Meet the Ultra-Affordable, Zero-Expense Ratio ETFs from BNY Mellon

BNY Mellon US Large Cap Core Equity ETF

BKLC

First up is BKLC, which tracks the Solactive GBS United States 500 Index TR (TR stands for "total return," meaning with dividends reinvested).

This index differs from the S&P 500 in several ways. First, it lacks the committee process—nobody is deciding which companies to add or drop and there is no positive earnings screener, making it far more passive.

Instead, this index simply holds the largest 500 companies by market cap and weights them by free-float market capitalization, which means that only shares available to the public are considered in the weighting process.

Practically speaking, the top holdings and sector exposure are more or less identical to the S&P 500. Here are the results from the new ETF Central comparison tool:

BKLC has been around since April 2020 and has accrued over $2.5 billion in AUM. Honestly, I'm shocked I haven't noticed it earlier, but now's the time to get more eyes on it!

BNY Mellon Core Bond ETF

BKAG

The lower-risk complement to BKLC for the classic "two-fund" portfolio is BKAG, which tracks the Bloomberg US Aggregate Total Return Index.

This index is pretty much the bond industry's version of the S&P 500. It tracks a portfolio of Treasury bonds, agency-issued bonds, mortgage-backed securities, and investment-grade corporate bonds of multiple maturities.

The portfolio characteristics of BKAG are what I'd expect from an aggregate bond ETF in 2024: a weighted average yield to maturity of 5%, which is the total return expected if all underlying bonds are held to maturity, and an average duration of 6.16 years, indicating its sensitivity to interest rates. Plus, it offers the usual monthly distributions.

BKAG boasts $1.76 billion in AUM, and with a 0% expense ratio, it manages to undercut two of the most popular options on the market that offer similar exposure: the iShares Core U.S. Aggregate Bond ETF

Final Thoughts

As of July 15th, if you wanted to create the cheapest ETF portfolio possible, buying these two on a no-commission brokerage is the way to go. Both ETFs are refreshingly liquid thanks to their underlying holdings, so the bid-ask spread is minimal.

They're not obscure niche products either. Both ETFs are at a very healthy size and are at no risk of closing down. Frankly, I'm shocked that they haven't grown larger yet as fees are one of the most contested parts of the ETF industry.

Hopefully, other asset managers follow suit and lower fees or eliminate them altogether for "core" ETF segments like broad market equities and fixed income. Competition is good and hats off to BNY Mellon for stepping up to set the bar high.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.