Schwab Launches Growth and Value ETFs

Schwab launched two more ETFs today (12/11/09): Schwab U.S. Large-Cap Growth ETF (SCHG) and Schwab U.S. Large-Cap Value ETF (SCHV). Both funds will have an expense ratio of 0.15% and commission-free trading in Schwab brokerage accounts.

Schwab made a grand entrance into the ETF business about five weeks ago. By offering their products with some of the industry’s lowest prices, coupled with zero-commission trading for Schwab customers, I went so far as to declare it a watershed event.

Although Schwab did not have the entire month to pull in assets, they made impressive strides during the month of November. In less than a month, they went from being a non-existent entity in the ETF world to the 20^th largest ETF provider. By pulling in $144 million in assets, they were able to jump ahead of 10 other ETF providers and four ETN issuers for assets under management. That’s still a long way from being profitable, but not a bad start.

Schwab U.S. Large-Cap Growth ETF (SCHG) (SCHG overview) will track the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. As of 11/20/09, the index had 428 constituents with the largest being Microsoft (MSFT) 4.7%, Apple (AAPL) 3.6%, Cisco (CSCO) 2.7%, Google (GOOG) 2.7%, and Wal Mart (WMT) 2.4%. Top sectors are Technology 32%, Health Care 14%, Consumer Discretionary 14%, Industrials 10%, and Energy 9%.

Schwab U.S. Large-Cap Value ETF (SCHV) (SCHV overview) will track the Dow Jones U.S. Large-Cap Value Total Stock Market Index. As of 11/20/09, the index had 319 constituents with the largest being Exxon Mobile (XOM) 6.5%, Procter & Gamble (PG) 3.3%, Johnson & Johnson (JNJ) 3.2%, General Electric (GE) 3.1%, and JPMorgan Chase (JPM) 3.0%. Top sectors are Financials 22%, Consumer Staples 15%, Energy 13%, Industrials 11%, and Health Care 10%.

The Schwab ETF website suggests that the primary competitors for these funds are the large cap growth and value ETFs from Vanguard (VUG, VTV), SPDRs (ELG, ELV) and iShares (IVW, IVE). The two iShares products are based on S&P indexes. However, the most popular large cap growth and value ETFs are the ones from iShares based on Russell Indexes, which I believe are currently the strongest competitors – iShares Russell 1000 Growth (IWF) and iShares Russell 1000 Value (IWD).

Disclosure covering writer, editor, publisher, and affiliates: Long IWF, AAPL, CSCO, GE, JNJ, and JPM. No positions in any of the other companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.