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What are ETF Fees?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 20 September 2016
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    Conjecture Corporation
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ETF fees are charges or fees that are assessed on the processing of transactions involving exchange traded funds. The charges themselves are sometimes referred to as management fees or possibly transaction fees, depending on the setting. Since exchange traded funds represent one of the lower cost forms of investing, brokers and dealers often set ETF fees at rates that are acceptable to investors and pose no barrier to active and frequent trading of these types of funds.

Like any type of investment transaction, part of the ETF fees involved have to do with the actual purchase or sale of the assets involved. Depending on the structure of the transaction, the broker who executes the purchase or sale will collect a commission. That commission is sometimes in the form of a flat rate per executed order, or may be a percentage of the total value of the assets traded. The investor is informed prior to the transaction of how the fees are configured, so there are no surprises on the back end once the charges are assessed and applied to the investor’s trading account.

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Along with ETF fees that are assessed at the time of a purchase or sale, brokerages may also charge what is known as maintenance fees. These fees have to do with the efforts taken on by the fund managers and the brokers to report gains and losses to the investor on a regular basis. Typically, these types of fees are deducted from the returns earned by the assets found in the fund, although those fees may be billed directly to the investor in the event that the earnings fail to cover the basic fees for a given period.

As with other types of investment opportunities, ETF fees are simply part of the cost of making trades and holding assets in some type of financial portfolio. The fees help to cover the expenses incurred by brokers and others involved in the investment process, as they take actions at the request and on behalf of their investment clients. One of the goals of most investors is to lock in the lowest schedule of these and other fees and charges by doing some comparison shopping with different brokerage houses. Brokerages may provide discounted schedules of charges for investors who do a great deal of business with the firm, making it possible for high end investors to shop around and find a reputable broker who charges a competitive rate on both ETF fees and the fees associated with mutual funds and other investment opportunities.

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