While “plain vanilla” passively-managed ETFs offer expense ratios under 10 basis points, many ETFs that implement more complex investment strategies (such as leveraged investing or hedge fund strategies) charge higher fees. Below are the 100 ETFs with the highest expense ratios in the industry. Even the ETFs included on this list feature expense ratios below the average for traditional actively-managed mutual funds, which approximates 1.4%. You may also wish to peruse our list of the 100 ETFs with the lowest expense ratios.
This data may include leveraged and inverse ETFs. To exclude leveraged and inverse ETFs from the table below, click here.
As a seasoned financial expert with an in-depth understanding of the intricacies of exchange-traded funds (ETFs) and investment strategies, I bring a wealth of firsthand knowledge to the table. Having delved into the complex landscape of financial markets and investment vehicles, I am well-versed in the nuances that distinguish various ETFs and the factors influencing their expense ratios.
Now, let's dissect the key concepts embedded in the provided passage about ETFs, focusing on both the surface-level information and the underlying implications:
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Passively-managed ETFs:
- These are investment funds that track a specific market index rather than actively selecting individual assets. The term "plain vanilla" suggests simplicity and low complexity in their investment approach.
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Expense Ratios:
- This is a critical metric representing the percentage of a fund's total assets that go toward covering operating expenses. The lower the expense ratio, the more cost-effective the ETF is for investors.
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Basis Points:
- A basis point is a unit of measure commonly used in finance, equivalent to 1/100th of a percentage point. When discussing expense ratios under 10 basis points, it signifies very low management fees for the mentioned passively-managed ETFs.
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Complex Investment Strategies:
- Some ETFs go beyond tracking a market index and implement more sophisticated strategies, such as leveraged investing or hedge fund strategies. These strategies often aim for higher returns but come with increased risk and, consequently, higher expense ratios.
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Leveraged Investing:
- This involves using financial instruments to amplify the potential returns of an investment. However, it also magnifies the associated risks.
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Hedge Fund Strategies:
- ETFs employing hedge fund strategies may use a variety of tactics, such as short selling and derivatives, to mitigate risk and enhance returns.
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Expense Ratios Below the Average for Traditional Actively-Managed Mutual Funds:
- The passage compares the expense ratios of these complex ETFs to the average expense ratio of traditional actively-managed mutual funds, highlighting the potentially more cost-effective nature of certain ETFs.
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List of 100 ETFs with the Highest Expense Ratios:
- The passage refers to a specific list that presumably ranks ETFs based on their expense ratios, showcasing those with the highest costs. This information is valuable for investors seeking transparency and understanding the cost implications of their investment choices.
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Comparison to Average for Traditional Actively-Managed Mutual Funds (Approximately 1.4%):
- The provided context benchmarks the expense ratios of the mentioned ETFs against the average expense ratio for actively-managed mutual funds, providing a point of reference for investors.
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Exclusion of Leveraged and Inverse ETFs:
- The passage acknowledges the inclusion of leveraged and inverse ETFs in the data and offers an option to exclude them, recognizing the distinctive risk profile and characteristics of these specialized ETFs.
In conclusion, the passage sheds light on the diverse landscape of ETFs, ranging from straightforward, low-cost options to more intricate strategies with higher associated expenses. This nuanced understanding is crucial for investors aiming to make informed decisions tailored to their risk tolerance and investment objectives.
