Of the many advantages of exchange traded funds over actively managed funds, including superior tax efficiency and intraday liquidity, fees or lack thereof is among the most highlighted. While not all ETFs are inexpensive at the pure fee level, data indicate the average expense ratio on ETFs resides in the area of 0.6% per year, or less than half the average annual expenses on actively managed mutual fee.
Of course, ETF issuers have used their products’ low costs to their marketing advantage and as the industry has matured, there has been increasing talk of cost competition and fee wars among some of the largest issuers.
Advisors and investors can further pare their total cost of ownership experience by buying and selling a growing number of ETFs on various commission-free platform offered by some of the biggest names in the brokerage business. Several of the ETFs mentioned here are available on various commission-free platforms. All are among the lowest cost equity-based ETFs on the market today.
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