What does an ETF really cost?

📘 Brief Explanation

An ETF costs not only the often-advertised TER (Total Expense Ratio), but also hidden costs such as transaction costs when buying and selling the underlying stocks, the spread between bid and ask prices, and any order fees from your own bank. The TER of 0.2% per year is just the tip of the iceberg, as the actual total costs are often between 0.5% and 1.0% annually, depending on trading volume and investment horizon. Especially with small savings rates, fixed order fees eat into returns, which is why a free savings plan or a low-cost direct bank is crucial. Taxes on dividends and capital gains also reduce net returns, although accumulating ETFs enable reinvestment without additional costs. Comparing the Total Cost of Ownership (TCO) instead of just the TER helps to realistically assess the true costs over ten years.

🔍 Why This Matters

The relevance of this topic arises from the systematic underestimation of costs by many investors, who often only look at the TER (Total Expense Ratio). In reality, hidden costs such as transaction costs, spreads, and the tracking difference effect significantly reduce net returns. Over an investment horizon of 20–30 years, even an additional 0.5% in annual costs can lead to a six-figure loss in final value. Furthermore, synthetic and physical ETFs differ in their cost structures, making comparability difficult. A purely TER-based approach therefore leads to poor decisions, as it does not reflect actual performance. For retail investors, the Total Cost of Ownership is crucial for realistically forecasting long-term returns.