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ETFs as retirement investments gets a push

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As financial service giants Schwab and Pimco signal an interest in selling ETFs, the move could possibly boost the presence of the lower-cost funds in more 401(k) plans, according to Monday’s MarketWatch.

“The entry of these giants could be a tipping point for ETFs to finally become a tool for investors of every stripe, spurring other money managers and brokerages to jump in,” writes John Spence for MarketWatch. “Their presence could also boost efforts to include ETFs in more 401(k) retirement plans.”

Morningstar analyst John Gabriel tells MarketWatch he believes there is an “excellent” chance that the two firms will begin rolling out their own products; both companies have registered a single ETF each, according to the news service, which adds that it’s not clear as to whether there will be a broader push.

“Schwab and Pimco have applied for exemptive relief from regulators to introduce ETFs — the first step in launching products. Schwab has filed to list a fund tracking the Dow Jones U.S. Total Stock Market Index. Pimco has registered an ETF that would follow an index of U.S. Treasury securities,” Spence writes.

December 2008′s issue of Boomer Market Advisor reports ETF-based 401(k)s are making more headway. The growing interest in the plans comes as regulators demand better disclosure of plan fees, BMA cites from the Wall Street Journal. Mutual funds, the mainstay of 401(k) plan investment menus, often have complex “revenue sharing” agreements. For 401(k) participants, ETFs in those plans means lower fees and clear disclosure of expenses and fund holdings.


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