TER vs “all-in cost”: spreads, FX, taxes (quick checklist)
Published: 2026-04-28
TER (ongoing charges) is a useful label, but it’s not your real cost of owning an ETF. Your all-in cost is the combination of (1) fund-level costs, (2) trading frictions, (3) tracking difference, and (4) taxes.
Here’s a short checklist you can use in 2 minutes.
Quick checklist (in order)
- TER / ongoing charges (fund fee). Start here, but don’t stop here.
- Tracking difference (TD): how much the ETF actually lagged the index over time. This is the most honest “all-in” number when available.
- Bid–ask spread (the hidden trading fee). Tighter is better; for long-term investors, this matters most when you buy/sell.
- Broker costs: commissions and any custody/FX fees.
- FX conversion cost (if you fund in EUR but buy a USD/GBP-traded line): check the broker’s FX spread/markup. This can dominate TER for small, frequent buys.
- Taxes you can’t “fee-shop” away: withholding taxes (dividends inside the fund) and your local capital-gains/dividend tax rules.
A simple example (why TER can mislead)
Imagine two similar ETFs:
- ETF A: TER 0.07%, but it trades with a wider spread and your broker charges 0.25% FX markup on every monthly buy.
- ETF B: TER 0.20%, but it trades in EUR with a tight spread and your broker’s fees are low.
If you invest small amounts monthly, FX + spread + commissions can easily cost more than the TER difference.
Two calm rules-of-thumb
- If TD is consistently reasonable (close to TER and not worse), the ETF is usually “fine enough”. Don’t obsess over 0.03% vs 0.07%.
- Control what you can control: use a broker with sensible fees, prefer liquid lines, and avoid unnecessary currency conversions.
Related: if you want the deeper version, read Why “low TER” is not the whole story.