Don’t Buy Into These 7 ETF Myths

Myth #7: ETFs are More Expensive Than Mutual Funds

Some people think ETFs are more expensive than mutual funds because you have to pay a brokerage commission to buy them.

Generally speaking, investors buying or selling ETFs will pay a brokerage commission, whereas investors buying or selling no-load mutual funds pay none. However, some brokers impose a commission to buy or sell no-load mutual funds. Also, many mutual funds (even no-loads) impose back-end redemption charges for selling their funds before a restricted time period.

Any fair-cost analysis between ETFs and mutual funds should look at the entire spectrum of expenses — not just the transaction fee to acquire the fund. Investors should pay attention to financial costs such as expense ratios, brokerage commissions associated with the fund’s internal portfolio turnover, and tax efficiency.

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