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Money Market EtfPosted on January 10, 2010. How does the management of exchange traded funds (ETFs) make money when it is traded on the open market? For example: If I bought 100 shares of iShares Dow Jones U.S. Real Estate (IYR) to $ 70.00 and sold at $ 75.00, how to earn money iShares? There is a fee included in the price. From a perspective of the United Kingdom and using Barclays iShares as an example, they are the exchange of the underling of the ETF from Barclays. I think it is known as a transaction cost variables in both directions of the purchase in cash (creation) and the redemption of iShares as percentageof net asset value. It can become quite complicated due to different time zones in international equities, and I believe that asset values are calculated in real time. The MMS that create ETFs can also make money by buying the components underlying SAT-opportune times and prices and exchange those for ETFs, I hope a better price, or at least sell ETF better price.Ie They buy stocks that make up the particular index, such as when the market dipped when the market goes up and exchange the shares for ETFs and sell ETFs brokers. The cost for the retail customer is called total expense ratio (which can be as low as 0.2%), which is included in the price action. So everybody wins! See article http://www.shareworld.co.uk/articles/etf ... First of all most all managers receive a salary and are very well paid. EFT as regular "Open End" mutual funds have operating expenses internally. They take a few cents each day of the ETF. This effectively lowers the published net asset value (NAV), the value of assets held by the ETF. Like a regular mutual fund and the fund management takes a cut. " Check the expense ratio. ETFs do not make money on transactions. This is no different than any other stock. They receive a management fee to take on the income they receive from the underlying securities. CommentsThere are no comments.Leave a Comment | Newest My Friends |