The expense ratio is only part of the cost of owning an ETF. Each purchase and sale also crosses the bid-ask spread.
Why spreads differ
Large, popular funds tracking liquid indices tend to have narrow spreads because many market makers compete. Niche or small funds can have much wider spreads, especially at the open and close.
How to check
- Compare the bid and ask on the broker's quote screen at a liquid time of day.
- Use limit orders so you do not accept a bad price.
- Check average daily volume and the fund's size.
For a long holding period a wide spread matters less; for frequent trading it can outweigh a lower annual fee.
Risk warning: Trading forex and CFDs involves a high level of risk and may not be suitable for all investors. You may lose more than your initial investment.
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