Level 0 ETF basics · Part 4/14

ETF fees: TER and hidden costs

ETFs are cheap, but not free. Four types of cost determine how much of the index return reaches the investor.

Three lines over 30 years: portfolio value of a savings plan at 0.2, 0.7 and 1.5 percent ongoing costs
€200 a month over 30 years at a 7 % return before costs, paid at the start of each month: (1) a 0.2 % TER gives about €226,700, (2) 0.7 % about €206,800, (3) 1.5 % about €179,000. €72,000 is paid in each time (dashed line). Costs act like a lower return, every year and on the compounding.

1. TER: the ongoing fund fee

The Total Expense Ratio states the ETF’s yearly management cost in percent. It is taken continuously from the fund’s assets; there is no separate bill.

Typical values:

  • Broad index ETFs (S&P 500 , MSCI World ): 0.05–0.25 %
  • Specialty/thematic ETFs: 0.3–0.7 %

Every ETF page shows the TER in the key facts.

Live data

Cheapest ETFs right now

Cheapest ETFs right now
ETFTickerTER
State Street® SPDR® S&P® 500 UCITS ETF (Acc)SPYL0.03 %
State Street® SPDR® S&P® 500 UCITS ETF (Dist)SPY50.03 %
iShares Core S&P 500 UCITS ETF (Acc)SXR80.07 %
State Street® SPDR® MSCI EMU UCITS ETFZPRE0.08 %
State Street® SPDR® MSCI Europe UCITS ETFSPYE0.08 %
Xtrackers DAX UCITS ETF 1CDBXD0.09 %
State Street® SPDR® MSCI All Country World UCITS ETF (Acc)SPYY0.12 %
iShares Core MSCI Europe UCITS ETF EUR (Acc)IMEA0.12 %

Auto-generated from the ETF database – updated daily.

2. Tracking difference: the actual deviation

The TER is the stated fee. The tracking difference measures how far the fund’s actual return deviates from the index, including the fund’s trading costs and income such as securities lending. It can be smaller or larger than the TER and is the more precise cost measure, though less often published.

3. Trading costs

  • Order fee: what the broker charges per trade; 0–1 € at many neobrokers, savings plans often free.
  • Spread: the gap between buy and sell price. Small for large, liquid ETFs, wider outside main trading hours.

How costs add up over decades

Costs reduce not only one year’s return but also the compounding on every following year. Example: 200 € a month over 30 years at a 7 % gross annual return (paid in: 72,000 €):

  • 0.20 % TER: about 226,700 €
  • 0.70 % TER: about 206,800 €

In this example the half percentage point costs almost 20,000 €. The return is an assumption, not a forecast. Your own figures can be run in the savings plan calculator .

Worked example

What 0.1 % more TER costs

€10,000 one-off, 30 years, 6 %/year before costs. Only the TER varies.

What 0.1 % more TER costs
TERValue after 30yExtra cost
0.10 %55831 €–
0.20 %54271 €−1560 €
0.30 %52753 €−3078 €
0.50 %49840 €−5992 €
0.70 %47082 €−8750 €

"Extra cost" = shortfall vs the cheapest row (0.10 %). Other assumptions can be tested in the savings-plan calculator.

Bottom line

Costs are one of the few properties of an investment that can be known reliably in advance. Between funds on the same index, a difference in TER measurably affects the final value over decades.

This article is for information only and is not investment advice.