Two numbers to check before the expense ratio
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Saving five basis points in fees while leaking thirty in execution is a real outcome. Order matters.
Net assets: will this fund still exist?
Net assets tell you how much money the fund runs. Too little and the manager may close it or merge it away.
Closure is not itself a loss — you generally get your share back. The problem is that the timing is not yours. Being wound up while underwater removes the chance to recover.
Newly launched thematic funds fail to gather assets often enough to matter. The more appealing the name, the more worth checking the size.
Turnover: can you sell when you want to?
Turnover is the money traded in a session. Use the currency figure rather than share count, or funds at different prices are not comparable.
Thin trading widens the gap between the bid and the ask, and that gap is a cost on every trade. The expense ratio is charged once a year; the spread is charged every time you deal.
Spreads tend to be widest right after the open and near the close. If you are not in a hurry, avoid those windows.
Then the fee
With both of those satisfied, compare fees. Funds on the same index perform alike, so the fee is what separates them over years.
Look at tracking difference alongside it — a cheap fund that follows its index poorly has saved you nothing.
Fees matter more the longer you hold; trading costs matter more the more you deal. Which you are determines the order.
What a small fund actually risks
Net assets are the size of the pot. Too small and the manager cannot cover the cost of running it, which leads to closure or a merger into another product.
Closure is not a loss in itself — assets are sold and NAV is returned. The problem is timing: you are exited when you did not choose to be, the gain or loss is crystallised, and tax follows.
That risk grows with your horizon. Buying for ten years and being liquidated in three breaks the plan. The longer you intend to hold, the earlier size belongs in the check.
When turnover matters more than size
Even a large fund can be expensive to trade if daily turnover is thin. A wide spread costs you on every market order — potentially more than a year of fees if you trade often.
Compare turnover in money, not shares. A hundred thousand shares at ten dollars and ten thousand at a hundred are the same size.
Judge it against your own order. Putting ten thousand into a fund that trades a hundred thousand a day makes you a tenth of the session — enough to move the price yourself.
Premium and discount, the third signal
Market price and NAV should track closely because liquidity providers arbitrage the gap. A persistently wide gap says that mechanism is not working well.
Watch it especially on locally listed funds holding foreign assets: while the home market is shut the underlying is stale, and the gap widens easily.
Three checks in order filter most of it: is the fund large enough not to worry about closure, does daily turnover absorb your order, and is the premium stable. Compare fees only among the candidates that pass.
This article is general information, not investment advice. Investment decisions and responsibility are your own.