Advisors have increasingly adopted ETFs over the past few years. And why wouldn’t they? ETFs are cheaper, more liquid, more transparent, and overall, offer many advantages over traditional mutual funds. However, it is essential to note that there are many complexities that advisors should be aware of when choosing ETFs to put in their clients’ portfolios.
When purchasing or selling any investment, certain transaction costs occur during the process. While these transaction costs are relatively low for ETFs – owning an ETF is not an entirely frictionless event. There are also forces at play “under the hood” that generate costs when holding an ETF, namely: fund management fees, taxes, slippage, trading expenses, and so forth.
This article was originally featured in the ebook, Advisors Guide to Investing Logicly.