Morningstar urges investors to look beyond TER when analysing ETF costs

Trading and holding costs

Investors must look beyond the headline total expense ratio (TER) when investing in ETFs and "take a more holistic approach" to assessing the total cost of owning an ETF, according to a research note by Morningstar.

The note, entitled Calculating the Total Cost of ETF Ownership, said the total cost of owning an ETF is split between two parts; the holding costs and the transaction costs. The relative importance of these two depend on the investor's time horizon and the total amount they are investing, it added. What are the most important factors for investors when selecting ETFs? Ben Johnson (pictured), director of global ETF research at Morningstar, explained: "Holding costs will represent the largest component of the total cost of ownership for long-term investors in an ETF, as they are by d...