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18 votes

Why is the expense ratio of an index fund sometimes higher than its equivalent ETF?

Because funds of different share classes are there to cater different account sizes. The actual equivalent of VTI is Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) if account size is &...
base64's user avatar
  • 10.5k
13 votes

Should we really be looking at the expense ratio while choosing funds?

Past performance accounts for the expense ratio, but is (proverbially) not indicative of future results. In particular, going by past performance and choosing a fund that has recently beaten the ...
nanoman's user avatar
  • 30.2k
12 votes

How does a fund's expense ratio work?

Suppose a fund has an expense ratio of 0.055%, as I understand it that means $55 per $1000. If the expense ratio is stated as 0.055% that is actually around 5 hundredths of 1% of the total amount ...
mhoran_psprep's user avatar
10 votes

Why is the expense ratio of an index fund sometimes higher than its equivalent ETF?

Adding onto base64's excellent answer, an ETF also avoids some of the liquidity costs incurred by open end funds. Since only authorized participants may trade shares directly with a fund, and only in ...
Matthew Vandergrift's user avatar
8 votes

How does one stock fund's charge of 1% more in operating expenses than another fund lower expected returns by 10%?

The 10% refers to the change in return, not the the change in principal. Case 1: you invest $1000 with a 0% TER and 10% return. That means your return is $100. Your balance would be $1100. Case 2: ...
amon's user avatar
  • 2,447
8 votes

Should we really be looking at the expense ratio while choosing funds?

Yes. While the expense ratio is deducted from the NAV, it is still relevant. Imagine you have two index funds tracking the same index. One with 0.1% and the other with 1% TER. Obviously the cheaper ...
Manziel's user avatar
  • 7,442
7 votes
Accepted

Is there any reason to choose my bank's index fund over Vanguard?

That expense ratio on the bank fund is criminally high. Use the Vanguard one, they have really low expenses.
zeta-band's user avatar
  • 3,997
6 votes

Pay index fund expense ratios with cash instead of fund balance

In many cases the expenses are not pulled out on a specific day, so this wouldn't work. On the other hand some funds do charge an annual or quarterly fee if your investment in the fund is larger than ...
mhoran_psprep's user avatar
5 votes

Why does the iShares EEM ETF have a higher expense ratio than similar ETFs like VWO?

Answer from Phillip is correct. I want to add that there are total 807 million shares outstanding fr EEM and turn over is 16% or Average Volume is 66 millions shares per day. So each EEM is changing ...
riya's user avatar
  • 1,245
5 votes
Accepted

When a stock is replaced in an index, does the ETF incur a net loss?

The NAV of an ETF changes because of the share price of its components. It's actual price increases or decreases because buying or selling of ETF shares in the marketplace. If a stock is removed ...
Bob Baerker's user avatar
  • 76.8k
5 votes

Pay index fund expense ratios with cash instead of fund balance

It seems at most a cosmetic difference - nothing keeps you from adding the 9$ cash to the fund the same day the fees are deducted from the shares.
Aganju's user avatar
  • 37.7k
4 votes

Pay index fund expense ratios with cash instead of fund balance

Simply put, that's not allowed. Outside a retirement fund, they simply do not provide a mechanism to pay that expense ratio separately. Ergo, any effort to pay that expense ratio would be ...
Harper - Reinstate Monica's user avatar
4 votes
Accepted

How do expense ratios work for etfs without dividends?

The expense ratio an ETF charges is simply deducted from the assets it holds. This reduces the net asset value which, by market forces and the redemption mechanism, drives the market value of ETF ...
user71659's user avatar
  • 3,644
4 votes
Accepted

Are index fund expense ratios "priced in"?

To paraphrase the late great John Bogle, there are only two "free lunches" or "pure wins" in investing: One is diversification and the other is minimizing investment costs (fees). You really do come ...
nanoman's user avatar
  • 30.2k
4 votes

How does one stock fund's charge of 1% more in operating expenses than another fund lower expected returns by 10%?

On a $100 investment, a 10% return is $10. A 1% fee is $100 * .01 = $1 $1 of the $10 is 10% There are times we talk about a 4% safe withdrawal rate in retirement. And people ask about paying a pro ...
JTP - Apologise to Monica's user avatar
4 votes

How does a fund's expense ratio work?

