How to Calculate the Total Cost of an ETF | ETF Trends

This article was provided courtesy of

While everyone can just sit back and enjoy the expense ratio cuts as the result of the so-called fee war, investors should still be wary of other costs to trading exchange traded funds.

Expense ratios are not the only costs associated with ETF investments. Bid-ask spreads – the price difference between the buying price and the selling price – and commission fees are just some other factors to consider.

The bid-ask spread is found by taking the bid subtracted from the ask, divided by the share price and multiplying by 100. [Read More: Bid-Ask Spread]

“The ETF expense ratio is an ongoing annual charge, whereas the bid-ask spread and commission costs are at the time of a transaction,” Joel Dickson, senior ETF strategist at Vanguard, said in a Wall Street Journal article.