Look beyond the headline fee
Costs and performance
Understand ETF charges and check how closely a fund has delivered the return of its index.
ETF costs: is the lowest TER always best?
No. TER is the annual operating charge taken from an ETF, but it is only one part of the cost of investing. You should also consider trading costs, the bid–ask spread, platform charges and how closely the ETF has followed its index.
Read guide 38Liquidity and spreads: what does it cost to trade an ETF?
Liquidity describes how easily an ETF can be bought or sold. The spread is the difference between the price offered by someone buying and the price offered by someone selling.
Read guide 39Tracking difference: does the ETF deliver what it promises?
Tracking difference is the gap between an ETF’s return and the return of the index it follows. It helps you see how the ETF has performed after costs and other effects.
Read guide 40Past performance: what can it tell you about an ETF?
Past performance shows how an ETF behaved during a particular period. It can help explain risk and tracking, but it cannot tell you what the ETF will return next.
Read guide 41How do I read ETF performance figures correctly?
Check the period, currency, income treatment, charges and benchmark before comparing ETF returns. Two figures can look comparable while measuring different things.
Read guide 42Performance chasing: why can buying last year’s winner go wrong?
Performance chasing means buying an ETF mainly because it recently performed well. It can lead investors into an expensive or crowded exposure just as market conditions begin to change.
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