What are your ETFs really costing you?

Paul Amery explains how to compare passive funds with actively managed funds, and the costs you should watch out for.

Europe's exchange-traded fund (ETF) market is growing healthily as more investors switch to passive' index-tracking from pricier actively managed funds.

But when you're comparing the costs of a tracker with an active alternative, remember the ETF doesn't give the exact index return. It incurs management fees and other costs just like an active fund, leading it to underperform slightly. For a full picture, you have to compare the after-cost return on the ETF with that on a rival product.

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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.