Look at an ETF’s TER
The total expense ratio (TER) is the ongoing charge for an ETF
. It’s a way of measuring the annual costs incurred by the fund.
You’ll be able to find it on the fund’s providers’ documentation. Or you can ask your stockbroker.
The TER includes charges such as the annual management fee and administration costs. But it usually doesn’t include trading costs and any taxes due.
Generally speaking, the lower the TER, the better.
How much are you paying your stockbroker to invest in ETFs?
Investing in ETFs is just like buying shares in the eyes of your stockbroker. So buying ETFs comes with the same charges that buying shares does.
Stockbrokers usually charge a flat fee per transaction, plus a sliding scale fee. You’ll also have to pay these when you sell the ETF, Phil Oakley in Money Week
If you’re investing small amounts into ETFs, these fees can be quite hefty in comparison.
The bid offer spread of an ETF
The bid offer spread is the difference between the buy (offer) price and the sell (bid) price.
On larger ETFs, the spreads are usually quite small. But if it’s a smaller fund, the spread can be quite significant.
To minimise paying large spreads, it’s best to avoid buying and selling ETFs when the market’s just opening or closing. There can be fewer buyer and sellers around.
If the spread seems large, you can always try again tomorrow.
So there you have it, why you should check out the price before investing in an ETF.
*********** Advertisement ************
How would you like to WIN R100,000 trading the stock market?
If you've ever dreamed of living the life of a high-flying trader - And earning a consistent income from the stock market - NOW is your chance!
Join the R100,000 Traders Challenge today and we'll:
teach you how to trade - even if you've never bought or sold a stock before
give you a FREE trading account to hone your trading skills
and give you a chance to win R100,000 in REAL MONEY
That's right! The top three traders by the 30th of November 2014 will take home a combined R100,000!
So what are you waiting for? Click here and become a high-rolling trader today!