are several good, low-cost options from the iShares Core Series of ETFs.

Recent changes. In early February 2019, Fidelity announced that it would match Schwab and increase the number of commission-free ETFs on their list to “more than 500” by the end of the month. However, in late February 2019 they announced that they added a few new Fidelity ETFs and 89 additional iShares ETFs (formerly 240) as part of a “first phase”.

In February 2017, Fidelity lowered the standard commission on online stock and ETF trades to $4.95 per trade, down from $7.95 previously. In August 2018, Fidelity announced a part of zero-expense ratio mutual funds, eliminated many account minimums, and cut a bunch of mutual fund expense ratios by getting rid of share classes.

Largest ETFs on Fidelity Commission-Free ETF list. Here are the top 20 most popular ETFs on their list, sorted by largest total assets. I have added in the asset class (index) and expense ratio.

ETF Name (Ticker) Asset Class Expense Ratio
iShares Core S&P 500 ETF (IVV) US Large Cap Blend 0.04%
iShares MSCI EAFE ETF (EFA) International Large Cap Blend 0.31%
iShares Core MSCI EAFE ETF (IEFA) International Large Cap Blend 0.08%
iShares Core U.S. Aggregate Bond ETF (AGG) US Total Bond 0.05%
iShares Core MSCI Emerging Markets ETF (IEMG) Emerging Markets Stock 0.14%
iShares Core S&P Mid-Cap ETF (IJH) US Mid Cap Blend 0.07%
iShares Russell 2000 ETF (IWM) US Small Cap Blend 0.19%
iShares Core S&P Small-Cap ETF (IJR) US Mid Cap Blend 0.07%
iShares Russell 1000 Growth ETF (IWF) US Large Cap Growth 0.20%
iShares Russell 1000 Value ETF (IWD) US Large Cap Value 0.20%
iShares MSCI Emerging Markets ETF (EEM) Emerging Markets Stock 0.67%
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) US Corporate Bonds 0.15%
iShares Edge MSCI Min Vol USA ETF (USMV) US Low Volatility 0.15%
iShares S&P 500 Growth ETF (IVW) US Large Cap Growth 0.18%
iShares TIPS Bond ETF (TIP) US Inflation-Protected Bond 0.19%
iShares 1-3 Year Treasury Bond ETF (SHY) Short-Term Treasury Bond 0.15%
iShares Short Treasury Bond ETF (SHV) Short-Term Treasury Bond 0.15%
iShares Russell 1000 ETF (IWB) US Large Cap Blend 0.15%
iShares Core S&P Total U.S. Stock Market ETF (ITOT) US Total Stock 0.03%
iShares Russell Midcap ETF (IWR) US Total Stock 0.20%

 

Lowest Expense Ratio ETFs on Fidelity Commission-Free ETF list. Here are the top 20 cheapest ETFs on their list, sorted by lowest expense ratio.

ETF Name (Ticker) Asset Class Expense Ratio
iShares Core S&P Total U.S. Stock Market ETF (ITOT) US Total Stock 0.03%
iShares Core S&P 500 ETF (IVV) US Large Cap Blend 0.04%
iShares Core S&P U.S. Value ETF (IUSV) US Large Cap Value 0.04%
iShares Core S&P U.S. Growth ETF (IUSG) US Large Cap Growth 0.04%
iShares Core U.S. Aggregate Bond ETF (AGG) US Total Bond 0.05%
iShares Core MSCI International Developed Markets ETF (IDEV) International Developed Large Cap Blend 0.07%
iShares Short-Term Corporate Bond ETF (IGSB) US Short-Term Corporate Bond 0.06%
iShares Intermediate-Term Corporate Bond ETF (IGIB) US Interm-Term Corporate Bond 0.06%
iShares Broad USD Investment Grade Corporate Bond ETF (USIG) US Total Corporate Bond 0.06%
iShares 0-5 Year TIPS Bond ETF (STIP) US Inflation-Protected Bond 0.06%
iShares Core 1-5 Year USD Bond ETF (ISTB) US Short-Term Bond 0.06%
iShares 0-5 Year Investment Grade Corporate Bond ETF (SLQD) US Short-Term Corporate Bond 0.06%
iShares Core Total USD Bond Market ETF (IUSB) US Total Bond 0.06%
iShares Core S&P Mid-Cap ETF (IJH) US Mid Cap Blend 0.07%
iShares Core S&P Small-Cap ETF (IJR) US Mid Cap Blend 0.07%
iShares National AMT-Free Muni Bond ETF (MUB) Municipal Bond 0.07%
iShares S&P Short Term National AMT-Free Bond ETF (SUB) Short-Term Municipal Bond 0.07%
iShares Core U.S. REIT ETF (USRT) US Real Estate 0.08%
iShares Core High Dividend ETF (HDV) US High Dividend Stock 0.08%
iShares Core MSCI EAFE ETF (IEAFA) International Developed Large Stock 0.08%

 

Commentary. Fidelity’s list includes a good mix of iShares Core ETFs with good management, low costs, and low bid/ask spreads. An individual investor can easily create a diversified portfolio of ETFs according to their desired asset allocation. However, in their latest round of additions, they added a bunch of older iShares ETFs which were mostly more popular for professional traders and options buyers, not for long-term investors. For example, why would you buy EEM when you could buy IEMG with a much lower expense ratio? DIY investors need to choose carefully.

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