expense ratio for etfs that do not pay a dividend (question)

Hello,

Suppose an etf has a 0.40% percent expense ratio and it pays no dividends to cover the expense ratio. Also suppose the ETF closely tracks the underlying securities.

How does the ETF company take the money out of the security? If it has to track the underlying stocks, taking money out would lower the value of the ETF compared to the underlying security.

I understand if the ETF stocks pay a net dividend of 0.9%. Then the ETF could simply take out 0.4% and leave 0.5% as the dividend that actually gets paid to the ETF shareholders. But if the ETF pays no dividend, I'm not sure how the ETF company pays itself its expense ratio.

 

"Volume."

 

"I lose on every trade but make it up on volume."

 

expenses are deducted from the assets of the etfs

 

Thank you for your reply. So does that mean the ETF slowly drifts below its NAV over time?

 

yes. e,g, compare the price of GLD with physical gold.