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Schwab Slashes Minimums On OneSource NTF Mutual Funds

FYI: Initial investments for most funds cut to $100 from $2,500; subsequent investments reduced to $1 minimums.
Regards,
Ted
http://www.thinkadvisor.com/2015/11/16/schwab-slashes-minimums-on-onesource-ntf-mutual-fu?t=mutual-funds

Comments

  • I think this is a brilliant move by Schwab and I hope it catches on with other brokerages. If I can start with $100 instead of $2500 or sometimes $10000, I a more likely to invest and invest sooner.
  • In the past, Fidelity's minimum investment on NTF platform was $500. When the asset went up, they gradually let it rises to $2,500.

    More importantly, the minimum on transaction-fee funds could be lowered to $5,000 - 10,000 instead of the $100K on institutional shares.
  • This could be dangerous for a fund junkie...
  • Don't think so. Most investors have difficulty paying $50 transaction fee (at least at Fidelity) to buy institutional mutual funds with higher $ minimum than $2,500. And there are additional fees for subsequent purchases.
  • edited November 2015

    This could be dangerous for a fund junkie...

    I disagree since a I'm a recovering addict. Such a junkie will figure out another way. What it will enable is to help people start saving and more regularly IMHO. It will also let more investors partake into funds they are otherwise not able to.

  • Many investors look at that $50 fee and think "why should I pay this, when I can get the same fund for 'free' (NTF)?"

    If they're looking at investing $5K in a TF fund, they may be right. $50/$5K is 1% and typically buys an ER reduction of 0.25%. That's four years to break even. For a true long term investor, four years is nothing, but I suspect most investors look at that as "forever" , i.e. too long.

    If anything, it seems that the minimums on institutional funds at brokerages seems to be going up (as contrasted with the increasing availability of load-waived retail funds). That could be due to the pricing structure imposed on TF funds. They pay fees, too.

    0.10% of AUM or $20/account/year is what Schwab charges TF funds. The same sort of calculation as above applies to the what these funds pay. For high min funds, $20/year is peanuts. Drop the min below $20K, and the funds might as well just pay Schwab 0.10%/year to sell institutional shares. That's a big bump in expenses for this share class.

    http://www.schwab.com/public/schwab/nn/legal_compliance/compensation_advice_disclosures/schwab_compensation.html#transaction_fee_funds
  • At least Schwab now charges the fee only on the front end. If you wanted to take some profits, rebalance, etc. the $49.95 they used to charge on the redemption end (for any amount) was steep.

    And I don't like plunking down $100k all at once for any fund...not a good market timer.
  • At least Schwab now charges the fee only on the front end. If you wanted to take some profits, rebalance, etc. the $49.95 they used to charge on the redemption end (for any amount) was steep.

    And I don't like plunking down $100k all at once for any fund...not a good market timer.

    But Schwab charges a ridiculous $75.95 for purchasing TF funds whereas Fido charges $49.95, also with no fee for redemptions.
  • @MrRuffles Agreed...but with my account, my sons' accounts, and my banking all at Schwab, it just seems like a bigger hassle to switch, in order to buy the random TF fund. Probably easier to call Schwab up and whine...has been quite effective at times in the past;)
  • Once reached certain asset level, Vanguard offers $20 for TF funds, $2 for additional systematic purchase and no fee for selling. However, Vanguard offers the fewest mutual funds outside of Vanguard funds. It pays to compare and shop which brokerages would serve you best.
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