Abstract
ETF investors love to talk about fees. After all, the expense ratios charged by ETFs are often fractions of those for competing mutual funds. But expense ratios are just one part of the true cost of investing in ETFs. Brokerage commissions and spreads also play an important role. Brokerage commissions are obvious-they are the money you pay your broker to execute a stock trade. Spreads, however, are a dirty little secret. Until recently, there was no publicly available data on ETF spreads, and for the most part, investors ignore spreads when choosing between ETFs and other investment options. They do so at their peril, however, as spreads can represent a substantial extra expense for certain ETFs. Hougan explores how spreads work in the ETF industry; how big they are for different funds; and what makes one ETF have larger spreads than another.
- © 2008 Pageant Media Ltd
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