Morningstar urges investors to look beyond TER when analysing ETF costs

Trading and holding costs

Tom Eckett
clock
Ben Johnson of Morningstar
Image:

Ben Johnson of Morningstar

Investors must look beyond the headline total expense ratio (TER) when investing in ETFs and "take a more holistic approach" to assessing the total cost of owning an ETF, according to a research note by Morningstar.

The note, entitled Calculating the Total Cost of ETF Ownership, said the total cost of owning an ETF is split between two parts; the holding costs and the transaction costs. The relative importance of these two depend on the investor's time horizon and the total amount they are investing, it added. What are the most important factors for investors when selecting ETFs? Ben Johnson (pictured), director of global ETF research at Morningstar, explained: "Holding costs will represent the largest component of the total cost of ownership for long-term investors in an ETF, as they are by d...

To continue reading this article...

Join Investment Week

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

More on ETFs

Invests in companies with strong biodiversity credentials.
ESG

HSBC launches biodiversity screened ETF

SFDR Article 8

clock 11 August 2022 • 1 min read
European-focused investment grade and high yield credit have highest inflows since April 2020.

Fixed income dominates ETF flows in July

Accounted for $32.5bn

clock 08 August 2022 • 2 min read
Total funds under management have fallen on the previous year, down to £1.4trn from June 2021’s £1.5trn.

Every asset class suffers outflows in second worst month on record

Responsible investment holds up

James Baxter-Derrington
clock 04 August 2022 • 2 min read
Trustpilot