ETF expense ratios accrue daily and are subtracted each day from an ETF's assets. This happens when the manager calculates the daily net asset value, or NAV, at the end of the trading day.
If you own shares of an exchange-traded fund (ETF), you may receive distributions in the form of dividends. These may be paid monthly or at some other interval, depending on the ETF. It's important to know that not all dividends are treated the same from a tax perspective.
Specifically, a fund is prohibited from: acquiring more than 3% of a registered investment company's shares (the “3% Limit”); investing more than 5% of its assets in a single registered investment company (the “5% Limit”); or. investing more than 10% of its assets in registered investment companies (the “10% Limit”).
These fees cover the costs of managing the fund's portfolio and are usually expressed as an annual percentage of the assets under management (AUM). MER (Management Expense Ratio): MER includes not only the management fee of an investment fund but also other expenses like administrative costs, trading costs, and taxes.
ETF investors do not directly pay these fees and costs to the ETF manager or issuer. Instead, the fees and costs are reflected in the daily price of the ETF. Management fees are not deducted on one specific date each year.
AUM fees are calculated as a percentage of the assets they manage and are payable on a yearly, quarterly or monthly basis as long as the advisor has a relationship with the client. A client's portfolio value will change on a regular basis.
The 4% rule states that you should be able to comfortably live off of 4% of your money in investments in your first year of retirement, then slightly increase or decrease that amount to account for inflation each subsequent year.
This investment strategy seeks total return through exposure to a diversified portfolio of primarily equity, and to a lesser extent, fixed income asset classes with a target allocation of 70% equities and 30% fixed income. Target allocations can vary +/-5%.
Q: How does the wash sale rule work? If you sell a security at a loss and buy the same or a substantially identical security within 30 calendar days before or after the sale, you won't be able to take a loss for that security on your current-year tax return.
SPY is more expensive with a Total Expense Ratio (TER) of 0.0945%, versus 0.03% for VOO. SPY is up 28.31% year-to-date (YTD) with +$7.13B in YTD flows. VOO performs better with 28.36% YTD performance, and +$103.99B in YTD flows.
Exchange-traded funds (ETFs) have embedded fees like the ones attached to mutual funds, and those fees are not tax deductible directly on your tax return.
Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.
ETFs have transparent and hidden fees as well—there are simply fewer of them, and they cost less.
The Vanguard S&P 500 ETF has had a total return of 257% over the past decade. Another huge benefit of this particular ETF is that it has a very low expense-ratio fee of just 0.03%. That means if you invest $1,000, you'll pay just $0.30 in fees, and $10,000 invested in the fund will cost you only $3.
You expose your portfolio to much higher risk with sector ETFs, so you should use them sparingly, but investing 5% to 10% of your total portfolio assets may be appropriate. If you want to be highly conservative, don't use these at all.
Holding too many ETFs in your portfolio introduces inefficiencies that in the long term will have a detrimental impact on the risk/reward profile of your portfolio. For most personal investors, an optimal number of ETFs to hold would be 5 to 10 across asset classes, geographies, and other characteristics.
What is the Rule of 40? The Rule of 40 states that, at scale, the combined value of revenue growth rate and profit margin should exceed 40% for healthy SaaS companies. The Rule of 40 – popularized by Brad Feld – states that an SaaS company's revenue growth rate plus profit margin should be equal to or exceed 40%.
How Many Stocks and Bonds Should Be in a Portfolio? If you take an ultra-aggressive approach, you could allocate 100% of your portfolio to stocks. A moderately aggressive strategy would contain 80% stocks to 20% cash and bonds. For moderate growth, keep 60% in stocks and 40% in cash and bonds.
Five of the key ETF risks to consider include: market risk, tracking error, liquidity, sector concentration, and single-stock concentration. A little due diligence can go a long way before purchasing an ETF, so don't judge a book by its cover.
But investors need to know the "wash sale rule," which blocks the tax break if you buy “substantially identical” assets within the 30-day window before or after the sale. If you want to stay invested, exchange-traded funds, or ETFs, can help avoid the wash sale rule, experts say.
Long-Term Holding of Leveraged ETFs
Leveraged ETFs are primarily used for short-term trading opportunities. Investors usually hold these funds for a day or two, sometimes up to 10-14 days on the longer side. In other words, these leveraged ETFs are not intended to be held for months or years on end.
Industry standards show that financial advisor fees generally range between 0.5% and 1.5% of AUM annually. Placement of a 2% fee may appear steep compared to this average. However, this fee might encompass more comprehensive services or cater to more unique, high-maintenance portfolios.
By hiring a single investment advisor, you receive more streamlined advice as only one person manages all your money matters removing any chance of conflicting advice or any disagreement. This also allows the chosen individual to clear up your doubts and offer guidance to you on how to best attain your financial goals.
However, in general, it's wise to start working with a financial advisor or wealth management team once you've built a nest egg of $1M in investable assets.