The low fees that exchange traded funds charge are a major reason the industry has seen $154 billion in inflows. Meanwhile, mutual funds have lost $119 billion in outflows over the same time period.
The ongoing ETF price war has kept ETF industry fees low, as providers aim at grabbing the most market share. As the ETF fee war has intensified the result has been lowered costs for investors.
For example, the three largest ETFs that track the S&P 500 have super low expense ratios: SPDR S&P 500 (NYSEArca: SPY) 0.09%, iShares S&P 500 Index Fund (NYSEArca: IVV) 0.07% and the Vanguard S&P 500 ETF (NYSEArca: VOO) costs 0.05%. [SPDR S&P Marks Two Decades of ETF Growth]
“Offering the lowest fees in a product category has been a strategy for several entrants, with some incumbents responding with price cuts. Still other ETF providers have introduced other strategies or sought other ways of differentiating their products, such as asking investors to look at other indirect costs of holding an ETF beyond simply a stated expense ratio. And in recent years, brokerage platforms have partnered with ETF issuers to offer commission-free trading of select ETFs,” Robert Goldsborough wrote for Morningstar. [A Closer Look at Three S&P 500 ETFs]