What are ETF expense ratios and why do they matter?

What are ETF expense ratios and why do they matter?

ETF expense ratios represent the annual fees that funds charge their shareholders. They are important because they directly affect your investment returns.

How are these expense ratios calculated?

Expense ratios are calculated by dividing a fund's operating expenses by its average assets under management. This gives a percentage that reflects the cost of managing the fund.

What is considered a good expense ratio for ETFs?

A good expense ratio for ETFs typically ranges from 0.05% to 0.50%. Lower ratios are generally better, as they leave more of your investment returns intact.

Can high expense ratios impact my investment returns significantly?

Yes, high expense ratios can erode your investment returns over time, especially in the long run. Even a small difference in fees can lead to substantial differences in your portfolio's value.

Are there any ETFs with no expense ratios?

Yes, some ETFs offer zero expense ratios, often as part of promotional strategies. However, it's essential to review other potential costs and the fund's performance.