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  • The cheapest ETF: How to find cheap ETFs?
  • The cheapest ETF: How to find cheap ETFs?

The cheapest ETF: How to find cheap ETFs?

Cheap ETFs: ETFs with low ongoing costs

You don’t want to pay too much. You can also opt for investments with low costs when investing. Costs have a direct impact on your return. Costs reduce your return. ETF funds are known for their low costs. But even with ETFs, the differences in costs are large. That is why we discuss cheap ETFs in this blog . Which ETF is the cheapest?

However, besides cheap, you also want a good ETF. Avoid ‘cheap is expensive’ and also read our blog about choosing the best ETFs . Later in this blog we will also discuss whether cheap ETFs are always a good choice.

Cheap ETFs - 3 examples

First, 3 examples of ETFs that have low running costs. This is not a purchase recommendation, but an illustration of cheap ETFs. There are cheaper ETFs to be found, but we also checked that the ETF has a (reasonably) good spread. Always do your own research before making a transaction.

#Name ETFRunning costsType of ETF
1Lyxor Core – STOXX Europe600 Equity ETF0,04%European stocks
2Invesco S&P 500 UCITS ETF0,05%S&P 500 stocks (US stocks)
3Amundi Prime Global Govies UCITS ETF0,05% Bonds (worldwide)

Cheap investing ETFs

Do you want to invest cheaply in ETFs? Then there are two factors you should take into account with regard to costs:

  1. The transaction costs that a broker charges for buying ETFs
  2. The costs of ETFs themselves

You can easily save a lot on transaction costs for ETFs by choosing a cheap broker. Check broker costs carefully and choose a cheap broker using our comparator .

With an ETF you also have to deal with a management fee (ongoing costs). This is a fee that is paid to the fund house that manages the ETF. If the ongoing costs were 0.5%, for example, this means that with an investment of €1,000 you would pay €5 in costs. Another word for these ongoing costs is also called the ‘Total Expense Ratio’.

Cheap ETFs: the impact of ongoing costs on your returns

Costs have an impact on your return . To make this impact clear, give an example.

Suppose you have the following two scenarios:

  1. A one-time investment of €100,000 and no (0%) ongoing costs
  2. A one-time investment of €100,000 and 2% ongoing costs.

In both scenarios we assume a return of 5% per year.

In scenario 1, your investment would be worth €163,861.64 after 10 years. In scenario 2, your investment would be worth €134,391.64 after 10 years, which is a difference in return of €29,470. This is because you have to pay the costs every year. The amount is therefore smaller every year than in the scenario without costs. As a result, you can use the compound interest effect less to your advantage. So in addition to the costs you pay, you also miss out on extra returns.

The above example illustrates the impact costs can have on your return. However, it is very important not to focus blindly on the costs. After all, an ETF with low to no costs is still a bad buy if it does not achieve a return.

Are cheap ETFs always the best choice?

Costs can therefore have a major effect on the return, but as already mentioned, cheap ETFs certainly do not have to be the best ETFs. For example, if an ETF achieves a very low or even negative return, then unfortunately you have no use for this cheapest ETF.

Important to look at is: which index is being followed and in what way? In addition to the ongoing costs, other cost factors can also play a role. For example, you also have to deal with a possible dividend leakage . Or shares within the ETF are lent out.

Cheap ETFs are certainly interesting. Small differences can already make a big difference in the return. But there is also a point where costs are no longer the most important criterion.

Compare cheap ETF brokers

Do you want to invest in ETFs? This is done via a broker’s trading platform. Easily compare all ETF brokers .

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