Hi all, very stupid question probably, but if we own an ETF, how do we pay the TER?
Say TER is 0.3%, is it paid once per year? Is it based on the capital invested in the ETF on December 31st, or is it an average of the year? And does it get paid in that it “removes” a portion of equity in the ETF that corresponds to that 0.3%?
you will not notice any fees outgoing from your account. ETF and any other liquid instruments with fees will charge the fee internally on a daily basis. Think about it as if ETF is loosing that tiny fraction of its value that day. So if an ETF TER is 0.3% your ETF is technically loosing %(0.3/365) of it’s value every day.
Some very few days (less than 5 a year) may accrue more charges than other days due to custodian fees overlapping but this is very irregular. But in the end a year total fee will end up being equal to TER.
edit:
also the fee is accrued for everyday but only charged on working days.