The asset-weighted average expense ratio for ETFs is 0.32%—significantly less than the simple average of 0.56%.* Similarly, the asset-weighted average spread is a negligible 0.04%—a far cry from the 0.31% industry figure.**
“Investors are voting with their dollars by selecting the products that offer the lowest costs,” Mr. Dickson said.
As for why industrywide cost averages for ETFs have been creeping up, Mr. Dickson explained that the number of narrowly focused, niche ETFs has proliferated in recent years. These less liquid ETFs carry higher costs that push up industry averages. But they tend to be smaller in size, so they have less impact on the asset-weighted figures.
For more information about the relationship between cash flow and costs, read Costs matter: Investors are still voting with their feet.
*Sources: Vanguard analysis of data provided by Bloomberg and Morningstar Direct, as of March 31, 2012.
**Sources: Vanguard analysis of data provided by Bloomberg and ArcaVision, as of March 31, 2012.
Notes:
- Vanguard ETF Shares are not redeemable with the issuing fund other than in creation unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
- All ETF products are subject to risk, which may result in the loss of principal.
- Past performance is not a guarantee of future results.