Twelve Things You Need to Know About ETFs

By Ben Steverman - 2012-02-27T22:16:37Z

Illustration by Dennis Pacheco

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How important are ETF expenses?

ETFs with the lowest expense ratios often attract the most assets. That can mean they have the most trading activity, which means investors may get better prices when they buy or sell such ETFs. In January 2011, the Vanguard MSCI Emerging Markets ETF (VWO) became the top emerging-market ETF by increasing assets ninefold in two years. Its 0.22 percent expense ratio is a third of the amount charged by the iShares MSCI Emerging Markets Index (EEM), previously the category's top fund. With lower expenses in many Vanguard ETFs, the firm "just soaked up assets," Balchunas says. "As long as Vanguard's around, you're going to continue to see issuers competing on price."

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