Costs

Brokerage Costs

As ETFs are bought and sold like shares, buyers and sellers will pay brokerage commissions when trading.

In addition, UK investors pay no stamp duty on ETF investments.

Fund Costs

At iShares we believe in openness when it comes to discussing costs. This is why we publish the TERs for all of our funds online. That provides a good indication of how much the funds will be paying for fund management, trustees, licensing and operational costs.

However, we also feel it important that investors know about the implicit costs of ETF ownership, looking at areas such as trading costs and rebalancing costs.

When it comes to trading costs, there are two main considerations: the bid/offer spread (effectively the difference in the buy and sell price) and brokerage commissions. ETF spreads tend to be lower for bigger funds (those with more assets under management) and funds that have high daily trading volumes. Under extreme market conditions however, this sometimes may not be the case.

Another consideration is rebalancing costs. From time to time, securities can be added or removed from the index and funds tracking these indices will need to be adjusted accordingly. This will incur a cost element.