TER costs of ETFs

I might be wrong, but I do get the impression that in the newbie investment community, there is a singular focus on TER when evaluating the cost of a fund/ETF.

There is much more to it:

  1. Bid-ask spreads. Before investing, check out the typical bid/offer spread of the fund your interested in. Spreads could be wide intraday during opening and near bigger events such as central bank rate decisions
  2. Tracking error: even if you found a good index you’d like to invest it, you need to check if the fund does a good job tracking it. Some ETFs miss their benchmarks by quite a lot
  3. Domicile: has been discussed in depth in this forum. Relevant for withholding tax considerations
  4. Use of derivatives. Is the fund synthetic or physical
  5. Liquidity: if you invest in a rather obscure index, where the underlying stock are not very liquid, it can easily happen that the ETF pushes up the underlying stock basket. This trading impact usually reverts and therefore costs you
  6. Index rules/turnover: if the ETF follows an index with weak index rules, that can lead to too frequent changes in the index where the ETF has to rebalance and hence incurs costs.
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