ETFs are lauded as a cheap way to access the markets. However, the expense ratio is only one component of the overall costs to investing in ETFs. For instance, investors should also factor in brokerage fees, rebalancing costs and the bid-ask spread on each trade. [The Various Costs of Trading ETFs]
Investors can use exchange traded funds and exchange traded notes to access broad themes, but the two investment vehicles are not the same. For example, ETNs are structured as a debt security and subject to the credit worthiness of the underwriting bank. [Investing in MLP ETFs vs ETNs]
Lastly, while ETFs try to reflect the performance of their underlying markets throughout the trading day, there are times that the ETFs may exhibit discrepancies with their net asset value. Potential investors should understand how the ETF investment works and how it tries to closely track the performance of an index or sector. [How Tracking Error Can Impact ETF Performance]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.