Investors are often running into virtually identical funds—like the iShares Gold Trusts (NYSEArca: IAU) and SPDR Gold Shares (NYSEArca: GLD)—that seem only differentiated by fees. But it may not be worth it to switch funds for small fee disparities, according to an article in the Wall Street Journal.
Though lower fees appeal to investors and draw in newcomers, cashing out of a fund to move toward the cheaper option could backfire if the gains from the sale triggers a tax bill, the article said.
Also, funds with a higher fee may provide investors with a sense of security, as the more expensive fund could hold more assets under management, which affects liquidity, the article said.
Whether the increased attraction to lower fees causes ETF sponsors in general to lower their prices, the end result will wind up benefiting investors, the Journal said.
For more information, visit online.wsj.com.