This Hidden Cost Could Be Eating Into Your ETF Returns
July 21, 2016 at 08:00 AM EDT
Exchange-traded funds (ETFs) are generally seen as a low cost way to build a diversified portfolio of assets, but new research published in IIJ has highlighted a big hidden cost that often goes unnoticed by investors. Seemingly small bid-ask spreads for many ETFs can mask much higher transaction costs when market prices deviate from net asset values (NAV). Certain types of orders could result in investors overpaying for these ETFs by a wide margin.