Schwab No Commission ETFs

Thanks to Davey Nelson and his tip regarding using the Schwab OneSource ETFs and taking advantage of the commission free trades. What this means is all 200+ One Source ETFs are free to trade with your brand new Schwab account. Whereas using TD Ameritrade would cost you $6.95 each way! For Schwab buying any ETF or stock would cost you $4.95 fee charged to get in and out of any of these other ETFs. However for the 200+ ETFs on the OneSource list they will waive the commission. This is inline with the Robin Hood model of charging $0.00 per trade for just these special OneSource ETFs.

So the ETF is a mutual fund that trades like a stock. Usually if you want to get in and out of a mutual fund it must be settled after hours and securities have to be sold from the fund to come up with the cash to pay you. This takes forever, by ADHD standards. Plus the outflow fee and management fees are some times high as 5%. ETFs on the other hand do not have these fees to get in and out, usually you just pay the commission, but Schwab has waved that for these 200 ETFs in order to get you to roll your IRA or brokerage account away from TSP or Vanguard.

However there is still a fee to manage the ETF. Most of the ETFs on the 200+ OneSource list are less than 1% some as low as TSP levels of 0.03%. You can get in and out of them as many times as you want for free unlike TSP which is limited to 2 moves per month. With funds like SCHZ for F Fund, SCHX for C Fund, SCHA and SCHM for S Fund, SCHP for G Fund, and SCHF for I Fund for around 0.03% to 0.05% you can almost get as good as TSP minus the Match with BRS. I made an excel list of OneSource funds for the sake of searching.

Since were all stuck in with at least $1,000 in our account for a year for the $100 bonus, we might as well invest it into something. Here is what I picked based on trying to emulate the Meb Faber GAA minus TSP fund. I avoided asset classes I am already heavy in, and that I have my Roth IRA and TSP invested in. I excluded the G fund by eliminating all treasury product ETFs. I eliminated all the C and S fund ETFs that dealt with any American equity. I then avoided good safe bonds (F Fund) as well as large cap International companies of developed economies (I Fund). This is what I came up with to put my $15k into:

Position Quantity Price Per Total
Cash 16 $1.00 $16.00
SGOL

13

$119.46 $1,552.98
PCY 200 $28.79 $5,758.00
SCHE 200 $24.20 $4,840.00
PUTW 100 $28.33 $2,833.00
$14,999.98

By no means you should invest in these in particular, because with all the elimination I still have many to choose from. I aimed for low fee ones and eliminated gimmicky ones like Direxion iBillionaire Index ETF (IBLN) which copies the strategy of Billionaire Fund Managers. There is also a total bullshit low carbon (LOWC) ETF that makes you feel good inside to “own” companies that hug the earth, but keep in mind you don’t own the stock, the fund does. Also the company doesn’t really get any of your money, stock ownership isn’t giving money, it’s buying ownership. You are just speculating, holding onto these shares to sell to some other sucker in the future. The companies don’t see a dime of it, this ETF is classic virtue signaling here. Plus it’s all Apple, Microsoft, Johnson and Johnson and Amazon, which you already own a shit ton of. Don’t be a sucker to fall for flashy repackaging of the S&P 500 for 10 times the price!

I am just trying something different here, and these ETFs I picked seemed very unique. You can look up any ticker using the old MCCS Library MorningStar Trick. Here is my random justification of how I built my Schwab churn:

SGOL that holds on to physical gold in a Swiss Vault. A basket is 50,000 shares of SGOL representing 5,000 troy ounces of gold in this vault. I guess if you bought 50,000 shares of the ETF you can redeem a single basket of gold which is 5,000 ounces (342.85 lbs) of physical gold. My tiny little purchase of 13 shares represents 1.3 ounces of physical gold currently worth $1597.70 in spot.

PCY is lending out money to developing foreign governments like Cambria’s SOVB. These countries have not so great credit so they pay a little more for the loan. Right now there is about 5% yield on the money invested in this ETF which is outpacing SOVB at 4%. I wanted to expand this position as domestic debt is paying less than 1%. This “helps” more people than the LOWC ETF bullshit mentioned above.

SCHE is money in large and mid cap companies of 21 emerging markets, but not South Korea because they are just too fancy. This is the completion index for that I Fund in TSP does not touch. By market cap the C,S,I fund and this SCHE ETF should account for a good chunk of all the money trading in the world.

PUTW is a very interesting Options Writing ETF. Just like how those folks at Allstate take your premiums every month to buy you a new house if it burns down. You only get that peace of mind by paying the premium every month. This ETF just sits on money in treasury securities and writes put contracts on the S&P 500. The puts come at a premium and allow someone the option of selling a security at the current price, but one month in the future. For example if your share of SPY goes from $240 to $120 in a month. You don’t flip out because you bought the Put from this ETF for $1.27 a share which will promise to buy that share from you for the $240 strike price. People or funds buy these puts to hedge against dips in the S&P 500.

On the flip side your SPY goes from $240 to $300, you sure as hell are not going to use the option to sell SPY for $240. Your contract expires unused and the ETF gets $1.27 a share jus to have taken that risk for a month. Genius!

As long as the market doesn’t go down, and these people don’t exercise their option, and the fund keeps the premiums and the ETF goes up in value. The money that sits there is then used to cover the losses if the option is ever exercised. Since there has been unprecedented movement upwards in the market, the fund has been steadily growing as premiums are collected but no option has been exercised. Hoping this stays the same for at least a year.

Cash $12,275
Bonus $200
202,000 MR $2,525
Total $15,000

I will check in from time to time to show how the portfolio is going. I put $12,275 of my own money in and then $2,725 came in as 202,000 MR points and bonus cash. Please fee free to share your own strategies. For the faint of heart and those who only put in $1,000 for the $100 bonus you have some good TIPS products with guarantied inflation protected returns (SCHP Schwab U.S. TIPS ETF). Going back to my missing funds post, I made a chart of my theoretical funds:

Theoretic Fund OneSource ETF Description
M Fund WMCR USA Mini and Micro cap
W Fund HAO, EDOG, EWX International Mid to Small cap companies of developing economies
IG Fund PCY, BWX Any government debt that is not USA, preferably for a country that needs it
J Fund HYS Junky junky bonds of risky BB rated and below company debt
Au Fund SIVR, SGOL Commodities
H Fund SCHH REITs
MLP Fund ZMLP Master Limited Partnerships
T Fund SCHP TIPS: Treasury Inflation Protected Securities
WSB Fund USCI YOLO

Good Luck!

-Derp

 

5 Responses to Schwab No Commission ETFs

  1. I went the r/wallstreetbets route and got in on JNUG before it spiked. Basically covered my trade fee’s. That was a fun YOLO.

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