What are the Expenses Associated with the Purchase of ETFs?

There may be fees and commissions involved in the purchase of ETFs, and ongoing expenses that reduce earnings over time.

Purchasing an ETF will probably involve paying some fees or commissions to the service or broker through which you acquired the shares, but these days those commissions are fairly minimal.

These fees will be the same or less than you might pay for using their services to acquire positions in other securities. ETFs are a relatively cheap way to gain an exposure to a particular sector of the market or to take a position that might otherwise be difficult and expensive to research, calculate, and engineer.

For these specialized services, some ETFs do carry significant expenses, but not many do. These expenses are still likely to be a better deal for the average investor than attempting to do the same thing alone.

If you want to get exposure to the Chinese market on your own, you will have to open a brokerage account in China, convert US dollars into Yuans, and start purchasing shares of many individual Chinese companies.

You would pay significant fees for all of that. While the Chinese Index ETF (FXI) has a slightly above-average expense ratio, it would probably be worth it to an investor who wants exposure to that market. You should certainly check an ETF’s expense ratio, but compare that to your alternatives and try to determine how much value you would be getting for your money.

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