ETF(ExchangeTradedFund) is an exchange-traded fund, which can be bought and sold on the exchange like stocks. In ETF trading, the handling fee is a very important factor, which will directly affect the income of investors. This paper will discuss the handling fee of ETF from four aspects.
Expense category of # #1.ETF
The handling fee of ETF mainly includes management fee, transaction fee and other expenses. Management fee is the fee charged by ETF management company to manage the fund, usually calculated in the form of annual interest rate. Transaction fee is the fee generated in the process of ETF trading, including transaction commission and bid-ask spread. Other expenses mainly include storage fees, audit fees and attorney fees.
For investors, management fees and transaction fees are the most concerned expenses, because they directly affect investors' income.
# # # 2. Collection of ETF management fee * *
The management fee of ETF is usually charged according to a certain proportion of the fund's net asset value, usually between 0. 1%- 1%. There are two kinds of management fees: front-end fee and back-end fee. Front-end charge refers to the management fee paid when ETF redeems, and back-end charge refers to the management fee paid when ETF redeems.
The advantage of front-end charging is that investors can clearly know what they need to pay, but the disadvantage is that if investors sell ETFs in a short time, they may lose money. The advantage of back-end charging is that it can encourage long-term holding, but the disadvantage is that investors don't know what they need to pay.
# # # 3. Collection of ETF transaction fees * *
ETF transaction fees are usually charged by brokers, including commissions and bid-ask spreads. Commission is the fee charged by securities companies to buy and sell ETFs on behalf of investors, usually a certain proportion of the transaction amount (such as five ten thousandths). Bid-ask spread refers to the difference between the bid price and the bid price of ETF, which is usually very small, but it will accumulate in intraday trading and affect investors' income.
For long-term investors, the influence of commission is relatively small, but for investors who trade in the day, commission and bid-ask spread will directly affect their income.
###4. How to reduce the handling fee of ETF
Although the handling fee of ETF is relatively low, it still has a great impact on the long-term income of investors. Investors should try their best to reduce the handling fee of ETF in order to increase the income.
Investors can choose low-cost ETFs with relatively low management fees and transaction fees. Investors can choose to hold for a long time to avoid commission and bid-ask spread caused by intraday trading. Investors can choose brokers with lower commissions to trade, so as to reduce the impact of commissions.
The handling fee of ETF is a very important factor. When choosing ETF, investors should pay attention to the types and collection of handling fees and take corresponding measures to reduce handling fees in order to improve their own income.