When it comes to investing, exchange-traded funds — or ETFs — are a powerful tool for investors. These funds offer diversification as well as targeted bets on specific sectors or countries, giving you the strategic edge of active management without worrying about picking individual stocks or trading foreign securities on far-flung markets like Indonesia.
Unfortunately, many investors simply look at what the fund owns, but not what it costs them. This often translates into paying big-time fees to the company that operates the ETF, which eats into your returns.
One of the best ways to supercharge your profits over the long-term is to focus on low-cost ETFs. This means you keep a higher share of the profits in your own pocket instead of enriching some high-priced manager somewhere. After all, every 1% you pay in expenses shaves 1% off your profits — and over the years, that can add up in a hurry.
So if you’re a frugal consumer who clips coupons or shops around for a deal, you should take the same approach to your investment account and shop around for the cheapest ETFs. Often you can find funds that are remarkably similar to ETFs you like — but at a fraction of the cost.
Here are some examples of cheap funds to consider: