Could ETFs Ever Be Free?

Over the years, the expense ratios on ETFs have come down to absurdly low levels, as the size of their assets under management have grown. State Street'sSPDR S&P 500 ETF is the largest ETF in the world, with $131 billion in assets under management and an expense ratio of 0.09%. Other funds cost even less, including Vanguard's S&P 500 ETF , which has an expense ratio of just 0.05%.

According to the Financial Times, at a recent conference in London, Vanguard's head of retail said, "I would like to think the cost of investing [in ETFs] could come down to zero. There will always be a fixed cost in there, but if [a firm's asset] volume is big [enough], the total expense ratio can come right down."

While it seems absurd to think that ETFs could ever be free, it's actually possible. In the below video, Motley Fool contributor Dan Dzombak explains how this could happen.

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Fool contributor Dan Dzombakcan be found on Twitter @DanDzombakor on his Facebook page,DanDzombak. He has no position in any stocks mentioned. The Motley Fool recommends BlackRock. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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