2 Replies to “The hidden costs of ‘free’ ETF portfolio strategies”

  1. Thanks for pointing these hidden fees out Micah. So many passive investors are drawn to “robo” in search of low fees and are completely unaware of the true costs. Illiquid ETF’s being used is far worse than the underlying mgmt. fees, due to the executions the firms are making in these managed accounts. I’d imagine some investors are getting hammered by the wide bid/ask spreads of some of these aforementioned ETF’s.

    1. Lots of info to digest in this short article. I can justify some of the costs of management fees, if a person is actually getting what they are paying for. For example, many people want to invest, but they either don’t have the time, desire or the ability to manage their own portfolios. Then it does make sense for them. But, even those folks should take a few hours of their busy lives to do a little research on their perspective managers. As with most things in the investing world, bid ask prices can be taken advantage of. Some of the ETFs I invest in only trade about 10k shares per day. This leads to wider bid ask prices. I have found that this too can be used in my favor by exclusively using limit orders. Markets orders tend to go against the small investor when it comes to bid ask prices. Personally, I think all investors should take an active interest in their investments. They should treat their investments like a business owner, since that is, in some respects, what they are. Many shrewd business owners pay good managers for their services, but they should and do expect to see some ROI for this expense. Individual investors should as well, in my opinion. Thank you once again for your comments on the blog. Micah

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