Financial Analysts Journal 07 Jan 2020 Volume 76 Issue 1
The Dynamics of ETF Fees
Despite widely publicized fee reductions, average expense ratios of ETFs have remained relatively steady. Thousands of new funds have not led to lower fees. Investors should examine all available opportunities before choosing specific funds.
Despite widely publicized fee reductions, average expense ratios of exchange-traded funds (ETFs) remained relatively steady between 2004 and 2018. Even though thousands of new funds entered the market during this period, the arrival of most ETF sponsors into a narrowly defined area has not generally led to lower fees for competing funds. Given the impact of fees on long-term investment returns, investors should carefully examine all available opportunities before choosing specific funds. Furthermore, as objectives for newer ETFs become increasingly specialized, investors must also consider whether the benefits of targeted strategies justify their higher prices.
About the Author(s)
Travis Box is an assistant professor of finance in the College of Business at Clemson University, Clemson, South Carolina.
Ryan Davis is an assistant professor of finance in the Collat School of Business at the University of Alabama at Birmingham, Birmingham, Alabama.
Kathleen P. Fuller is at the Holman School of Business at the University of Mississippi.