Myth: ETFs with the lowest expense ratios have the lowest total costs
Fact: Look Beyond the Expense Ratio
An ETF's expense ratio and trading costs are not correlated —so a low-fee fund may not have the lowest total cost of ownership (TCO).
To calculate an ETF's cost, a combination of technical and strategy-specific factors come into play:
- Bid-ask spreads
- Rebalance frequency
- Rebalance size