Niche emerging markets ETFs like ECON, GXG or BRAQ have quite high Total Expense Ratio (over 0.75% per year). If you buy and hold these ETFs for many years, the cost will quickly add up.
I was thinking about buying the underlying stocks themselves rather than the ETFs since most of the underlying stocks are quoted on the US market NYSE and can be bought via a US discount broker.
Say you want to invest $ 10,000, you use a cheap broker like Lightspeed which charges $ 0.40 / 100 shares, and you decide to buy the 20 underlying stocks that makes up the GXG ETF.
That will cost you about 20* 0.4 = $ 8.
Once you've done this, you can hold the 20 stocks for the next 10 years if you choose to do so and that would have cost you only $ 8.
If you buy the GXG ETF and hold for a year only, that will cost you $ 10,000 * 0.86% = about $ 86. It will cost lot more if you hold for many years, especially if the market is going up and you could end up paying well over $ 1,000 over 10 years to hold the ETF.
Am I right to say that it's a lot more cost effective to buy the underlying shares making up the ETF, rather than buying the ETF itself, or am I missing something.
PS: I might only be able to buy say 15-17 of the 20 underlying stocks making up GXG if only 15-17 stocks are tradable on NYSE, but still it will give me the emerging market exposure I am looking for.
Similarly for the ECON ETF, I might only be able to buy maybe 22-23 of the 27 stocks that make up 97.7% of the ETF if only 22-23 are tradable on Nyse but it does not bother me that much. I am more interested in a cost effective way to get exposure to niche emerging markets.
Correlation is the highest its been since 1987. Right now diversification doesn't mean anything...
It might mean something once the Market corrects 20-30% though.