The Dynamics of ETF Fees

Despite widely publicized fee reductions, we find that average ETF expense ratios have remained relatively steady during the last 15 years. Even though thousands of new funds have entered the market, the arrival of most ETF sponsors into a narrowly defined area does not generally lead to lower fees for competing funds. Given the impact of fees on long-term investment returns, investors should examine all of the available opportunities before choosing specific funds. Furthermore, as objectives for newer ETFs become increasingly specialized, investors must also carefully consider whether the benefits of targeted strategies justify their higher prices.