Cheap is not always better. Among the important considerations to make when you’re eying an exchange traded fund (ETF) is what it will cost you in expenses. But always going for the ETF with the lowest fees could wind up costing you more in the long run.
It makes sense to pick an ETF that has a low expense ratio to keep fees down, but this may not be the best way to keep more of your capital. Elizabeth Trotta for SmartMoney says that this can actually end up costing you more.
Many investors buy ETFs assuming that all they’ll pay is the annual fee, but those in the know warn that some ETFs have hidden costs for trading them, which vary based on the ETF’s volume. The more heavily traded an ETF, the cheaper it is to trade. [How to Read an ETF Chart.]
For more stories about ETFs, visit our ETF 101 category.
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.