ETF fees newbie question

Discussion in 'ETFs' started by TraDaToR, Oct 4, 2016.

  1. TraDaToR

    TraDaToR

    Hello,

    I have started trading some ETFs, and I would like to be sure of one thing. When you day trade ETFs, All you have to worry about is your broker commissions and costs for shorting/trading on margin( which is prohibitive on numerous ETFs by the way ), you never have some acquisition fees or whatever that pops up at the end of the day/year, right?

    I understand management fees are baked into the fund's return, but what scared me are those acquired fund fees and expenses in prospectus. I guess it is the fund expenses for acquisition of underlyings but I wasn't sure... I thought perhaps some were functioning like that and I need to read every prospectus.

    I don't want to be the one that scalped ETFs all year and end up with a giant bill of 0.49% per trade fees at the end of the year...LOL
     
  2. wintergasp

    wintergasp

    Hmmmmm did you compare the bid/offers and live price between the ETFs and the underlying asset? For example when I look at the Cocoa ETF, the spread is always wider than what we see on futures.
     
  3. TraDaToR

    TraDaToR

    Yes. Thanks. B/A spread is another hidden cost compared to underlyings. For sure.

    But I am worried about possible entry charges for certain ETFs. Is it possible to incur some other fees than those baked into the price and the usual broker/exchange/financing costs?

    For example, on ADRs if I am right, there is an annual custody fee and I don't know if it is calculated on a time basis or charged for every purchase. I was worried there would be the same kind of thing on SOME ETFs.
     
  4. JBM

    JBM

    To answer your question, the ETF annual fee is deducted from the NAV of the ETF and that fee includes every administration fee within it due to the liquidity nature of ETFs, and the NAV resets at the end of the day. That is why you can have an underlying index up 5% over a time span and the ETF would be lesser based upon the annual fee.
     
    murray t turtle and TraDaToR like this.
  5. TraDaToR

    TraDaToR

    Thanks a lot JBM.
     
  6. JBM

    JBM

    No problem. I had the same question when I started digging into the fees.
     
  7. "When you day trade"...

    Yes, the key words are "day trade" and since you aren't becoming a beneficial owner (by holding the ETF), you only have to worry about commissions. Some ADR's will price at above/below their NAV, and if you held then in a sense you're paying a "fee" for buying it at a premium. However, it doesn't matter if you're going to day trade them.