We took a look at three common misconceptions that can contribute to increased costs. Explore each of them to find out how to avoid these costly mistakes.
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:
Discover how to analyze the true costs of owning an ETF before you make your next trading decision.
Fact: Get the complete liquidity picture. Investors often use point-in-time statistics like 30 or 90-day average trading volume to analyze an ETF's liquidity.
But a fund's liquidity profile can change in different markets. Your ETF due diligence should:
Navigate the twists and turns of an ETF's liquidity dynamics by identifying the most liquid and cost-effective ETFs.
Fact: Choose the right execution strategy. In fact, ETF investors can choose from a variety of execution strategies to control costs.
Because ETFs trade on an exchange with primary and secondary market liquidity, you have the flexibility to choose:
Master the mechanics of ETF trading so you can execute your trades with more confidence.