Schwab S&P 500 Index Fund: 0.09% ER, $100 To Start

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Brokerage firm Schwab lowered the annual expense ratios on many of its in-house mutual funds this week. For example, the Schwab S&P 500 Index Fund (SWPPX), which used to have an expense ratio of 0.36%, now has an expense ratio of 0.09%. That’s just $9 a year for every $10,000 invested. In addition, the minimum initial investment in each of the Schwab Equity Index Funds is now only $100, with no minimum balance requirements.

According to this CNN Money article, “This is not a promotional offer… These are permanent reductions.” This is basically what Fidelity did a few years ago when it lowered their S&P 500 index fund expense ratios to 0.10%, and they have kept it that low since, so there’s hope. Although technically they can always raise the expenses later, I do think ongoing competition will make it hard for them to do so. From the prospectus:

Schwab and the investment adviser have agreed to limit the “net operating expenses” (excluding interest, taxes and certain non-routine expenses) of the Investor Shares, Select Shares and e.Shares to 0.09% for so long as the investment adviser serves as the adviser to the fund. This agreement may only be amended or terminated with the approval of the fund’s Board of Trustees.

Also at 0.09% and $100 to start, there is the Schwab Total Stock Market Index Fund (SWTSX) which tracks the entire US Market (not just the largest 500 or so companies) through the Wilshire 5000 Index.

Schwab Traditional and Roth IRA accounts
I took a quick look at the Schwab IRA accounts, and they appear to have no account fees or minimums. You must initially open with $1,000, but that is waived if you make an automatic monthly transfer of at least $100.

Overall, this is a nice development for smaller investors with Schwab that want to invest in some broad index funds. However, I’ll stick to Vanguard for my IRAs since their fees are nearly as low on the Total US funds, and Vanguard is still much cheaper on all other asset class index funds.

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  1. This is interesting because Vanguard has basically had no competition for 20 years. With Schwab and Fidelity cutting expense ratios, Vanguard is still the leader in the low-cost indexing field, but at least now there’s other horses in the race.

  2. Hmmm Now that SWPPX and SWPIX are the same, I wonder if they are going to merge them anytime soon

  3. Any one knows any sign up bonus for Schwab?

  4. No sign up bonus,but free checking. ATM rebate and no minimums.
    Worth a look, Charles Schwab.

  5. Besides the free checking, they have a savings account with a 2% APY. Considering the other offers given lately it is not that bad to look at.

  6. This is great news! I opened an account with Schwab because they have fairly low mutual fund minimum balances, so they’re good for someone starting out without much money. But I always thought the expense ratios were too high and I would switch when I had more money in my account… now it looks like I won’t have to!

  7. Jonathanand others:

    Has anyone heard of –
    Costa Insurance and Financial Services
    866.212.1202 866.896.3796 fax
    PO Box 1030.Carlsbad.CA.92018
    They’re offering a 10% bonus on retirement account transfers. Very tempting especially because of the net positive growth of account even in recessionary times like now…thanks for your comments.

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