Surely they always underperform the market due to fees? They’re just a way of tracking a specific market.
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Yes you are right for a tracker ETF. But I suppose it depends on the make up of the fund. I maybe should have been a bit clearer that passive usually outperforms active.
Well yes, but the point of choosing an ETF is being happy slightly under performing but having lowering risk and not having to track and analyse companies. A fund that can outperform the market it can under perform just as easily, for example crypto funds or specific industry ETFs. I remember my friend told me about this clean energy ETFs back in 2010-11 he thought it was a safe bet to outperform the market, the market rebounding from the crash and solar is the future right? wrong, he is still holding -50% to this date
An ETF does not under perform, it normally represents the benchmark?
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If it tracks the underlying index then, presuming no error, the performance of an ETF will replicate the performance of the market (whether that is all markets or specific markets).
Correct. Except for when you include OCF in which case the ETF would ever so slightly under perform the market it tracks. So both right imo
Yes, but then you need to include fees and tracking errors. Also, assets in an ETF change which incur costs and don’t perfectly match the index, they usually consist of a smaller mix of companies. For example last year Vanguard FTSE100 ETF underperformed the index only by 0.5%, IShares S&P500 ETF underperformed by 3%, but Vanguard’s outperformed by 4%! so you still need to put some thought in selecting ETFs
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