ETF production line gets leaner

The launch of a new batch of ETFs is a sure sign that Europe’s funds market is getting more competitive. That can only be good for private investors, says Paul Amery.

Deborah Fuhr, partner at exchange-traded fund (ETF) consultancy ETFGI, calculates that the average European ETF has an annual total expense ratio of 38 basis points (0.38%). That's much cheaper than the average actively run European equity fund, which charges 1.7% a year, according to research group Lipper. Those charges add up.

Let's say you start with a portfolio of £10,000, which grows at 5% a year for the next 25 years. If you take a 1.7% hit each year for expenses, your portfolio will grow to £22,218. If you suffer only 0.38% a year in costs, you'll have £30,800 in 25 years' time.

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Paul Amery

Paul is a multi-award-winning journalist, currently an editor at New Money Review. He has contributed an array of money titles such as MoneyWeek, Financial Times, Financial News, The Times, Investment and Thomson Reuters. Paul is certified in investment management by CFA UK and he can speak more than five languages including English, French, Russian and Ukrainian. On MoneyWeek, Paul writes about funds such as ETFs and the stock market.