The short version
- The TER (total expense ratio, called ongoing costs in the key information document) is taken from the fund's value. You never get a bill.
- Tracking difference shows how far the fund's return differs from its index. It can be higher or lower than the TER. 1
- Spreads, order fees and venue fees come up when you buy or sell.
- Currency costs can apply if your broker converts money.
- A 0.4-point difference in yearly fund costs can add up to thousands of euros over 30 years.
Where the costs show up
Inside the fund
- TER ongoing charges, taken from the fund’s value
- Tracking difference how far the fund lags or beats its index
When you buy or sell
- Order or savings-plan fee charged by the broker
- Spread gap between buy and sell price
- Venue fee on some exchanges
- Currency exchange if a conversion is needed
Not costs, but money that leaves
- Taxes on income and gains, under German rules
Two funds, one index, €14,000 apart
Let's do the maths. Two funds track the same index and earn 6% a year before costs. Fund A costs 0.1% a year, Fund B costs 0.5%. Alex, a hypothetical investor, puts in €200 a month for 30 years.
| Fund A (0.1%) | Fund B (0.5%) | |
|---|---|---|
| Paid in | €72,000 | €72,000 |
| Estimated value after 30 years | €191,216 | €177,235 |
The gap is about €14,000. That's more than the fees themselves, because money taken as fees also stops growing. These are illustrations, not forecasts.
Each cost in plain English
TER and ongoing costs
The fund takes its running costs from its assets every day. That's why you never see the TER on your statement. Consumer advice centres point out that ETFs have much lower running costs than actively managed funds. 1
Tracking difference
This is the gap between the fund's return and its index's return. In theory it's about as big as the running costs. In practice it can be higher or lower, for example because of securities lending income or taxes inside the fund. For large world indices the differences are very small. 1
Spread
When you buy, you pay the higher "ask" price. When you sell, you get the lower "bid" price. The gap is the spread. It's usually small for large ETFs during exchange trading hours and wider when markets are quiet or jumpy.
Order and savings-plan fees
Your broker may charge per order or per savings-plan purchase. A fixed fee weighs more on small amounts. Compare verified fees in our Broker Comparison.
Currency conversion
An ETF can trade in euros even if it holds US companies. If you buy a share class that trades in another currency, your broker may convert your money and charge for it.
Want the nerdy details?The rules, the exact numbers and the edge cases. Open it whenever you're curious.- UCITS and fund domicile, decoded
UCITS and fund domicile, decoded
UCITS is the EU rulebook for investment funds sold to the public. It sets rules for diversification, for keeping fund assets separate from the manager's own money and for investor information such as the key information document. 2 It says nothing about how good a fund's returns will be.
Domicile is the country where the fund is legally based. Many ETFs sold in Germany are domiciled in Ireland or Luxembourg. The domicile doesn't decide how Germany taxes you. German investment tax law applies to foreign funds too, and the equity-fund classification depends on how much the fund invests in shares, not on where it's based. 3
Germany's consumer advice centres also mention two practical points: very small funds are more likely to be closed or merged, and physical and synthetic replication are both legitimate methods. 1
Easy-to-miss costs
Looking only at the TER. Two funds with the same TER can track their index differently.
Ignoring order fees on small savings plans. €1.50 on €50 is 3% of each purchase.
Believing "free trading" means free. Spreads still apply.
Questions about ETF costs
Where do I find the costs?
In the fund's key information document (KID) and factsheet, and in your broker's price list.
Is a cheaper ETF always better?
Not automatically. The index, the tracking difference and whether the fund fits your plan matter too.
The takeaway
Look at the whole picture: TER, tracking difference, your broker's fees and the spread. Small yearly differences get big over long periods.
Check yourself
How do you pay an ETF’s TER?
Video lesson · In the makingWhat an ETF really costs
Official sources
- Verbraucherzentrale: ETF-Kauf: criteria for choosing an ETF (costs, tracking difference, fund size, replication)
- EU Directive 2009/65/EC (UCITS) on EUR-Lex
- § 2 InvStG: equity and mixed funds
- Verbraucherzentrale: advantages and disadvantages of ETFs
Last checked:
We explain how the German rules work in general. This isn't personal financial, tax or legal advice. Investments can lose value.