By Philippa Billings, Chief Advice Officer, Otivo
ETFs earned their popularity partly on price, they're famously cheap compared with old-style managed funds. But cheap isn't free, and the costs of an ETF hide in a few different places, one of which never appears on a statement. Knowing where they are matters, because fees are one of the few things about investing you can actually control. Here's what an ETF really costs.
ETF fees come in a few layers. The main one is the management fee, charged as a small yearly percentage of your investment. On top of that, you pay brokerage each time you buy or sell, and a usually small buy-sell spread built into the trading price. As at July 2026, ETF management fees are generally low compared with traditional managed funds.
What is the main fee on an ETF?
The headline cost is the management fee, sometimes shown as a management expense ratio. It's charged as a small annual percentage of the money you have invested, and it's deducted from the fund rather than billed to you directly, so you never see an invoice. Because it's a percentage of your holding, it scales with how much you've invested. ETF management fees are generally low, particularly for broad index-tracking funds, which is a big part of their appeal.
What is brokerage and when do you pay it?
Brokerage is the fee your broker charges to execute a trade, and you generally pay it each time you buy and each time you sell. Unlike the management fee, it's a cost of transacting rather than a cost of holding, so how much brokerage you pay depends on how often you trade. This is why trading frequently in small amounts can be inefficient, the brokerage takes a bigger bite out of each small parcel. Fewer, larger trades spread that fixed cost more thinly.
What is the buy-sell spread?
This is the cost that never shows up on a statement. The buy-sell spread is the small gap between the price at which you can buy an ETF unit and the price at which you can sell it at the same moment. You effectively pay it when you trade, even though it isn't itemised as a fee. For broad, heavily traded ETFs the spread is usually tiny, while for narrower or less-traded funds it can be wider. It's worth being aware of, because it's a genuine cost hiding in plain sight.
Why do ETF fees matter so much over time?
Because fees compound against you, the mirror image of how returns compound for you. A small annual percentage sounds trivial in a single year, but across decades it quietly compounds into a meaningful chunk of your final balance, since every dollar paid in fees is a dollar no longer invested and growing. That's why even a modest difference in the management fee can matter over a long holding period. Fees are one of the few certainties in investing, which is exactly why controlling them is worthwhile.
How can you keep ETF costs down?
A few habits help. Favouring lower-fee funds keeps the ongoing management cost in check. Trading less frequently in larger parcels keeps brokerage proportionate. And being mindful of the buy-sell spread, particularly on narrower funds, avoids an avoidable cost. None of this is a recommendation of any particular product, it's simply general awareness of where the costs sit, so more of your return stays yours.
Frequently asked questions
Are ETFs cheaper than managed funds?
Generally their management fees are lower, particularly for broad index-tracking ETFs, which is a large part of their appeal. That said, it's worth comparing like for like, since costs vary between funds.
Do I pay a fee every time I buy an ETF?
You generally pay brokerage each time you buy or sell, plus a usually small buy-sell spread built into the price. The ongoing management fee is separate and is deducted from the fund rather than charged per trade.
How much do ETF fees matter?
More than they appear to, because fees compound against your returns over time. Even a small annual percentage can add up meaningfully across decades, so keeping costs low is one of the few reliable levers you control.
Where to from here
Fees are one of the few things you can control in investing, which makes them worth understanding. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a retirement planning module that can factor the cost of your investments into your overall position, based on your age, income, balance and goals. It helps you see how costs shape the long-term picture.
Sources
- ASIC MoneySmart — ETF fees and costs — moneysmart.gov.au
- Australian Securities Exchange — ETF costs and spreads — asx.com.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.