If you're an investor looking to possibly put your money into an Exchange Traded Fund (ETF), how much can you expect that will that cost you?
ETFs are a lot like mutual funds, in that they are made up of a number of individual stock or bond holdings and have operating expenses that will be charged against your account, but they're not exactly. Unlike mutual funds, which are only allowed to change hands at the end of a business day, you can actively trade an ETF - placing market orders to buy and sell at any time when the market is open, just like the shares of stock or bonds you might own.
Combined, those characteristics make an ETF something of a hybrid between mutual funds and regular stocks. Which means that figuring out how much it costs you to own an ETF is a little more involved than looking at the fund's Operating Expense Ratio.
If you're shopping for an ETF, and you're looking to minimize your costs as a way to help maximize your return on your investment, you'll also need to consider the funds Bid-Ask Spread, the value of any trading commission you might have to pay, as well as how long you plan to keep your money in the ETF and also how much money you'll keep in the ETF.
Fortunately, our newest tool is here to do the job for you! Based on math presented by Michael Iachini in the Winter 2011 edition of Charles Schwab's On Investing magazine (the link will work once the print edition is published online), our latest tool can help you find out how much it owning an ETF will really cost you!
Just enter the relevant data below, and we'll do the rest!
Using the default values in the tool, we find that the approximate annual ownership cost for investing $10,000 for half a year in an ETF with an Operating Expense Ratio of 0.10%, a Bid-Ask Spread of 0.15% and a per-trade commission of $8.95 is 0.76%, or $75.80.
Different ETFs and different brokers however will have very different numbers. Using our tool will help give you a good way to compare the relative costs of owning those ETFs when it matters most: before you choose to invest in them!
Image Credit: The Digerati Life
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
Thanks in advance!
Closing values for previous trading day.
This site is primarily powered by:
CSS Validation
RSS Site Feed
JavaScript
The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.
Other Cool Resources
Blog Roll
