Gyroscopic Investing

Just FYI - I noticed that Schwab recently cut the fees for SCHO to 0.08%.  IMO, SCHO is a really good option for PP cash as it has substantially the same assets as SHY at (now) half the cost.  

Wow! That's very impressive and a huge improvement over SHY and SHV. And I agree that SCHO is a good option especially if you are trying to stay diversified between fund families.

I am very happy with the SCHO holdings in my 401k.

SCHO total assets 227m, ave volume 59k
SHY total assets 8.6b, ave volume 1.6m

When cost is this low already and up to 25% of my life savings are at stake, I'll still stick with SHY based on the numbers above. Disagree?

Yet another advantage of having multiple PPs.   Only one out of my three PPs uses SCHO for the cash, so it's only 8.3% of my life savings that are at stake.

BearBones wrote: SCHO total assets 227m, ave volume 59k
SHY total assets 8.6b, ave volume 1.6m

When cost is this low already and up to 25% of my life savings are at stake, I'll still stick with SHY based on the numbers above. Disagree?

I don't think those numbers indicate any significant risk.  However, they do indicate a low-volume risk might be there, so I check the recent bid/ask spread:

SCHO (yahoo):
Bid: 47.64 x 900
Ask: 50.65 x 500

OUCH!!!!  I don't know if that is normal or not, but the fact that it happened once means it isn't impossible and there is no way I want to be taking a haircut like that trying to get out.

Note that currently the markets are closed on a weekend.  Normal SCHO trading activity (as opposed to someone trying to low-ball at the end or even after hours) could be OK.  I'd be wary but not entirely rule it out at this point.


SHY (yahoo):
Bid: 84.10 x 400
Ask: 84.89 x 400

Now that's more like it.

I can confirm that the spreads are pretty tight during normal trading hours. I too had a minor heart attack when I saw those insane after-hours spreads, but it tightens up a LOT anytime you can get your order filled immediately.

Guys, dont forget that ETFs create shares on demand.  The bid, ask and volume is irrelevant to liquidity.

I always use limit orders just to be safe, and haven't had any issues with the spreads during trading hours.  They're normally pretty tight.

As of right now:

Bid: 50.52 Ask: 50.54

Pointedstick wrote: As of right now:

Bid: 50.52 Ask: 50.54

Much more reasonable. 

As for ETF liquidity, they do create shares on demand (and eliminate them), but if you look in the prospectus you'll see how much demand there has to be.  Usually it is something like 20,000 to 50,000 shares at a time, but some are as low as a few thousand or as high as 100,000 shares at a time.  When volumes do not justify creating another basket of shares the arbitrage isn't as likely to be quickly profitable so the bid/ask spread widens until it gets interesting.

I watched the focus shares ETFs at Scottrade for the year or so they were alive. The spread and volumes were always bothersome.  And then they shut them down.