2017 has been kind to AlphaGlider investors in the fund1 management fee department. Back in February we saw the major custodians get into a price war over stock and ETF trade commissions, leading our independent custodian, TD Ameritrade Institutional (TDAI), to cut its trade commission by 30 percent to $6.95 per trade. Now come significant cuts to expense ratios of five exchange-traded funds (ETFs) used by AlphaGlider strategies — four from Vanguard (VTI, VEA, VTV, BSV) and one from Charles Schwab (SCHP).
The 1 to 2 basis point (one basis point is one hundredth of one percent) reduction in expense ratios of these five funds takes the weighted average expense ratio down by 7 to 8 percent for each of AlphaGlider's five strategies. On AlphaGlider's approximately $14 million in assets under management as of this writing, AlphaGlider investors in aggregate will lower their annual investment expenses by over $1,100. And since a dollar saved is a dollar earned, that's an additional $1,100 in annual investment returns for AlphaGlider investors, again in aggregate.
The annual savings from TDAI's February's trade commission reduction are of a similar magnitude to AlphaGlider investors as from Vanguard and Schwab's recent ETF expense ratio reductions. If the trade commission reduction had been in effect during 2016, AlphaGlider investors would have saved $1,000. Currently, AlphaGlider strategies are invested in 16 different ETFs and one mutual fund. 10 of these trade commission free at TDAI, while the other seven incur the new, lower commission of $6.95 per trade.
— John Bogle, founder of The Vanguard Group"