ETF Fees: How Low Can They Go?

By Tom Lydon: The exchange traded fund industry is in direct competition with the mutual fund business as far as fees are concerned. Another direct competitor to the ETF industry is itself, as ETF providers are contending to have the lowest fees in the business.

By Tom Lydon: As providers fight over the ongoing price war in the race to see who can offer the cheapest exchange traded fund product, investors are jumping at the chance to cover broad markets at next to nothing prices. Still, you should not let cheap ETF fees blind you to other cost factors.

By Tom Lydon: Fees have become a hot topic within the exchange traded fund industry. The recent focus on fees and the impact they can have upon investment returns has put exchange traded funds into the spotlight for use in 401(k) plans.

NEW YORK (Reuters) - Fund companies are growing more wary of introducing new exchange-traded funds, and more willing to kill those that have not caught on, as they grapple with a price war in an overcrowded $1.2 trillion market dominated by the three largest providers. BlackRock Inc., State Street Global Advisors and Vanguard Group offer ETFs in virtually every major asset class. Together, the Big Three have captured 77.6 percent of all new investor money that has come this year into the U.S. ETF market this year, up from 60.5 percent in 2011, according to Lipper. ...

Charles Schwab (SCHW) has recently cut the commission rates for online trades of equities and non-Schwab exchange-traded funds regardless of the retail investor’s account size and trading frequency.

By Tom Lydon: Exchange traded funds are known for low fees, especially for long-term, buy-and-hold investors. Forbes recently compiled a list of ETFs aimed at helping investors preserve wealth through lower investing costs.

By Tom Lydon: While everyone can just sit back and enjoy the expense ratio cuts as the result of the so-called fee war, investors should still be wary of other costs to trading exchange traded funds.Expense ratios are not the only costs associated with ETF investments. Bid-ask spreads -- the price difference between the buying price and the selling price -- and commission fees are just some other factors to consider.

ETF Database submits: As the ETF world continues to grow, the competitive landscape continues to evolve. In recent years, a growing number of firms have attempted to differentiate themselves by offering unique exposure to asset classes and strategies not previously available – such as funds tracking the Philippine stock market or ETNs linked to the price of industrial metals such as zinc or tin.