What it actually costs to hold an ETF (advanced)
Three cost numbers, three different jobs — and the fund that looks cheapest on any one of them alone isn’t always the cheapest to actually hold.
Why the headline fee is a floor, not an answer
The yearly running cost of the fund, shown as a % of your money. Lower is cheaper. More → is the number every factsheet leads with, and it’s a real, guaranteed, every-single-year cost. But it’s a floor, not a ceiling: it’s what the fund promises to charge for running itself, not everything that actually drags on your return once the fund is out trading in the real market. Two funds with an identical 0.20% TER can end up costing you meaningfully different amounts once you look one level deeper.
All-in cost — the first layer down, and its own blind spot
The all-in yearly cost of owning the fund — the headline fee (TER) plus trading and other running costs rolled in. A truer picture of what you actually pay than the TER alone. More → rolls the fund’s own internal trading and running expenses into the TER, and it usually sits a little above it — rarely by a lot, for a plain index fund. It’s a genuinely truer number than TER alone. Its own blind spot: it’s still an internal figure. It says nothing about what it costs you to actually buy and sell the fund on an exchange — the The small gap between a fund’s buy price and its sell price at any moment. Crossing it — buying, then later selling — is a real, if tiny, cost on top of the fund’s own yearly fee. More → you cross each time you trade, which sits entirely outside both TER and all-in cost.
Tracking difference — the one that can run either way
Here’s the one that trips up a pure cost-column comparison: How closely the fund’s actual return has matched the index it targets — a small gap is normal; a bigger one means it strayed further from what it is meant to copy. More → isn’t a fee at all — it’s what actually happened once the fund traded in the real world for a year. A fund can post a tracking difference worse than its own TER (sampling drag, cash buffers, tax on dividends received) or, less intuitively, a tracking difference better than its TER — some funds earn back a little by lending out their holdings, which can partially offset the running cost. A lower-TER fund with a persistently worse tracking difference than a slightly higher-TER peer isn’t automatically the cheaper one to actually hold.
Reading the three together
The practical version: when two funds track the same index, don’t stop at the TER column. Check the all-in cost next — if it’s a lot wider than the TER gap between the two funds, that’s worth a second look at what’s driving it. Then check tracking difference over a few years, not one — a single year can be noisy, but a fund that’s persistently a little wider than its own TER (or its peers') is quietly costing more than the label suggests, and one that’s persistently tighter (or even ahead) is delivering more than its label promises. None of the three alone tells the whole story; together they’re the closest thing to an honest answer.
What we still can't show you
To be straight about the gaps: our tracking-difference read compares a fund against others tracking the same index — an honest peer comparison, not a licensed index feed, so it’s "tighter or wider than similar funds," not an official tracking-error figure against the real index series. We also don’t yet show a fund’s actual bid-ask spread (a real, per-trade cost that sits outside all three numbers above) — that needs a live quote feed we don’t currently carry. Read the three signals above as the most complete honest picture we can build from what we store today, not a claim that nothing else affects your real cost.