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Vanguard Cuts Fees on ETF Trading

The nature of the ETF industry has lead smaller firms to introduce unique products such as the Claymore/Arca Airline ETF (FAA), the Claymore/MAC Global Solar Energy Index ETF (TAN), the WisdomTree Dreyfus Emerging Currency Fund (CEW) and the WisdomTree India Earnings Portfolio (EPI).

Decisions by dominant players such as Vanguard and Fidelity to slash fees on specific products could compromise these smaller ETF providers' ability to compete if the large brokers begin to offer competing products. Right now, the greater risk is than investors may limit themselves to a single ETF provider.

Over the nearly two decades that ETFs have been in existence, close to 1,000 different funds have been launched, proving investors with a plethora of opportunities to expand their portfolios into facets of the market previously unreachable. However, with brokerage firms now starting to adapt commission-free plans to keep customers in-home, the possibility of pigeon-holing an investment strategy becomes greater.

As the cost of trading plummets, trading fees become an increasingly smaller share of costs. For small investors who make a lot of trades, it can still be hefty, but all in all, this is a shallow moat that investors should be willing to cross.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion Money Management is not long on any of the equities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
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