Exchange traded fund (ETF) costs may be low, but they add up. ETF investors should always be aware of the amount of money they are doling out in management fees and understand what the long-term impact of high fees will be.
The iShares MSCI Emerging Markets Index (NYSEArca: EEM), with $39 billion in assets at year-end invested and covering 430 stocks from the emerging markets, gained around 72% in 2009, writes William Baldwin for Forbes. [Things That Determine an ETF’s Performance.]
The cheaper alternative to EEM is the Vanguard Emerging Markets Stock ETF (NYSEArca: VWO). VWO’s year-end assets were $19 billion and it returned 75% on a slightly different basket of stocks.
VWO runs at an expense ratio of 0.27% – if you invested $100,000, you would pay $270 per year. On the other hand, EEM has an expense ratio of 0.72%, meaning you’d pay $720 a year on a $100,000 investment.