Investors may incur a hidden cost as trading in funds with large spreads will eat away at potential returns since they affect the price at which an ETF purchase or sale is made.
Commissions
Lastly, investors will always notice the upfront fees for executing a trade on a brokerage account. For active day traders, commission fees can quickly add up and diminish overall returns, especially those that implement a dollar cost average in or out of a position.
Nevertheless, there are a number of online brokerages that provide commission-free trades on ETFs, including Fidelity Investments, TD Ameritrade, Charles Schwab, E*Trade, Vanguard and Merrill Lynch. [Six Popular Commission-Free ETF Trading Platforms]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.