Exchange traded funds (ETFs) just aren’t what they used to be. Apparently the word caught on that ETFs offer low cost means for diversifying portfolios because the median ETF expense ratio went from 0.28% to 0.36% in 2006, according to Morningstar.
One thought behind the price hike is that the narrowly-focused ETFs do not have as much pricing pressure because they have little competition, says Jesse Emspak for Investor’s Business Daily. In addition, mutual fund fees are coming down, perhaps in competition with broader-focused ETFs.
Some investment experts doubt the higher prices for specialized ETFs will have much bearing because few investors tend to purchase them. Broad ETFs still are more favorable with most investors because of their diversity.
As more, specialized ETFs continue to spew forth, it will be interesting to see how that affects their expenses.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.