One of the chief advantages of index-based ETFs was low expense ratios. Actively managed funds generally do cost more. Try and get an idea of what the fee structure will be before you invest. Compare these fees to similar investments in the mutual fund arena. Remember, if there is one indicator of how a fund might perform in the future it is low cost, or low expense ratio. We generally look for funds in the least expensive quartile of the peer group.
Further, studies have shown that the expense ratios for ETFs can often be higher than the expense ratios of open-end mutual funds on an apples-to-apples comparison. For example, a Wall Street Journal study in 2007 showed that on an index-by-index comparison, Vanguard and Fidelity mutual funds had lower expense ratios than the comparable ETFs, in all but one case (in that case it was a tie!). Also, there are no trading costs for the mutual funds, while the ETFs have trading commissions to buy or sell. If you’re at one of those full service brokers, the trading commissions can be huge dollars.