ETF Returns
November 23, 2005 7:52 AM   Subscribe

When researching Indexed ETFs or Closed-End ETFs with the intention of buying, should I be looking at the fund's Yearly NAV Return or the Market Value Return as an indicator of success?

Which number will tell me how much the fund has earned over the various periods displayed in the fund's charts? Which should I be paying more attention to, and if the answer is 'It depends on your goals' then what are the differing goals that each return number is germaine to? Also, any additional info on ETFs in general is appreciated.
posted by spicynuts to Work & Money (2 answers total)
 
Response by poster: Oh, one other thing. When looking at a site like this when it talks about Premium/Discount, what does this mean? Since closed end funds are bought like stocks, if I buy through my Ameritrade account, why would there be a maintenance fee or a load? Does the ETF management company take a percent out of the return that affects the NAV or share price?
posted by spicynuts at 7:57 AM on November 23, 2005


Only one thing I can help with - the premium/discount referred to on that site is the market price of the ETF compared to the NAV. A premium means that the ETF is trading at a price above its NAV, a discount means its trading below it.

You can see this on the site you linked to: the NAV has increased by 23%, the share price by only 5% and the hence the discount has gone up (premium fallen)

The difference will arise because of liquidity, expectations of future performance etc. in the same way that the market cap of a company is not the same as its balance sheet value, and can be below it (i.e. investors think there's more value in selling off all the assets and winding up the company). Explanation on the ETF site

And, secondly, yes there will be a management fee -- the ETF is close-ended but the manager is still stock/fund picking and will take a fee for doing that. The return will be net of fees and expenses. In a fund-of-fund structure the underlying funds will distribute net of their fees too so you get hit twice.
posted by patricio at 9:01 AM on November 23, 2005


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