Are Commission-Free ETFs Really Cheaper?

February 14, 2012

 

While an increasing number of brokerages and ETF providers offer ETFs that can be traded commission free, some may not truly be as cheap as they look, in part because of the selections offered, according to an article in Forbes.

As an example, the article cited the WisdomTree Global Equity Income ETF (NYSEArca: DEW), which is one of the commission-free ETFs ETrade now offers. The fund has liquidity issues due to gaps in its trading history and a wide bid/ask spread, according to the Forbes article.

When such spreads between what buyers will pay and what sellers will accept are wide, investors may end up paying more for the ETF than it’s worth, the article said.

Also, commission-free ETFs may not always be the-best performing ETFs, so investors should do their homework before making decisions, the Forbes report said.

To read the entire article, go to Forbes.com.

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