An example explanation ... https://www.morningstar.com/invglossary/expense_ratio.aspx I believe they: the fund has "one big bank account" with all the/any cash and obviously "one big ...
Fattie's user avatar
  • 13.8k
4 votes

Should we really be looking at the expense ratio while choosing funds?

Lowering the expense ratio, according to my understanding, only matters when we have another fund with a similar distribution of holdings, and has a lower expense ratio which yields a higher return. ...
RonJohn's user avatar
  • 50.7k
3 votes

Do low cost ETFs or mutual funds really do well for an investor?

Here is a DRIP calculator that allows you to compare the performance of ETFs and stocks with and without dividend reinvestment. You have to do them one at a time: https://www.dividendchannel.com/...
Bob Baerker's user avatar
  • 76.8k
3 votes
Accepted

Why does the iShares EEM ETF have a higher expense ratio than similar ETFs like VWO?

This is a product of a few factors: EEM is very liquid, while it has just under half the assets under management of VWO (35b vs 65b) it has a daily volume nearly 5x higher than VWO (2.5bn vs ~500m) ...
Philip's user avatar
  • 5,768
3 votes

How much are fees on ETFs on Robinhood? Where are they shown?

Think of an ETF company like any other company, they have employees and offer some good/service to the consuming public. The service is managing the ETF(s) and they charge a fee for that service to ...
Hart CO's user avatar
  • 70.5k
3 votes

How much are fees on ETFs on Robinhood? Where are they shown?

When you're looking at the expense ratio of a fund, that "expense" is not from the broker but from the fund itself. Meaning if the value of the constituents of the fund rises 10% in one year ...
D Stanley's user avatar
  • 137k
2 votes

Does a low expense ratio off-set a transaction fee? Or is it better to go with a high-ratio mutual fund without a transaction fee?

The question is valid, you just need to work backwards. After how much money-time will the lower expense offset the one time fee? Lower expenses will win given the right sum of money and right ...
JTP - Apologise to Monica's user avatar
2 votes

Is there any reason to choose my bank's index fund over Vanguard?

Your bank's fund is not an index fund. From your link: To provide a balanced portfolio of primarily Canadian securities that produce income and capital appreciation by investing primarily in ...
quid's user avatar
  • 49k
2 votes

Calculating or estimating implicit fees from 401k

TD Ameritrade offers a free tool to calculate the your total 401(k) expenses, including fund management fees. It is available here: https://www.tdameritrade.com/retirement-planning/retirement-...
Charles Fox's user avatar
  • 2,779
2 votes

Why certain ETFs are popular( liquid) but Options on very same ETF are not

The OCC and Vanguard have nothing to do with the liquidity of an ETF's options. Like the stocks, option trading is an auction maket and liquidity is a function of supply and demand. Vanguard's target ...
Bob Baerker's user avatar
  • 76.8k
2 votes

Is there any reason to choose my bank's index fund over Vanguard?

Extortionate expense ratio aside, comparing the fund to the vanguard balanced fund (with an expense ratio of 0.19%) shows that your bank's fund has underperformed in literally every shown time period. ...
Koen vd H's user avatar
  • 731
2 votes

Why does the iShares EEM ETF have a higher expense ratio than similar ETFs like VWO?

Sorry I misread the question, updated my answers below. Benchmarks EEM(iShares): follows MSCI index. VWO (Vangaurd): follows FTSE EM all cap index A comparison table for easy reference: https:...
Thinkerer's user avatar
  • 129
2 votes
Accepted

Does it make more sense to purchase VTI or VUN?

Generally Canadian listed ETF's are a better choice, they have less paperwork, better currency conversions, etc. The higher the tax bracket the more true this is, and the more you want to pay the 15% ...
zie's user avatar
  • 136
2 votes
Accepted

Showing expense ratio of a fund in real dollar terms

As Ben Voigt's comment points out, the stated growth rate of your mutual fund investment is after the expense ratio has been deducted. Thus, in broad terms, if the fund tells you that your investment ...
Dilip Sarwate's user avatar
2 votes

Principal 401k expense fees

I work for a small company, we use a different 401(k) provider. A few years ago when I started the expense ratios were similar to those mentioned in the question. A few employees asked the owner if ...
mhoran_psprep's user avatar

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